CORPORATE INCOME TAX
Belgian Government encourages enterprises to mobilize their untaxed reserves
The Belgian Tax Administration introduced a temporary measure to encourage the mobilization of untaxed reserves and bring forward the taxable moment and related tax revenues. Instead of at the standard corporate income tax (hereafter CIT) rate, eligible reserves can be taxed at a more favourable rate of 15% or even 10% in some cases.
The temporary measure applies to the following reserves to the extent they were set up in income years closing before January 1, 2017:
- Investment reserves, provided that reinvestments have been made correctly and retained during at least 3 years
- Tax-exempt reserves originating from the 120% deductibility of certain expenses (such as expenses related to electric cars, co-commuting, security and surveillance costs etc)
- Tax-exempt profits of so called integration companies (inschakelijksbedrijven/sociétés d’insertion)
- Capital gains resulting from the contribution of a business unit or a universality of goods
- Certain other tax-exempt capital gains realized under old tax exemption regimes
The temporary measure explicitly excludes tax-exempt reserves and capital gains that already benefit from other favourable regimes, such as:
- Capital gains realized on inland vessels, sea ships, commercial vehicles
- Capital gains benefiting from spread taxation
- Tax-exempt provisions for risks and charges and doubtful debts
- Capital subsidies
- Investment reserves for which the 3 year investment term or 3 year reinvestment retention period has not yet expired
- Tax exempt tax shelter reserves etc.
Preferential rate of 15 % or 10%
The preferential rate of 15 % will be applied for assessment years 2021 (related to income years starting as from January 1, 2020) and 2022, upon conversion of the untaxed reserve in a taxable reserve (an actual distribution is not required). The preferential rate can be further reduced to 10% to the extent the released untaxed reserves are used to reinvest in depreciable tangible and intangible assets during the financial year of conversion (excluding investments in passenger cars, light trucks and commercial vehicles that can be used for transport of passengers as well as investments already considered as eligible reinvestments under other favourable tax regimes). The minister of Finance clarified that the acquired assets do not need to be new, can be even acquired from group entities and can be allocated outside of Belgium (i.e. to a foreign branch) with no mandatory holding period on the acquired assets.
However, companies meeting the conditions to be considered as small enterprises could combine the (temporarily)increased investment deduction (at a 25 % rate) with the impact of this temporary measure, in case the reinvestment would be made in new assets.
When to use and when not to use
The conversion of tax-exempt reserves in taxable reserves is part of the profit appropriation of the financial year in the annual accounts. Therefore, eligible tax-exempt reserves should be convertible into liquidation reserves (subject to an additional 10% levy but distributable at a 5% or 0% withholding tax rate when distributed after 5 years, respectively upon liquidation). Moreover, the measure would allow to positively impact the undercapitalisation threshold (under the “old” thin cap rule) as from the income year following the year of conversion of the untaxed reserves. Also, for interest expenses falling under the new 30% EBITDA rule, the deduction capacity can be increased one-off during the income year during which the untaxed reserves have been released.
On the other hand, companies that are carrying forward fiscal losses or other tax attributes may rather choose not to use this measure as the released untaxed reserves constitute a minimum taxable base.
Key Attention points
This measure is optional, meaning each company can choose to either get taxed on the eligible untaxed reserves in due time (upon distribution or liquidation) at the normal CIT rate and with the possibility to offset the resulting profit with tax losses carried forward or other tax deductions. Or to make use (for assessment years 2021 and 2022) of the separate levy that forms a minimum tax, considering no offset is possible against its taxable base and the levy cannot be offset against withholding taxes or tax credits. It should be noted also that the surcharge for insufficient prepayments would be applied to this special levy as well.
The measure is only valid for assessment year 2021 and 2022 with financial years starting January 1st, 2020. Additionally, eligible untaxed reserves must have been recorded before the beginning of financial year 2017.
CORPORATE INCOME TAX
Fee forms 281.50 : filing deadline of June 29, 2021
Each company or branch annually has to file tax fee forms 281.50 for commission payments, consultancy fees, benefits in kind, rebates granted via credit notes, etc. paid or attributed in the course of the preceding calendar year to (Belgian or foreign) beneficiaries for whom these payments are professional income.
