Mazars Info April 2023

CORPORATE INCOME TAX

Proposal tax reform Finance Minister: impact holdings & investment companies

In addition to our article in our March 2023 newsletter, The Minister of Finance proposes significant changes to the dividend received deduction (“DRD”) regime and the taxation of dividends and capital gains on shares.

The capital gain exemption and DRD regime are currently subject to three conditions:

• Taxation condition
• Holding period condition
• Minimum participation condition (minimum participation of 10% / acquisition value ad € 2.5M)

The DRD would be replaced by a dividend received exemption (“DRE”) and would be fully compliant with the EU Parent Subsidiary Directive (also in view of Pillar 2 implementation).

Investment companies are currently only subject to the taxation condition. The Minister of Finance proposes to abolish this preferential treatment by adding the minimum participation condition and holding period condition to apply the DRE / capital gains tax exemption. This amendment would trigger an increased tax burden, in particular for Belgian private equity funds
and DRD investment companies.

The minimum participation condition would be revisited and aims to exclude (short-term) shares held for mere investment purposes. Companies with a participation below 10% but an acquisition value north of € 2.5M could only claim the DRE or capital gains exemption if their participation qualifies as financial fixed assets for statutory GAAP purposes, which consider a
long-term relationship. Companies could (re)consider their accounting classification.

These measures are heavily criticized by different stakeholders, in particular the private equity business. The Prime Minister will consult the different political parties in the coming days on the proposal of the Minister of Finance.

Forms 281.50 – 29 June 2023 deadline approaching

Each Belgian company or permanent establishment annually has to report on tax forms 281.50 all payments related to commissions, service fees, benefits in kind, commercial discounts granted by separate credit notes, etc.

The forms have to be drafted per calendar year, irrespectively the closing date of the financial year. For payments made during calendar year 2022, the ultimate deadline is 29 June 2023.

As from income year 2021, the scope of this reporting obligation has been reduced significantly:
No fee form 281.50 should be filed if :

• The cost or benefit relates to goods or services provided by a taxpayer who is based in the European Economic Area (European Union + Norway + Iceland + Liechtenstein) AND an invoice or other equivalent document for the payment is established according to the applicable VAT legislation. Or
• The amount of the cost or the benefit does not exceed the amount of € 250,00 per recipient per calendar year

Non-compliance with this reporting obligation could trigger a separate tax assessment the socalled “secret commission tax”, on the non-reported / belatedly reported amounts.

The secret commission tax is not tax deductible. Moreover, no tax attributes can be offset against this separate tax assessment (“effective tax cash-out”).

VAT

Project to modernize the VAT chain adopted by the Federal Parliament

The project aiming to modernize the VAT chain has recently been adopted by the Federal Parliament. The law of March 13, 2023, introduces major changes in the Belgian VAT Code on procedural aspects.

• Article 3 of the law introduces a new sanction mechanism in case of late or absence of submission. The current procedure does not guarantee that all taxpayers will be treated equally, since a respective tax office can act more quickly than its counterpart in the occurrence of these events. After a period of 3 months, the administration will automatically notify the taxpayer of a proposal for a substitute return. The amount of VAT due is the highest of the last 12 months with a minimum of € 2.100.
• Article 4 of the law amends Article 62 of the Belgian VAT code in the frame of request of information raised by the tax authorities to verify the amounts submitted. In such case the taxpayer is compelled to answer in writing and within 1 month as from the 3rd working day following the date of the notification.
• The future amendment of Royal Decree n°4 completes the modifications introduced by the law. This amendment will allow taxpayers subject to monthly VAT submission to request refund of their VAT credit for each compliance period.
• With the implementation of the new provision account (Compte-provisions/Provisierekening) the refund claim within the framework of the filling of periodic return will only concern the excess amount determined by the declaration itself for and not the aggregated amount.
• In accordance with this law, Royal Decree n°4 will also be amended allowing quarterly taxpayers to submit their VAT return until the 25th of the month following the quarter.

The law is scheduled to enter into force as from 1st January 2024. Our specialist VAT team can provide a tailored assistance in the frame of these new rules.

PERSONAL INCOME TAX

New filing deadlines for the personal income tax return as from assessment year 2023

Introduction
As from assessment year 2023 (income year 2022), the Belgian tax administration applies different filing deadlines for the personal income tax return. Depending on the nature of the income and the complexity of the tax return, a longer filing period may or may not be tolerated.

