- Coronavirus raises various tax questions in Belgium
Coronavirus raises various tax questions in Belgium
The rapid spread of the coronavirus (Covid-19) leads to far-reaching measures at home and abroad.
UPDATED 6 APRIL 2020
These measures may have (sometimes unexpected) tax consequences. Below, we cover various tax related questions that taxpayers may have.
The Belgian Governments initially ordered that restaurants, bars, etc. are closed, both on weekdays and during the weekend. Other businesses (e.g. retail stores) could remain open on weekdays. The Belgian Government has now announced that almost all shops must close. In order to mitigate the financial impact for these companies, the Flemish Government announced that businesses in the Flemish region can request a compensation. Businesses that are mandatorily closed entirely are entitled to a lump-sum compensation of EUR 4,000 while businesses that can remain open on weekdays are entitled to a compensation of EUR 2,000. If companies are required to remain closed after 4 April, they are entitled to an additional compensation of EUR 160 per day. A compensation of EUR 3,000 is also foreseen for businesses that do not need to close but that can demonstrate that the turnover has decreased with 60% between 15 March 2020 and 30 April 2020 compared to the same period in the previous year. The Walloon government foresees a lump-sum indemnity of EUR 5,000 for certain businesses that have to close and EUR 2,500 for certain businesses that have to change their opening hours. Funds are also made available in the Brussels region for similar measures. These compensation payments are not taxed.
Deferred payment of taxes
The Federal Tax Authorities have announced to grant an automatic extension of the payment date for VAT and wage withholding taxes of 2 months. Consequently, these payment dates are automatically extended as follows:
VAT – extended payment date
Wage withholding tax – extended payment date
Monthly return – February 2020
20 May 2020
13 May 2020
Monthly return – March 2020
20 June 2020
15 June 2020
Quarterly return (including special VAT return 629) – Q1
20 June 2020
15 June 2020
Customs & Excises also amended the electronic customs portal PLDA and extended payment terms from one week to four weeks for (a) excise duties and packaging levy on alcohol and alcoholic and non-alcoholic beverages; and (b) import VAT. This extension of payment terms applies until 30 June 2020 and only to the abovementioned taxes in PLDA
With respect to the payment of corporate income tax, personal income tax (resident and non-resident) and legal entities tax, the usual payment terms are automatically extended with a period of 2 months (in addition to the normal payment term) for all taxes assessed as of 12 March 2020. Although this additional 2 month payment term will not yet appear on the assessment notices that were sent up to and including 27 March, the postponement also applies to these cases and the taxpayer may add the two month period itself.
Companies facing financial difficulties as a direct result of the Coronavirus pandemic, regardless of their activity or sector, can additionally request a number of tax and social security support measures from the Federal Tax Authorities, which should allow companies to bridge these temporary financial difficulties.
All Belgian registered businesses (both companies and self-employed individuals) are entitled to these measures if it can be shown that they have incurred nuisance from the spreading of the Coronavirus and the correlating measures, which can be either direct (e.g. significant decrease in turnover) or indirect (as a consequence of a chain-reaction, e.g. partner companies suspending business). Companies which are in structural financial distress (i.e. companies already facing financial difficulties prior to the Corona outbreak in Belgium) can in principle not benefit from these measures.
The support measures consist of (i) a further deferral of payment, (ii) a waiver of late payment interest and (iii) a waiver of late payment fines. These measures can be requested for VAT, wage withholding tax, corporate income tax, personal income tax, and legal entities tax. A company can request to apply (one or more of) these measures using a form specifically issued for this purpose and should submit a separate request for each individual debt. The form can be found on the website of the Federal Tax Authorities here. In principle, a request can only be lodged after the receipt of an assessment notice or a request for payment. Application of these measures should, in any case, be requested on 30 June 2020 at the latest.
It should be noted that these supportive measures are conditional upon the timely, correct and complete filling of the relevant tax return. Hence, it is of utmost importance that the relevant tax formalities (e.g. VAT return, income tax return) are duly and timely complied with. In this respect, the Tax Authorities have announced a general extension of the filing deadline. Reference is made to question 3 below.
