Belgium: Corporate tax measures effective 2020 | KPMG | BE

Belgium: Corporate tax measures effective beginning 2020

Belgium: Corporate tax measures effective 2020

The corporate tax reform law, published in the Belgian official gazette on 29 December 2017, includes measures that will be effective as from assessment year 2021 (that is, for tax periods beginning as from 1 January 2020).

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The following discussion focuses on the measures that will be effective for tax periods beginning in 2020.

Corporate tax rate reduction

The corporate tax rate will be further reduced, and the “crisis contribution” repealed. The standard corporate tax rate will be reduced from 29.58% to 25%. For small companies, the first €100,000 of profits will be taxed at a rate of 20% (instead of 20.4%).

R&D partial exemption from wage withholding tax

The exemption from withholding tax for wages paid to scientific research staff (those with “scientific” bachelor degrees) will be increased from 40% to 80% as from 1 January 2020.

Tax-free reserves

Certain pre-2017 tax-free reserves can be converted to taxable reserves at a preferential rate of 15% or 10%, if reinvested.

Interest deduction limitation

The last part of the EU anti-tax avoidance directives (ATAD I and II) will be implemented. A limitation of deductible interest will apply for the greater of €3 million or 30% of EBITDA (earnings before interest, tax, depreciation and amortization).

  • The new limitation will only apply to interest on loans concluded as of 17 June 2016. The existing thin capitalization rule ratio (5:1) will continue for interest on “old” intra-group loans and for interest paid into “tax havens.” 
  • For the calculation of interest and EBITDA, an ad hoc consolidation will be made.
  • Non-deductible interest will be transferable without limit to subsequent years. There will be a possibility of transferring to other group companies.
  • Stand-alone entities and financial companies will be excluded.

Permanent establishments (PE)

The definition of a “Belgian establishment” will be extended to commissionaires based on the OECD’s base erosion and profit shifting (BEPS) Actions 1 and 7. 

Losses of foreign establishments whose profits are exempt by treaty in Belgium will only be deductible in Belgium if they concern “definitive” losses within an European Economic Area (EEA) Member State.

Company cars

The deduction of company car costs will be a function of the CO² emission, determined by a formula. The deduction may range between 50% and 100%. The excess deduction for electric cars will be limited to 100% (instead of a 120% deduction).

The deduction of fuel costs will also be based on a formula.

Asset depreciation

The double declining depreciation method will be repealed. The first depreciation will also for SMEs be applied on a pro-rata temporary basis.

 

Read a January 2018 report prepared by the KPMG member firm in Belgium

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