General
According to the general principle, a paper tax return must be submitted by 30 June 2023 at the latest. An online tax return via Tax-on-Web will have to be submitted no later than 15 July 2023 (in accordance with previous years). However, this deadline will not only be applicable for the taxable person who would file his/her own personal income tax return, but also proxy holders will need to respect this deadline (except for the cases below).

Complex tax return
If a complex tax return should be submitted, a paper tax return will also have to be submitted no later than 30 June 2023. For a complex tax return to be filed electronically (via Tax-on-Web) an extension is possible for the taxable persons (and the proxy holders) until October 18, 2023.

A tax return is considered complex if it contains one or more of the following income:

• Profits and/or gains;
• Remuneration of company directors;
• Remuneration of the assisting spouses (legal cohabitants);
• Foreign professional income.

Proposal for simplified tax return
The time limits for the submission of a proposal for simplified tax return follows the same approach as the general principle. If an adjustment has to be made to the proposal for a simplified tax return, a filing deadline via Tax-on-Web of 18 October 2023 (at the latest) has to be requested by the individual or the proxy holders.

However, please note that this is only applicable in case the adjustment includes one or more of the following income:

• Profits and/or gains;
• Remuneration of directors;
• Remuneration of the assisting spouses (legal cohabitants);
• Foreign professional income.

Lump-sum basis
Taxpayers who are taxed on a lump-sum base will need to file their tax return no later than 15 January 2024.

PERSONAL INCOME TAX

Overview

Below you will find an overview of the filing deadlines:

(1) For the definition of a complex tax return, we refer to the conditions mentioned in the paragraph complex tax return.
(2) Only applicable under certain conditions.

GLOBAL MOBILITY SERVICES

New proposed social security framework agreement on telework

According to the EU Regulation on social security Nr. 883/2004, the general rule to determine the competent social security State is that the employee is subject to the social security system of the State in which his employer is located. In case of activities in two or more Member States, the employee is subject to the social security system of the State of residence provided the employee works more than 25% in the State of residence. During the Covid-19 crisis, this rule was “temporarily” put on hold since a lot of employees were – at that time – forced to work from home through telework. Today with the introduction of telework in our normal way of working, a long-term solution is needed to guarantee this flexible way of working and to avoid a switch in social security system due to a limited number of teleworking days in another country then the employer State.

Consequently, the Working Group consisting out of 42 experts from 20 different EU Member States, has received a mandate entitling them to draft a clear definition of “telework”, create an uniform framework of the rules applicable to telework and create specific designation rules for a model framework agreement based on article 16 of the EU Regulation Nr. 883/2004. The work of this Working Group has, after some months, now been written down in a summary report to be presented to the Administrative Commission of the EU on 29 March 2023.

Although the legal texts have not yet been published, we would like to share already some of the details (which will be confirmed once the official text will be published).

The current rule in case of simultaneous employment (i.e. working simultaneously in more than one Member State) states that, generally, when an employee works more than 25% in the State of residence, the employee will be subject to the social security system of the State of residence.

The basis for the proposed framework agreement would be based on the “exception” article 16 of the EU Regulation nr. 883/2004 entitling Member States to deviate from the general rule. This agreement would become applicable to employees working for an employer with a seat in a Member State and employees teleworking from their state of residence.

According to this new framework agreement, when an employee works less than 50% of the working time through telework in the State of residence over a period of 12 months, the Member State in which the seat of the employer is situated remains authorized to levy social security contributions. If the 50% teleworking-from-home-threshold would be exceeded, the employee would become subject to the social security system of the state of residence, implying that the employer should register for social security purposes in the state of residence. However, both employer and employee should agree that this framework agreement will be applied for the case in question. Otherwise, the general rules of the EU Regulation nr. 883/2004 will remain applicable.

This new rule for the framework agreement proposed by Working Group will normally take effect as of 1 July 2023 for all the countries that sign this framework agreement. Since this will take place the coming weeks, it will always be required for each Member State combination to verify whether the framework agreement has been agreed.

We will keep you informed on the further progress of this proposed framework agreement once more information becomes available.

Protocol of the Belgian and Luxembourg Double Tax Treaty : Disagreement over interpretation

In our previous newsletter of March 2023, we drew your attention on the new protocol concluded between Belgium and Luxembourg which is applicable since 1 January 2022.

This new legal text allows Belgian or Luxembourg cross-border workers, who normally work in another State than their state of residence, to (tele)work in their residence State during 34 days per year without any tax consequences.

As it is often the case, the rule appears to be clear in theory, but in practice, the application is not as straightforward as desired.

In fact, it appears that the Belgian and Luxembourg tax authorities disagree over the interpretation of the rule if a part-time worker wants to benefit from the new tolerance.