Deferred prepayment of taxes
If self-employed persons and companies are in a tax paying position and do not make timely prepayments of income taxes, a tax increase will be imposed. Each quarter a prepayment can be made and each prepayment leads to a tax credit which reduces the tax increase suffered if no prepayments would have been made. A prepayment made in the first quarter results in a higher tax credit than a prepayment made in a later quarter. Many self-employed persons and companies are currently facing liquidity problems due to the corona crisis and can therefore not make prepayments. In order to avoid that they are being penalized if they only prepay the taxes later this year, the tax credits for the last two quarters of 2020 are increased.
For companies, the tax credit for prepayments of corporate income taxes increases in the third quarter from 6% to 6.75% and in the fourth quarter from 4.5% to 5.25%. This measure does not apply for companies that repurchase own shares, make a capital reduction or attribute/pay dividends between 12 March and 31 December.
For the self-employed persons, the tax credit for prepayments of personal income tax increases from 2% to 2.25% in the third quarter and from 1.5% to 1.75% in the fourth quarter.
In addition to the above, measures are also announced at the regional levels.
The Flemish Government has, for example, announced that the road tax collection for the assessment year 2020 is postponed for legal entities by four months. Assessment notices sent as from 26 March onward will immediately show a payment term of six months (instead of the usual two months). For assessment notices that were sent recently and on which a payment term of two months is mentioned, the taxpayer may add four months. No new late payment interest will be charged for that period. Self-employed persons can flexibly request a payment plan and, if necessary, a waiver of interest on late payments. In addition, the assessment notices with respect to immovable property tax (onroerende voorheffing / précompte immobilier) which are usually issued in May will be sent out as from September 2020 for legal entities. This means de facto that the payment of immovable property tax is deferred for companies active in the Flemish Region. Self-employed persons can flexibly request a payment plan and, if necessary, a waiver of interest on late payments. In the meantime, the Flemish Government has also exceptionally given the municipalities the opportunity to adjust the surcharges for the immovable property tax. As a result of this, the assessment notices for immovable property tax can at the earliest be sent out at the end of June whereas these notices are generally issued at the end of April/beginning of May. This means that the immovable property tax is also deferred for non-legal entities, be it for approximately a two-month period.
In the Walloon region all (regional) tax payments are suspended as the deadlines will be extended by the period corresponding to the crisis.
In the Brussels region, the Brussels Government has announced that it will extend the 2-month payment term for immovable property tax with an additional 2 months.
Following the federal decisions to prevent the coronavirus, cities and municipalities also provide support measures for the self-employed and entrepreneurs affected. A compilation of a.o. the fiscal measures of the Flemish cities and municipalities can be found on the website of VVSG here. However, it is recommended to have a look at the website of your municipality.
The Tax Authorities have announced a general extension of the filing deadline: the filing deadline for corporate income tax returns (resident and non-resident) and legal entities tax returns which should have been filed between 16 March 2020 and 30 April 2020, has been extended until 30 April 2020.
Also for VAT purposes, the filing deadlines have been extended. The extended filing deadlines are shown in the below table:
Extended filing date
Monthly return – February 2020
6 April 2020
Monthly return – March 2020
7 May 2020
Quarterly return – Q1
7 May 2020
The deadlines for the filing of intra-community reports is extended to the same dates. Furthermore, the general deadline for the annual filing of the VAT client listing is extended until 30 April 2020.
Due to the fact that notary offices and citizens may currently not be able to complete all the formalities in time, the Flemish Tax Administration will grant, as a general measure, an extension of two months after the end of the period in which the stricter corona measures apply (at present being 19 April 2020). This implies that:
- No tax increase for a late inheritance tax return will be imposed if the declaration is filed within two months after the end of the period of stricter corona measures. It is not necessary to request for this postponement. If, for example, an inheritance declaration should have been filed by 28 March at the latest, this deadline is now extended to 19 June (i.e. two months after the end of the period of stricter corona measures). The filing deadline is automatically extended if the more stringent measures remain in force for a longer period.
- No tax increase will be imposed if the period within which a deed must be submitted for registration is exceeded. The period is automatically extended if the more stringent measures remain in force for a longer period. If, for example, two parties agree to sell an immovable property and this sale should be registered by 28 March, this deadline is now extended to 19 June (i.e. two months after the end of the period of stricter corona measures). The filing period is automatically extended if the more stringent measures remain in force for a longer period. In addition, the period of time to comply with the conditions to maintain a favourable regime is similarly extended with 2 months.
