The government recently submitted a draft law containing tax provisions to parliament. This draft law contains two measures which were left out of another draft earlier this year because the Council of State considered that their ‘urgent’ introduction was not sufficiently motivated by the government.
The tax provisions concerned are:
- Implementation of the changes to the Parent-Subsidiary directive: anti-hybrid and anti-abuse rule
- Exit tax: introduction of choice between direct and spread payment
Hybrid mismatches (situation of double non-taxation)
No dividends-received deduction (DRD) will be allowed for dividends paid by a company to the extent that such income has been deducted or can be deducted by the company from its profits.
The literal text of the anti-abuse rule in the Directive is copied into Belgian tax law. No DRD or exemption of withholding tax (WHT) will apply for dividends linked to a legal act (or series of legal acts) which is proven to be artificial and set up primarily to obtain the DRD, the exemption of WHT or any advantage of the directive in another EU Member State.
Legal acts are considered as artificial if they are not set up for valid business reasons which reflect economic reality.
Entry into force:
- regarding DRD: income paid or attributed as from 1 January 2016, but not applicable to payments paid or attributed during a financial year ending before the first day of the month following the publication of the law in the Belgian Official Gazette (e.g. if the law is published in November, the provision applies to income paid as from 1 January 2016 during financial years closing on or after 1 December 2016)
- exemption of WHT: income paid or attributed as from the first day of the month following the publication of the law in the Belgian Official Gazette
The second part of the draft law offers a choice between the direct or spread (over 5 years) payment of exit taxes in limited cases.
Exit taxes concern capital gains on Belgian assets following:
- Contribution of a company division, branch of activity or universality of goods
- Merger or demerger
- Transfer of company seat, main establishment or seat of management
- Transfer of assets of Belgian establishment
The taxpayer can opt for spread payment of the exit tax provided that the assets are maintained within a company or a foreign establishment located in another Member State of the European Economic Area (EU + Norway and Iceland, but except Liechtenstein, as it is no party yet to an agreement on the mutual assistance in the recovery of taxes).
In case of spread payment the tax authorities can require a guarantee if there is a risk of non-recovery. The taxpayer must each year complete a form with information related to the follow-up of the assets concerned. In certain circumstances (sale of the assets, assets leaving the EEA, etc.), the remaining tax liability becomes immediately due. No tax increase will apply if no prepayment of the exit tax is made.
Entry into force: as from assessment year 2017 and applicable to transactions made as from the date of publication of the law in the Belgian Official Gazette.
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