On one side, Luxembourg states that the part-time worker keeps his right to the 34 days of tolerance, but on the other hand Belgium mentioned that in such scenario, the 34 days need to be prorated according to the part-time working regime (2/3, 4/5, …).

As this disagreement over interpretation could lead to double taxation, the Belgian Minister of Finances asked his Administration to contact the Luxembourg Administration in order to get a mutual interpretation.

If you have employees working in Luxembourg or Belgium and you believe this protocol might be applicable to you or you have questions about cross-border employment situations, please reach out to your Global Mobility contact at Mazars.

LEGAL

Legislative proposal containing book 6 'Extra-contractual liability' of the new Civil Code

On 8 March 2023, a legislative proposal containing Book 6 "Extra-contractual Liability" of the (new) Civil Code was submitted, marking another important step in the reform of the Belgian Civil Code.

This proposal significantly amends and expands the legal provisions on extra-contractual liability, given that the current (old) Civil Code contains only six articles in this regard. Given the increased importance of this matter, the existence of significant gaps in the legislation as well as the lack of legal certainty (due to a lack of definition of essential elements), a reform was imminent.

Three key features can be identified in the reform: a clearer and more readable structure of extra-contractual liability law, the confirmation of several developments in case law and the introduction of a number of innovations in areas where case law was uncertain or contradictory.

The new book 6 will be divided into seven chapters: introductory provisions (chapter 1), facts giving rise to liability (chapter 2), causation (chapter 3), damages (chapter 4), consequences of liability (chapter 5), injunction or prohibition (chapter 6) and special liability regimes (chapter 7).

Here is an overview of some notable novelties and changes to the existing rules on extracontractual liability law.

➢ Concurrence of contractual and extra-contractual liability
The principle that parties who enter into a contract thereby implicitly exclude the application of the extra-contractual liability rules, has been abandoned. The reform allows the injured party to choose which of the two legal grounds to base his claim on.

In addition, an end is put to the quasi-immunity of the executive agent, based on which the principal creditor can sue the executive agent of the principal debtor only extra-contractually under the same conditions as he can sue the principal debtor extra-contractually. This is only possible in exceptional cases, such as in cases of crime. The executive agent also cannot, as a rule, be sued contractually by the principal creditor, but only by his principal, the principal debtor. The proposal of abolishing this quasi-immunity is accompanied by the possibility for the executive agent to raise the same defences against the injured party as the principal debtor.

➢ Presumption of liability for another's act
The proposal introduces a refutable presumption of liability against persons who, by virtue of a statutory or regulatory provision, a judicial or administrative decision or a contract, are entrusted with the overall and permanent supervision of another person's way of life. This presumption may be rebutted by demonstrating that the damage is not due to an error in supervision.

➢ Causal link
The definition of the concept of the causal link as a condition without which the damage would not have occurred, is retained, while also being refined and supplemented for some specific situations. Where there is uncertainty as to whether the liable party caused the damage, the theory of loss of opportunity is no longer used, but replaced by proportional liability. The injured party is entitled to partial compensation for the damage in proportion to the probability with which the fault caused the damage.

➢ Fault as the basis of liability for own acts
The material element of the fault is emphasised, while the subjective element loses importance. Consequently, the requirement of "knowingly and intentionally" violating the standard of conduct was omitted. Specific provisions regulating the liability of minors and the mentally challenged are introduced.

➢ Equal treatment of natural persons and of private and public legal persons
The proposal explicitly confirms that legal persons are subject to the same liability rules as natural persons. In addition, legal persons can be held liable not only directly, but also on the basis of the fault of a person for whom they are liable.

➢ Plurality of liable parties and recourse claims
If several persons are liable for the same damage, they are liable in solidum, and the person who has compensated the injured party may exercise recourse against his co-respondents to the same extent. The rules under which several persons who have committed a common fault are jointly and severally liable are abolished.

Finally, there are a number of issues that are not addressed in the legislative proposal, mainly because of the complexity of the concerned problem, the many actors involved and the diversity of interests and competences. These include a number of special liability regimes, ecological damages and third-party payer recourse.

The provisions of the new book 6 will apply to facts that occurred after the law came into force.

However, this is still only a legislative proposal and thus, subject to change. We will keep you updated on the further progress of parliamentary work.

KEEP IN MIND THE DEADLINE!

VAT

• VAT return (Monthly) March 2023: April 20, 2023
• VAT return 1st Quarter 2023 (Quarterly): April 20, 2023

Corporate income tax

• Forms 281.50 : 29 June 2023