This also implies that the payment of the registration duties can be postponed to the same extent.
Although income from employment is generally taxable in one’s 'home' state, employees which are active in a cross-border context (e.g. Dutch residents working in Belgium or vice-versa) are often taxed in the country in which they are economically active (the 'work' state), provided that a minimum amount of the (professional) time is effectively spent in that country (specific conditions apply depending on the country in question).
Considering the general advice of the Belgian (and foreign) authorities to telework to the largest extent possible, the period spent in the work state by these employees could significantly decrease, which could potentially limit the work state’s right to tax the professional income, or even entirely shift this right to tax to the home state of the employee concerned. It is thus very important to keep a record of the days that the employee(s) concerned have worked from their home office, in order to assess any changes to the applicable tax regime.
Specific agreements have been made regarding employees commuting between Belgium on the one hand, and Luxembourg, respectively France on the other hand. Employees commuting between Belgium and Luxembourg are taxable on their professional income in the work state if any professional activity physically carried on outside this work state is limited to a period of maximum 24 days, unless force majeure can be shown. In light of the current limitations on travel, the Belgian and Luxembourg authorities have expressed their intention to qualify the present situation as such force majeure: the period spent by the employee in his home state for the purpose of teleworking, will not be considered for the calculation of the aforementioned 24-day limitation. A similar agreement has been reached between France and Belgium on the 30-day rule under the Belgium-France tax treaty. For both tax treaties, this measure is effective as of March 14 and applies until further notice.
Employers could be faced with unexpected tax implications as a consequence of (longer periods of) teleworking. Indeed, if the employee’s home office in another country would be available to the employer with a certain degree of permanence (the so-called 'fixed place of business'), and the employee is exercising the activities of the company through that home office, it could constitute a permanent establishment of the employer. However, in order to qualify as a permanent establishment, the employer should have the employees’ home office at its disposal, meaning that it is able to organize its business activities from this location (the so-called material permanent establishment).
It should be reiterated that an employee’s home office does not automatically qualify as a 'fixed place of business', since such home office is often not 'at the disposal' of the company. Whether or not a home office constitutes a location that is at the disposal of the company depends on the factual circumstances, whereby a number of hallmarks are generally considered, such as the address of the home office which is identified as the address of the company, the continuous use of the home office for business purposes, access of the employer or specific reimbursement of expenses for the use of the home office (note that this list is not exhaustive). The place of business should also have a certain degree of permanence to be considered 'fixed'.
In addition to the material permanent establishment, a so-called agency permanent establishment can be equally recognized if the employee of a foreign-based company is working from home and in his/her regular course of business habitually concludes contracts on behalf of the employer, in relation to its core business (or playing the principal role in the conclusion thereof).
On 3 April, the OECD Secretariat issued guidance on the consequences of the corona crisis for international tax treaty rules. The OECD Secretariat concludes that the exceptional and temporary change of the location where employees exercise their employment because of the corona virus should not create a new permanent establishment for the employer. No material permanent establishment is being created (to the extent teleworking does not become the new norm over time) either because working from home lacks a sufficient degree of permanence or because the employer does not have control over the home office. Similarly no agency permanent establishment is being created if the employee is temporary concluding contracts in his/her home country due to the corona crisis as the activities performed in the home country are only transitory. The conclusion might be different though if the employee was already habitually concluding contracts on behalf of the enterprise in his/her home country prior to the corona crisis. The OECD Secretariat notes however that the threshold presence required by national law to register for corporate income tax purposes may be lower than those applicable under tax treaty rules. Although these exceptional circumstances preclude employees to work according to their regular schedules or from their regular places of business, the Belgian Tax Authorities have not issued any guidance yet in this respect.
If you have obtained a tax ruling in the past confirming that the home office of a Belgian employee does not constitute a permanent establishment in Belgium on the condition that the employees’ activities are carried out from the home office only 1 or 2 days per week, we suggest to contact the ruling commission in view of confirming that the validity of the ruling is not affected.
Due to the measures taken in the fight against the coronavirus, the Ruling Commission is willing to provide a ruling confirming that the employer can temporarily give its employees, regardless of their job category, a tax-free allowance of up to EUR 126.94 per month to cover the costs caused by teleworking, such as heating, electricity, paper,...
