• Tax measures applying from 1 January 2017

Tax measures applying from 1 January 2017

Cindy De Bock, Senior Advisor |

29 December 2016

A new Program Act has adopted the measures which the federal government announced in its federal budget agreement of October 2016. Below we set out the tax measures taking effect from 1 January 2016.

Fuel cards

When a company car is put at the disposal of an employee or director for private purposes, 17% of the calculated benefit in kind must be added to the company’s disallowed expenses. This percentage increases from 17% to 40% if the fuel cost related to the personal use of the car is entirely or partially borne by the company.

In addition, the amount to be added to the disallowed expenses no longer decreases in proportion to the beneficiary's personal contribution for the private use of the car. Even if the beneficiary's personal contribution equals the benefit in kind, which is therefore reduced to zero, the company will still have to add 17% (without fuel card) or 40% (fuel card) to the disallowed expenses.

This tax measure also applies in legal entities tax and non-resident tax for companies.

The new regulations apply from 1 January 2017.

Speculation tax

The speculation tax due on capital gains of stock market listed securities will be abolished from 1 January 2017. This taxation was part of the tax shift measures introduced by law of 26 December 2015. The speculation tax was due when capital gains were realized by a natural person within a 6 months’ period to be calculated from the date of acquisition of the securities.

Increase in the withholding tax rate on investment income

Nominal withholding tax rate on investment income

The withholding tax rate increases from 27% to 30% on investment income attributed or paid as from 1 January 2017.

Liquidation reserves

The reduced withholding tax due when dividends, originating from liquidation reserves are distributed within a period of 5 years to be calculated from the year in which the liquidation reserves were constituted, increases from 17% to 20%.

This higher rate applies to liquidation reserves built from 1 January 2017 in relation to assessment year 2018.

“Internal” capital gains

“Internal” capital gains will be the subject of specific tax audits and be tackled by means of the existing anti-abuse regulation (art. 344§1 ITC).

Internal capital gains are realized when shares are contributed in or sold to other companies of which the majority of shares also belong to the seller. For share contributions as from 1 January 2017, the paid-up capital (which is not subject to tax in case of a capital reduction) equals the acquisition value of the contributed shares of the contributor. The excess amount of the contribution value of the shares is to be considered a taxable reserve. Consequently, the repayment of this excess capital is subject to a withholding tax which amounts to (in principle) 30% as from 1 January 2017.

Excess profit rulings

Excess profit rulings incompatible with EU principles of state aid

In a press release of January 2016 the European Commission concluded that selective tax advantages granted by Belgium under its "excess profit" tax scheme are illegal under EU state aid rules.

The Belgian "excess profit" tax scheme, applicable since 2005, allowed certain multinational group companies to pay substantially less tax in Belgium on the basis of tax rulings.

Belgian company tax rules require companies to be taxed on the basis of profit actually recorded from activities in Belgium. However, the 2005 "excess profit" scheme, based on Article 185§2, b) of the ITC (Income Tax Code), allowed multinational companies to reduce their tax base for alleged "excess profit" on the basis of a binding tax ruling. These were typically valid for four years and could be renewed.

Under such tax rulings, the actual recorded profit of a multinational is compared with the hypothetical average profit a stand-alone company in a comparable situation would have made. The alleged difference in profit is deemed to be "excess profit" by the Belgian tax authorities, and the multinational's tax base is reduced proportionately. This is based on a premise that multinational companies make "excess profit" as a result of being part of a multinational group, e.g. due to synergies, economies of scale, reputation, client and supplier networks, access to new markets.

Recovery of state aid

The European Commission instructed the Belgian government to recover all unauthorized state aid granted by the excess profit rulings, including late payment interest.

The amount of state aid to be recovered equals the taxes due on the excess profit which has been excluded from the taxable income. This amount is to be calculated for each taxable period during which prohibited state aid was granted until the income year associated with assessment year 2015.

Late payment interest due will be calculated from the day the state aid has been granted until the effective date of refund.

Reduced VAT rate applicable to social housing extended to private initiatives

The scope of the reduced VAT tax rate of 12% for social housing will be extended to private initiatives as from 1 January 2017. Therefore, the reduced tax rate will be applicable to every natural person or legal entity buying, (re)building or leasing houses in order to rent these within the framework of a social policy.

Doubling of the ceiling for the stock-exchange tax

The maximum tax amount of the stock-exchange tax will be doubled from 1 January 2017. Also the scope of this tax will be extended towards transactions effected by Belgian residents through foreign financial operators.

  • The ceiling of 650 EUR increases to 1.300 EUR
  • The ceiling of 800 EUR increases to 1.600 EUR
  • The ceiling of 2.000 EUR increases to 4.000 EUR

For more information, we refer to our previous alert in this respect.