In principle, the fee forms related to calendar year 2020 have to be filed electronically via the online platform ‘Belcotax-on-web’ ultimately on 29 June 2021.
Those who fail to comply with the rules in time (late or no filing) risk to be subjected to a separate assessment (‘secret commissions tax’) of 100% (or 50% in case it can be demonstrated that the beneficiary of the income is a legal entity and subject to corporate income tax).
As from 1 January 2020 the secret commission tax is no longer tax deductible. In addition, no tax attributes can be offset against this separate tax assessment, resulting in an effective tax cash-out even in case of a tax loss position.
The secret commissions tax does not apply in case it can be demonstrated that the beneficiary properly has declared the income. Further, in case the income was not properly declared by the beneficiary, no secret commissions tax is levied if the beneficiary is identified at the latest within 2 years and 6 months following January 1st of the tax year concerned.
Do not hesitate to contact your Mazars contact person if you would have any question or if you would like to have our assistance with the filing of these forms. Indeed, proper compliance of these forms will decrease the risk of tax audit questions and avoid cash-out through the payment of the 100% assessment in the medium term.
1. COVID-19 vaccines, COVID-19 tests and closely linked services are zero-rated
One of the COVID-19 measures by the Belgian Authorities was a temporary VAT rate decrease to 0% for COVID-19 vaccines and COVID-19 tests and related services.
In a new Directive 2021/C/33 the Belgian VAT Authorities are clarifying which specific goods and services are zero-rated, with a focus on related services.
The zero rate is a temporary measure lasting until 31 December 2022.
The following goods are covered:
- COVID-19 vaccines that have received an EU market license. This is currently the case for 4 vaccines Pfizer, JnJ, Moderna & AstraZeneca.
- In-vitro diagnostic tests. It concerns PCR, serological, antigen and self tests. However, cotton swabs, recipients or other material needed for performing the tests but that also can be used for other type of services, are subject to the normal VAT rate unless they are included in the test kit.
The following services are covered:
All services that are needed to operate a vaccination centre:
- Reception desk services
- Security on the premises
- Administrative support
- Cleaning services
- Callcenter services
- Vaccination campaigns…
The following services are explicitly excluded:
- Services related to food and beverages
- Any commute to and from the vaccination centre
- Immovable lease (this is exempted from Belgian VAT)
Note that the zero rate is not applicable on services and / or goods that were provided to / by the vaccination centre before 1 January 2021.
When in doubt, please don’t hesitate to contact your Mazars Indirect Tax advisor.
2. Permanent cancellation of the December pre-payment
Last year, the December VAT pre-payment was cancelled as one of the COVID-19 measures.
The pre-payment is a procedure whereby the taxable person needs to pay an advanced VAT payment for the December transactions by 24 December. In principle the VAT related to these transactions are due by 20 January. There are two calculation methods:
- A payment based upon the actual transactions performed between 1 and 20 December
- A payment of the same amount paid for November / 3rd quarter
In the former case the taxable person needs to report the amount in box 91 of the Belgian VAT return.
This pre-payment is now cancelled permanently. Box 91 of the Belgian VAT return stays on the form but is not being used anymore.
3. New minimum refund thresholds
When a taxable person is in a refund position, the refundable amount is transferred to the next return period. At the end of every quarter the taxable person can request a refund as long as a minimum threshold was reached. As from 1 April these thresholds have been decreased.
4. Temporary decrease of proportional penalties
For the (partial) non-payment of the VAT amount as stated in the VAT return, the proportional penalty is decreased to 10% (instead of 15%). This measure is only applicable from 1 April 2021 until 30 June 2021.
5. Pro memorie – renting out your holiday home – with or without VAT
The COVID-19 pandemic made holiday homes more popular than ever. Therefore a short reminder. Or, if you are thinking about investing, a short introduction on the VAT principles.
The main principle – renting out immovable property is exempted from VAT. Renting out a holiday home follows that same main principle as is the furniture and available appliances, dishes, etc. in the fully-fitted holiday home.
Because the rent is exempted from VAT, there is no right to deduct VAT on all costs incurred.
