CORPORATE INCOME TAX
“Minimum tax” for multinational companies approved by Belgian Parliament
The Belgian Parliament approved on 14 December 2023 the draft law on a minimum tax for MNE’s and large domestic groups (“Pillar II” This law entered into force as of 31 Dec 2023 and marks the Belgian implementation of the Council Directive (EU) 2022/2523 of 15 December 2022 installing a minimum effective tax rate of 15% for multinational enterprises and large domestic groups with consolidated annual revenues exceeding EUR 750 million.
This new legislation introduces a Qualified Domestic Minimum Top-up Tax ('QDMTT') and an Income Inclusion Rule (IIR), applicable to financial years beginning on or after 31 December 2023.
Additionally, the Undertaxed Profits Rule ('UTPR') is set to apply for financial years commencing on or after December 31, 2024.
Transitional measures, such as a Country-by-Country Reporting Safe Harbor and an Undertaxed Profits Rule Safe Harbor, are established for MNE Groups during the initial phase of their international activities.
The Belgian ruling office will not grant any advance rulings on the application of this new legislation.
R&D Tax Credit Regime
The bill brings significant changes to existing domestic tax code provisions, particularly in the R&D tax credit regime. It shortens the repayment period from five to four years, meeting the criteria for a "Qualified Refundable Tax Credit."
Loss limitation rule
With the approval of the Pillar 2 legislation, the Belgian government amended the loss limitation rule (i.e. limited use of carried forward tax losses that can be offset against taxable income north of EUR 1 million). For FY23, this limitation stands at 40% and will rise to 70% as from FY24.
Administration and Compliance
The introduction of new compliance and filing requirements, along with an advance tax payment system, brings forth important considerations.
▪ QDMTT and IIR / UTPR Return
Qualifying entities will be required to submit separate returns for:
- the Qualified Domestic Minimum Top-up Tax (QDMTT): first filing by 30 Nov 2025 for FY’s ending 31 Dec 2024;
- the Income Inclusion Rule (IIR) by 30 June 2026 for FY’s ending 31 Dec 2024;
- Undertaxed Profits Rule (UTPR), by 30 June 2026 for FY’s ending 31 Dec 2024.
Non-compliance may result in administrative sanctions, such as tax increases or administrative penalties ranging from EUR 2,500 to EUR 250,000, and/or criminal sanctions.
The specific models for these returns are yet to be published through a Royal Decree.
Advance Tax Payments
Similar to CITR, a system of quarterly install tax payments (QIPs) is introduced, facilitating the collection of Top-up Tax under the QDMTT and IIR in the same year as the realization of lowtaxed profits. A surcharge will be applicable when insufficient QIPs are made. However, for the first year of implementation, the advance tax payments in any quarter are weighted equally. The details of the QIPs system will be provided in subsequent regulatory measures.
An interaction between the advance tax payment systems for CIT liability and the Top-up Tax liability under the QDMTT is foreseen. The goal is not to penalize taxpayers who have made sufficient QIPs from an overall (i.e., corporate income tax and QDMTT) perspective. A similar interaction is not anticipated with respect to the IIR.
OECD Administrative Guidance for the Pillar Two GloBE Rules published
The OECD/G20 Inclusive Framework on BEPS published on 18 Dec 2023 a technical guidance to assist governments in implementing the global minimum tax, including guidance on safe harbour rules, CFC tax regimes, etc.The Inclusive Framework released the same day an update to the Pillar One timeline.
Further practical updates on the impact for Belgian parent or subsidiaries will be provided in the coming tax newsletters.
VAT Deduction – Invoice requirements
(ECJ 24 May 2023, C-690/22 – Ordonnance)
In accordance with Belgian and EU legislation (Article 226 (6) of the EC Directive 2006/112), from a VAT perspective invoices must contain a set of required default information, including a description of quantity and type of goods supplied or type and extent of services rendered.
National tax authorities have occasionally refused the right of deduction to taxpayer when the invoices did not satisfy this requirement.
In the present case; in a shortcut, a VAT taxpayer established in Portugal, provides IT consultancy services.
Following a tax audit, the Portuguese tax administration has rejected the right of VAT deduction on 4 purchase invoices. According to the Portuguese tax administration, the very generic description stated on the invoices of the services provided to Shortcut did not comply with the formal requirements. As a consequence, VAT has been wrongly deducted.
The question arises whether tax authorities can refuse the right to deduct VAT on the ground that invoices with a very generic description of the services do not comply with the formal requirements of Article 226(6) of the VAT Directive?
The ECJ had already decided that the tax authorities cannot refuse the right to deduct VAT on the sole ground that an invoice does not meet the conditions required by Article 226(6) of the VAT Directive if those authorities have all the information to ascertain whether the substantive conditions for that right are satisfied (ECJ 29 September 2023, C-235/21).
In line with its concept of substance over form, the ECJ decides that the tax authorities cannot refuse the right to deduct VAT on the sole ground that an invoice does not meet the conditions required by Article 226(6) of the VAT Directive, if they have all the information they need to check that the material conditions relating to this right are met.
In addition, according to the Court, by virtue of Article 226 (6) of the EC Directive 2006/112, it is mandatory to specify the scope and nature of the services provided, but not to provide with an exhaustive description of the services.
Our VAT specialists can provide assistance in the issuance or review of VAT legislation compliant invoices.
