Law implementing changes to Parent-Subsidiary directive | KPMG | BE

Law implementing changes to Parent-Subsidiary directive and introducing a spread payment of exit tax published

Law implementing changes to Parent-Subsidiary directive

The law of 1 December 2016 containing tax provisions has been published in the Belgian Official Gazette of 8 December 2016.

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The law contains two measures:

  • 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
    We refer to our earlier communication of 6 October. The law has been adopted without changes. The entry into force of both measures is now known as it is linked to the date of publication of the law.

Parent-subsidiary directive: implementation of anti-hybrid and anti-abuse rule

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.

 

Anti-abuse rule

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 income paid or attributed during a financial year ending before 1 January 2017
  • exemption of WHT: income paid or attributed as from 1 January 2017

Exit Tax

The second part of the 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 8 December 2016.

© 2017 KPMG Tax and Legal Advisers, a Belgian Civil Cooperative Company with Limited Liability (burg. CVBA/SCRL civile) and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (“KPMG International”), a Swiss entity. All rights reserved.

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