A new tax on banks and insurance companies
More details about the new tax, based on the currently available information (subject to change):
The tax is due by credit institutions and insurance companies which are established according to Belgian law and which are recognized (based on the law of 24 April 2014 for credit institutions and the law of 9 July 1975 for insurance companies) and by other credit institutions and insurance companies which exercise their activities on the Belgian territory. An exception is made for companies (meant in art. 261, third section BITC) that have a license to act as administrator of a recognized centralized system for securities lending.
Technically, the tax consists of a reduction of the normal dividends-received deduction, notional interest deduction and/or tax losses carried forward (changes to art. 207 BITC). The reduction will in practice lead to an effective cash-out in the hands of all credit institutions and insurance companies in scope, irrespective of the dividend-received deduction, notional interest deduction or tax losses available in their hands.
For credit institutions, the aforementioned deductions must be reduced with the amount of the 'debts to clients', as recorded on Line 229 in table 00.20 (solo) of the Scheme A (territorial), multiplied by 3,23% (for AY 2016) and multiplied by the notional interest deduction rate of the company. The percentage for later assessment years will be determined by Royal Decree.
For insurance companies, the aforementioned deductions must be reduced with the technical provisions, as recorded in account C (code 14) "technical provisions" and account D (code 15) "technical provisions" regarding transactions linked to an investment fund of the group of activities "Life" when the investment risk is not borne by the company? of the balance sheet as described in the annex to the Royal Decree of 17 November 1994, multiplied by 2,22% (for AY 2016) and multiplied by the notional interest deduction rate of the company. The percentage for later assessment years will also be determined by Royal Decree.
The reduction will be attributed to the effectively used tax deductions in the following order:
- tax losses carried forward;
- dividends-received deduction (with priority to the dividends-received deduction which can be carried forward);
- notional interest deduction.
The reduction of the dividends-received deduction cannot lead to a higher use of the notional interest deduction of the current year, nor of the stock of the notional interest deduction carried forward. Both the reduction of the dividends-received deduction and the reduction of the tax losses will lead to an increased carry forward.
The new law would enter into force as from assessment year 2016. Should you have any questions, please do not hesitate to contact your KPMG tax advisor.