GLOBAL MOBILITY SERVICES
End of the old special tax regime for foreign executives
On 31 December 2023, the special tax regime for foreign executives will come to an end. As a result, foreign executives (and their employers) currently benefitting from the “old” special tax regime will lose this benefit as from January 2024 onwards. Be prepared for this change!
On January 1, 2022 a new expat regime for incoming taxpayers and researches came into force. This new regime replaced the old special tax regime for foreign executives, which was introduced by the circular letter of August 8, 1983.
To soften the transition from the ‘old’ special tax regime to the ‘new’ regime, transitionary measures were included in the law. These transitionary measures are applicable until December 31, 2023, meaning that as of January 1, 2024 the old special tax regime will come to an end and foreign executives will no longer be able to claim the tax benefits resulting
The “old” special tax regime
To recap, we briefly summarize the main benefits of this regime:
- Foreign executives were considered as non-residents for income tax purposes. Consequently, they were only taxable on their Belgian source income. They were not taxable in Belgium on the part of their income corresponding to the professional working days performed abroad (i.e. "Foreign Travel Exclusion").
- The part of the gross salary deemed to reimburse certain extraordinary expenses arising from expatriate employment in Belgium was exempt from income tax in Belgium (i.e. the so-called “Tax-free allowances”). The annual amount of these tax-free allowances was capped at 11.250 EUR and in some cases 29.750 EUR.
The “new” special tax regime for incoming taxpayers and researchers
A new special tax regime for foreigners coming to work in Belgium was introduced in 2022 with the aim to continue to attract highly skilled professionals.
In comparison to the “old” regime the conditions to apply this “new” special tax regime have been changed, as well as the benefits and the duration of this regime.
These changes have an important effect that less people qualify for the conditions of this “new” special tax regime and the recurring benefit (i.e. the tax-free allowance) is limited to 30% of the gross income (to be paid on top of the gross salary), with an absolute maximum of 90.000 EUR on an annual basis and a duration of 5 years (to be extended with 3 years).
Due to the introduction of the new special tax regime, a transition period of 2 years had been implemented for the employees benefiting from the “old” special tax regime and who were not able to opt for the “new” special tax regime (as the necessary conditions were not fulfilled). This transition period started on January 1, 2022 and ends on December 31, 2023.
Because the “old” special tax regime and its related tax and social security benefits will disappear after December 31, 2023, employees and employers benefitting thereof and who could not apply for the new regime will now be considered as “regular” employees. This change will have an important impact on the total employer cost, their net salary and in some
cases also on the employee’s tax residency.
Consequently, this change has some Belgian income tax and social security consequences for the concerned employees and employers. Therefore, we recommend to analyse and quantify the impact on the salary package for the affected employees and employers.
Our Global Mobility Services experts would be glad to advise and assist you on this matter.
“Federal Learning Account” entry into force at the latest on April 1, 2024
On December 1, 2023 the Act of October 20, 2023 on the Establishment and Administration of the Federal Learning Account was published in the Belgian Official Gazette. This Act will enter into force on a date determined by the King and at the latest on April 1, 2024.
The Federal Learning Account is a digital databank in which various data of the employees are registered. The data concerned are, amongst others, the identity of the employee, the working regime of the employee, the JLC under which the employee is situated, the number of learning days to which he is entitled the current year, the number of learning days the
employee has taken for a followed training, the number of learning days to be transferred to the next year, and so on.
Individual learning right
The Federal Learning Account has been introduced in the light of the Labour Deal of October 3, 2022, on the basis of which employees have an individual learning right.
For 2023, each employee of a company with more than 20 employees has at least 4 learning days and each employee of a company with less than 20 employees has at least 1 learning day.
For 2024, this is respectively at least 5 days and at least 1 day. To keep up with the balance of the number of learning days already taken by an employee, the government introduced a transparent and uniform way to keep track of this.
Obligations regarding Federal Learning Account
The new Act on the Federal Learning Account stipulates certain obligations for the employers of the private sector. Please find an overview of the main obligations:
- Registration in each quarter of a calendar year (and at the latest within the deadline provided for the multifunctional declaration to the National Social Security Office) of the data regarding the individual learning right of their employees.
- It is the employer’s responsibility to make sure that all registered data are correct. Thus, the employer has the obligation to update the data of his employees each time this is necessary. The employee himself will also be able to access the Federal Learning Account electronically through www.mycareer.be, which will be monitored by Sigedis, an entity of the institutions of Belgian Social Security. Consequently, the employee has the right to ask the employer to alter data which is not correct.
- Sigedis will calculate on the basis of the data registered in the Federal Learning Account the individual learning account of each employee. The employer has the obligation to verify if this is correct.
- For all employees who already have an employment agreement on the date of entry of the Act (i.e. at the latest April 1, 2024), the employer has the obligation to register their data at the latest 6 months after the date of entry into force of the Act.
Employers who do not fulfil this obligation will be put on a list, which will be made public on the site of the Federal Public Service Employment Labour and Social Dialogue, if they do not remedy their obligations within 30 days after being warned about their non-compliance.
For more information about this topic, please contact our Labour law team.
KEEP IN MIND THE DEADLINE!
- VAT return December 2023 and Q4 2023 : January 20, 2024
Corporate income tax
- Withholding tax forms 273 (interests or royalties) and forms 273A-Div (dividends) and possible exemption or reduction forms with payment or attribution date December 31, 2023 : 15 January 2024