Real estate sector : optional VAT regime for immovable letting
In the context of budgetary control end March, the Belgian Government reached an agreement on the optional VAT regime for professional letting of immovable goods. Last year, this real estate VAT reform was cancelled last minute due to budgetary reasons, even though this option is already foreseen in different other EU Member States.
The new VAT regime will provide landlords the broad option to apply VAT on professional lettings of "new" buildings (being constructed or sufficiently renovated) as of 1 October 2018. In order to apply VAT, both parties will have to agree.
If the option is exercised, the revision period for the immovable property will be extended from 15 years to 25 years.
Besides the possibility to charge 21% VAT on the professional lease, the short term lease (<6 months) of old and new immovable properties will be subject to 21% VAT, except for private dwellings or social housing. This is not optional but compulsory,
By applying VAT on the letting, landlords will now become entitled to deduct input VAT on costs related to immovable goods (construction, maintenance, etc.). This measure should improve the competitiveness of the Belgian real estate sector and should lead to an administrative simplification.
Brexit: impact on VAT and customs
Finally, the answer to a very important question if your business is involved in transactions with the UK: the EU and UK negotiators have reached an agreement regarding when the Brexit will affect VAT and customs practice.
In order to allow businesses to prepare themselves to tackle the VAT and customs challenges, the implementation of a transition period is agreed upon between the EU and the UK. The transition period is planned to take an end on 31 December 2020, even though that it is foreseen that the UK will leave the EU as from March 31, 2019. Important to mention, the agreement regarding this transition period is still to be ratified by both parties.
As of the 1st of January 2021, sales and purchases to and from the UK will then no longer qualify as intracommunity transactions, but as export and import transactions.
CORPORATE INCOME TAX
Belgian Constitutional Court annuls 5,15% fairness tax
On March 1, Belgium’s Constitutional Court declared the so-called "Fairness Tax" unconstitutional, thus nullifying it.
The fairness tax, effective from tax year 2014, is a separate tax imposed at a 5.15% rate on dividend distributions by non-SME companies, to the extent that they offset taxable income, in the year of distribution, with current year notional interest deduction and/or tax losses carried forward. It applied both to Belgian resident companies and to Belgian establishments of foreign companies.
The Constitutional Court struck down the Fairness Tax in its entirety. However, in the light of budgetary and administrative difficulties, the consequences of the annulled tax are maintained for prior tax years 2014 to 2018, which implies that the fairness tax cannot be recovered for those years, except to the extent the law violates the EU Parent-Subsidiary Directive, i.e. the situation that a Belgian company redistributes a dividend since this was considered incompatible with the PSD by the ECJ judgement of 17 May 2017.
Further to the Court decision, the Fairness Tax is automatically abolished for tax year 2019 (financial year 2018) and following years (which was already the intention of the Belgian Governement).
PERSONAL INCOME TAX
Mobility allowance or "cash for cars"
The Belgian government has recently adopted a new regulation that would allow employees to voluntarily exchange a company car (with fuel card) for cash.
By returning their company car (with fuel card), employees will receive a mobility allowance in return. This exchange should be considered as a full exchange since the employee will renounce his right to a company car and all related benefits. This allowance should then be used by the employee to finance his private travel and commuting.
The amount of the mobility allowance will be calculated based on the catalogue value of the company car and will be increased in case the employee had a corporate fuel card at his disposal and will be decreased with any personal car related contributions made by the employee.
Important to know is that the implantation of such mobility allowance is subject to a few conditions concerning the company car system within the company.
From a tax and social security perspective the granting of a mobility allowance could be beneficial. Your Mazars contact person is able to calculate what the impact would be for the employer and the employee. Since this regulation has not yet been published in the Belgian Official State Gazette, this regulation could still be subject to some changes.
On May 1, 2018 the new insolvency law will enter into force. This new law merges the existing continuity of enterprises act of 31 January 2009 and the bankruptcy act of 8 August 1997 in a single text, which at the same time is integrated within the Economic Law Code. Going further than the mere coordination of existing legislation, the new insolvency law constitutes a thorough reform.
Important innovation is the broadening of the personal scope of application of insolvency legislation as the new legislation will be applicable to all enterprises, i.e. any individual who independently exercises a professional activity, any legal entity and any organisation without legal personality. This is much broader than the former concept of "trader".
Other innovations are the full digitization of all insolvency proceedings, reinforced preventive measures, the strengthening of the "second chance" rules and the introduction of a wrongful trading provision. The latter broadens the directors’ liability and strives to have the directors acting immediately when the company is in difficulties.
KEEP IN MIND THE DEADLINE
GDPR : effective as of May 25, 2018
VAT return April 2018 - May 20, 2018