Belgium: Tax on banks, insurance companies

Belgium: Tax on banks, insurance companies

A new tax on banks and insurance companies was approved by the parliament, and will be effective as from assessment year 2016. The new tax will be imposed on credit institutions and insurance companies that are established under Belgian law and on other (EEA) credit institutions and insurance companies that exercise activities within the Belgian territory.

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The tax technically is a reduction of the otherwise available dividends-received deduction, notional interest deduction, and/or tax loss carryforward. This reduction results in an “effective cash-out” in the hands of the credit institutions and insurance companies—regardless of the dividends-received deduction, notional interest deduction, or tax losses (referred to as the “deductions”) otherwise available to them.

  • For credit institutions: The deductions are reduced by the amount of the “debts to clients” multiplied by 2.37% (for AY 2016), and then multiplied by the notional interest deduction rate of the company. 
  • For insurance companies: The deductions are reduced by the amount of the “technical provisions” multiplied by 1.88% (for AY 2016), and then multiplied by the notional interest deduction rate of the company. 

The reduction will then be applied to the tax deductions in the following order:

  • Tax losses carried forward
  • Dividends-received deduction (with priority to the dividends-received deduction that can be carried forward)
  • Notional interest deduction

Reduction of the dividends-received deduction cannot lead to a higher use of the notional interest deduction of the current year, nor of the stock of the notional interest deduction that is carried forward. Both the reduction of the dividends-received deduction and the reduction of the tax losses will lead to an increased carry forward.

Read a July 2015 report prepared by the KPMG member firm in Belgium: New tax on banks and insurance companies approved by Parliament

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