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Draft law containing extra tax measures to help companies to face COVID19 outbreak introduced in parliament

The government introduced a new draft law containing extra measures to combat the economic consequences of the corona crisis for our enterprises. 

  1. Carry back of corona losses 

Enterprises (either subject to personal income tax or to  corporate income tax) will have the possibility to carry back the estimated loss due to the corona crisis of income year 2020 and impute it on the taxable revenue of income year 2019. This measure is intended to allow companies to get a faster refund of tax prepayments or to pay less taxes for assessment year 2020.

The carryback, which can never be higher than the taxable profit of income year 2019, will be limited by a double ceiling: the losses to be borne by the company for income year 2020 and  an absolute maximum of 20 Mio EUR. This temporary exempt reserve can be applied for income year 2019 and will be added back to the taxable income of the following income year, 2020.

The estimate of the  loss of the company  will need to be as close as possible to the actual loss with a maximum tolerance  of 10%. The exceeding difference will be  taxed higher in the following year at a separate rate scaling up to 40% depending on the amount of the excess.

A specific provision is also foreseen to eliminate the possible benefit of the reduction of the corporate income tax rate to 25 % as from assessment year 2021.

  1. Reserve fund for equity reconstruction  

For the next 3 years following income year 2020 and to help companies to regain the equity they lost due to the corona crisis, companies will be able to allocate part of their profit to an exempt  ‘reserve fund for equity reconstruction’.

This reserve fund has to be constituted as an intangible reserve and the maximum amount is also limited by a double ceiling either the accounting loss of income year 2020 or 20 Mio EUR.  

The reserve fund is also linked to the employment of the company. Personnel costs, for income year 2020 and the 3 following years should equal, at least 85 % of the personnel costs paid in 2019. If not a pro rata part of the reserve fund will become taxable. 

Both measures will be accompanied by some conditions to limit the cash out by dividend distributions, capital reductions, buy back of shares… and transactions with tax havens without economic substance.  Adapted rules will apply for companies where the accounting year does  not follow the calendar year

 

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Koen Van Ende
Partner

Corporate Tax
Brussels

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