There is however one exception, offering hotel services and renting out fully fitted rooms is not exempted from VAT.
The owner will have to invoice VAT and has a right to deduct VAT on all costs incurred.
What is the difference? The VAT Authorities consider the renting out of holiday homes or apartments as VAT taxable only if a package of hotel services is included in the rental fee:
- Frequent cleaning of the premises during the stay
- Providing and changing household linen during the stay
- Providing some kind of reception
- Providing breakfast
The courts however are much more lean when it comes to these hotel services. There are examples whereby the court considered the rent as VAT taxable if the owner only provides the key and a tour around the premises as long as the rental period is short.
The ruling commission is somewhere in between – in principle it follows the VAT Authorities point of view but is leaner when it comes to the specifics or timing (for example, a physical reception is not necessary as long as there is a cell phone number that can be contacted 24/7,…).
In short, there is still a grey area. When in doubt you can contact us and we will pleased to assist you. This grey area allows you to opt for the one system or the other as long as you accept all consequences from your option.
6. Holiday pictures !
After the holidays you want to show off (and bore) the people with your pictures. For those old-school people, ignoring Instagram and other socials, and still printing their pictures, we have this nice-to-know.
In principle, having your pictures printed is rated at 21%. However, if you opt to have your pictures printed in an album, this should be rated at 6%! Even if you would only have a digital copy of the album (yes, as from 1 April 2019, the 6%-rate is also applicable on eBooks).
In case you hired a photographer to make a complete photo-shoot, he doesn’t have to split the invoice between his services and the album – all is taxable at 6%.
Note that eBooks with audio and video are still taxable at 21%.
PERSONAL INCOME TAX
VVPRbis and the application on ‘interim and intermediate dividends’
Dividends are usually submitted to a 30% dividend withholding tax rate. However, in 2013, the Belgian tax legislator has introduced the so-called ‘VVPRbis’ regime, an advantageous method for dividend distributions made by small companies. This regime foresees in a reduced withholding tax rate if the below indicated conditions are cumulatively met:
- The dividends are distributed by a small enterprise (according to article 1:24, §1-6 WVV)
- The dividend must relate to new nominative shares, issued as of July 1, 2013
- Those shares must have been issued due to a new contribution in cash and should have been fully paid up and may not be preferential
- Shares should be held uninterruptedly in full ownership
In case these conditions are met, dividend distribution is possible at a 20% withholding tax rate if the dividends are paid or attributed at the time of profit distribution during the second accounting year following the capital contribution or at a 15% withholding tax rate if the dividends are paid or attributed at the time of profit distribution during the third (and following) accounting year(s).
Questions and concerns were raised whether the ‘VVPRbis’ method was also applicable on interim and intermediate dividends. As a short recap, interim dividends relate to the result of the current financial year whereas intermediate dividends relate to accumulated profit and available reserve.
The former Minister of Finance already confirmed in the past that the law does neither specify the manner the profit allocation must be performed, neither to which profits the dividends must relate to.
A Circular Letter of 23 April 2021 (Circ. 2021/C/36) stipulates that both types of dividends are to be considered to be part of the profit distribution of the current financial year. As such, in order to determine the applicable withholding tax rate, one needs to look at the financial year in which a profit distribution takes place, to determine whether a rate of 20% or 15% is applicable.
Example: a small enterprise, incorporated in 2015, had its first closure of the accounting year at the end of 2016. In the course of 2019, an ‘interim dividend’ was distributed. As such, the withholding tax rate will amount to 15% since it concerns a profit distribution of the 3rd financial year following the year of capital contribution.
KEEP IN MIND THE DEADLINE!
- VAT return May 2021 : June 20, 2021
Corporate income tax
- Forms 281.50 (calendar year 2020) : June 29, 2021
- Prepayment corporate income tax Q2/2021 : July 12, 2021
Personal income tax
- Personal income tax return - Belgian residents
o On paper : June 30, 2021
o Via Tax-on-web : July 15, 2021
o Via proxyholder (Tax-on-web) : October 21, 2021
- Wage withholding tax return (May 2021): before June 15, 2021
- Second monthly prepayment for social security contributions Q2/2021 : June 5, 2021