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Attention points for prepayments in assessment year 2020 – Impact of Earning Stripping Rules

As the end of 2019 draws near, we would like to focus your attention on the last prepayment date for this year.  This is the last chance for every company in a tax paying position who has not yet made sufficient prepayments to avoid or mitigate a tax increase. For companies with a year-end closing on December 31st the deadline for this last prepayment is December 20th, 2019. 

In addition, be aware that since January 1st, 2019 the new rules on limitation of interest deduction (Earning stripping rules) entered into force and can have an impact on the amount of prepayments of the company.

Although the complete legal framework of the new regime still needs to be finalized, we already developed a tool to simulate the impact of these new interest limitation rules.

Such simulation is needed in order to optimize the last prepayment for the financial year. Note that especially for taxpayers being part of a group / consortium it is advisable to look into this without further delay.

General information concerning prepayments

As a reminder, every company in a tax paying position can prepay its corporate income tax (CIT) to avoid the surcharge that applies if no, or not enough, prepayments are made. Each quarterly tax prepayment leads to a credit, which reduces the overall CIT surcharge.

For assessment year 2020 a surcharge rate of 6,75% on the tax liability of a company applies. On the other hand, a prepayment done in the first quarter brings along a credit of 9%. For the second quarterly prepayment, a credit of 7,5% applies.  In the third quarter the credit rate drops to 6% and eventually in the fourth and last quarter the credit is limited to 4,5%,.

Prepayments in the last quarter of 2019 

A company that hasn’t made any prepayments in financial year 2019 can still do so in the fourth quarter and this until December, 20th  (for companies with financial year ending December,31st). Although the credit rate linked to this last quarterly prepayment (4,5%), is only 50% of the credit linked to prepayment done in the first quarter, it might still be worthwhile to consider in order to avoid, or at least mitigate, the tax surcharge of 6,75%.

Contact your KPMG Tax Adviser to discuss the impact of this new interest deduction limitation rule on your company’s tax position and consider if, from a tax cash management perspective, it’s advisable to meet the last prepayment deadline, December 20th, 2019.

New account number

As mentioned in our E-tax flash of March, 2019 prepayments made for assessment year 2020 must be paid to the new bank account number BE61 6792 0022 9117 of the tax prepayment service.

A transition period is foreseen meaning that all tax prepayments made to the old bank account number will be transferred automatically. Since this may have an impact on the payment allocation date, we highly recommend to immediately use the right bank account number.

Reimbursement or transfer of prepayments – some changes

If early 2020 it would turn out that too much prepayments were made, it is possible to have the excess prepayments either refunded or transferred to the following taxable period.  In the past this could be done by simply writing a letter or e-mail to the tax prepayment service within one after the receipt of the prepayment overview.

In this respect, please be informed that the tax authorities will no longer send this prepayment overview (unless upon written request).  Instead, companies have the possibility 24/7 to check their real-time prepayment situation via the MyMinfin platform.  In addition, as from now on, transfer or refund requests of excess prepayments should also be filed via “MyMinfin” and this within 3 months after the end of the taxable period. Only, in exceptional cases written refund/transfer requests are allowed.

KPMG Tax Advisers 

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Frank Vancamp
Tax Partner

Corporate Tax
Brussels

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