Corporate tax reform measures entering into force in 2020
Corporate tax rate reduction
The corporate tax rate is further reduced and the crisis contribution is abolished.
The standard corporate tax rate drops from 29,58% to 25%. For small companies, the first 100.000 EUR of profits are taxed at 20% (instead of 20,4%).
R&D - partial exemption of payment of wage withholding tax
The exemption of payment of wage withholding tax for scientific research staff holding (scientific) bachelor degrees is increased from 40% to 80% as from 1 January 2020.
Tax free reserves
Certain tax free reserves constituted before 2017 can be converted to taxable reserves at a preferential rate of 15% or 10%, if reinvested.
Interest deduction limitation
The last part of the EU anti-tax avoidance directives (ATAD I and II) is implemented. A limitation of deductible interest to the highest of 3 million EUR or 30% of EBITDA is introduced.
The new limitation only applies to interest on loans concluded as of 17 June 2016. The existing thin capitalization rule (5:1) remains for interest on “old” intra-group loans and for interest paid to tax havens.
For the calculation of interest and EBITDA, an ad hoc consolidation must be made.
Non-deductible interest is transferable without limit to the following years. There is also the possibility of transfer to other group companies.
Stand-alone entities and financial companies are excluded.
Permanent establishments (PE)
The definition of Belgian establishment is extended to commissionaires based on BEPS actions 1 and 7 of the OECD.
Losses of foreign establishments of which the profits are exempt by treaty in Belgium are only deductible in Belgium if they concern “definitive” losses within an EEA member state.
Deduction of company car costs in function of the CO² emission according to the following formula:
120% - (0,5% x coefficient x number of grams of CO² emission per km) (for diesel cars the coefficient will be 1, for petrol cars 0,95)
Deduction between 50 and 100% (but 40% if CO² emission > 200 g)
Excess deductions (e.g. 120% deduction for electric cars) will be repealed (limited to 100%).
Deduction of fuel costs will be based on the same formula (now always 75%).
For plug-in hybrids, in case the energy capacity of the electric battery < 0,5 kWh per 100 kg weight of the car or the CO2 emission > 50 g/km, the emission of a corresponding vehicle which runs exclusively on a fuel engine will be taken into account. In absence of such a corresponding vehicle, the emission will be multiplied by 2,5. This will only apply for vehicles purchased as from 1 January 2018.
The double declining depreciation method will be abolished.
The first depreciation will also for SMEs be applied on a pro-rata temporis basis.
Separate tax on insufficient director’s salary
The tax rate will be increased from 5,1 to 10%.
Fines no longer deductible
All fines will no longer be tax deductible, such as proportional VAT fines, registration duty fines and increases of social contributions.
Several other exemptions, such as for additional personnel, will be abolished.