Legislation repairing corporate tax reform submitted to Parliament
Tax consolidation – group contribution
The draft legislation now explicitly requires that a direct participation (of at least 90% for at least 5 years) is required. On the other hand, it is no longer required that the financial years of the participating companies start and end on the same date.
In addition, the amount of the group contribution is no longer limited to the loss. It is also confirmed that the received group contribution must be included in the taxable base. No tax deductions can be applied on the received group contribution.
Special rules are also foreseen regarding the minimum 5-year participation period in case of restructurings.
As a reminder, the tax consolidation will enter into force for assessment year 2020, linked to a taxable period starting on or after 1 January 2019.
Foreign permanent establishments now also fall into scope. Double taxation is avoided when CFC profits are distributed or in case of a (non-exempt) capital gain on shares. Taxpayers will be required to report any CFC.
The CFC rules will enter into force for assessment year 2020, linked to a taxable period starting on or after 1 January 2019.
Interest deduction limitation (earnings stripping rules)
As is known, the deduction of interest will be limited to the higher amount of 3 MEUR or 30% of EBITDA. The amount of EBITDA must be reduced with the deducted group contribution. Companies that issue real estate certificates and leasing and factoring companies now fall outside scope.
The interest deduction limitation will enter into force for assessment year 2021 related to a taxable period starting as from 1 January 2020.
For the calculation of the incremental equity, it is the equity at the beginning of the taxable period (X and X-5) that must be taken into account. Any changes to equity (and to the corrections to be made to it) during the taxable period must no longer be taken into account.
An anti-abuse measure is foreseen that excludes equity which the shareholder has financed by debt for which interest has been deducted (thus avoiding a double deduction, of NID and of interest).
The incremental NID enters into force for assessment year 2019 related to a taxable period starting as from 1 January 2018.
Sanction in case of insufficient salary of directors
It is confirmed that the salary must be paid to a director which is an individual. If there is no individual director, the sanction will apply anyway. The sanction can also apply to non-residents. The increase of the sanction from 5 to 10% as from 2020 is abolished.
- The fairness tax will not be explicitly abolished as the Constitutional Court has already annulled the tax (while partly maintaining its effects for the past)
- The extra deduction of 20% for common transport, security and incentives for bike use will be abolished (only for corporate tax purposes) as from assessment year 2021