The Ruling Commission has prepared a standard application for this. This draft application can be found here. The Ruling Commission announced to handle the ruling request within a short timeframe.
In accordance with Belgian VAT law, an advance payment triggers VAT becoming due. If the intended transaction afterward does not take place (e.g. the agreement is canceled by the customer or following a government corona prevention measure), a refund of the VAT on the advance payment could be requested.
Please also take into account that an actual VAT refund claim ultimately depends on the provisions of your contract with your customer.
In the event a contract is terminated by the customer before the actual supply of goods or services, a refund of the VAT could be requested in accordance with the Belgian VAT Code. Such a VAT refund claim does, of course, require that the VAT has already been (partially) paid by your company before the cancellation/termination of the contract.
Again, take into account that an actual VAT refund claim ultimately depends on the provisions of your contract with your customer.
The retention by your business of the advance payment made by your customer following the cancellation/termination of the transaction/contract is not subject to VAT. Since such retention is to be considered as solely indemnifying your business for any damage incurred as a result of the cancellation/termination of the transaction/contract, no VAT is due.
The VAT that would already have been paid to the Belgian State on the advance payment could be recovered up to the amount of the advance payment that would be retained (and is agreed upon) as cancellation/termination fee.
In the event that the price would remain (partially) unpaid after the goods or services were supplied and the underlying contract itself would not be annulled, your business could request for a refund of the VAT paid to the Belgian State in relation to the totally or partially lost claim/debt.
Such a refund would in principle require that your company can prove that the claim/debt has remained unpaid - despite having used all possible means to obtain payment of the claim/debt – and that therefore the loss of the claim/debt is certain and indisputable. The question whether a claim/debt could be considered as ‘certain and indisputable’ depends on the circumstances and facts of each case. For example, in the event that the claim/debt would have been lost for reason that the customer has become bankrupt, such claim/debt would be considered as ‘lost and indisputable’ (and thus a refund could be requested) at the date of the judgment pronouncing the bankruptcy of the customer.
The Belgian Government has asked all Belgian civilians and companies to donate their medical material and supplies to hospitals, in order to cover possible shortages.
In this respect, one should know that taxable persons who deducted VAT on the manufacturing or purchase of items donated for free is in principle obliged to adjust the deducted VAT via a self-supply subject to VAT. This additional VAT cost could discourage companies from donating medical supplies.
For this reason, the Belgian VAT authorities have now decided that a donation of medical supplies to hospitals will not lead to a VAT adjustment. This measure will apply until 30 June 2020.
The aforementioned tolerance applies to the following goods:
- Medical devices as referred to in Royal Decree 18 March 1999 (e.g. instruments intended for diagnostic and therapeutic purposes, devices intended for clinical research, etc.)
- Protective equipment for healthcare workers and patients (mouth mask, protective clothing, disinfectants, etc.)
Please note that the measure does not apply to the donation of pharmaceutical drugs.
The medical supplies must be donated to one of the following institutions:
- Healthcare institutions as referred to in the coordinated law of 10 July 2008. Pursuant to this law, hospitals must meet certain standards and must be approved/recognized by the FPS Public Health (this concerns, in particular, those institutions whose medical care services normally fall within the scope of the exemption envisaged by Article 44, § 2, 1°, a) of the VAT Code);
- Associations of hospitals as referred to in Royal Decree 25 July 1997;
- Hospital groups as referred to in Royal Decree 30 January 1989;
- Mergers of hospitals as referred to in Royal Decree 31 May 1989: and
- Locoregional clinical hospital networks as referred to in the law of 28 February 2019.
In order to benefit from this VAT measure, the company should be able to provide proof that the medical supplies were donated free of charge to one of the institutions mentioned above. The proof must consist of a document in which the hospital confirms that the donated medical supplies were used to provide care or were donated to another healthcare institution.
In addition, this document must be drawn up in twofold for each donation, dated and signed by both parties and should contain the following details:
- Name, address and VAT number of the benefactor;
- Name, address and company number of the beneficiary;
- A complete description of the donated goods; and
- Amount of goods.
This document replaces the document required by article 3 of Royal Decree n° 1, which establishes that business assets were used for other purposes than the economic activity by the benefactor.
It should also be noted that the following guidelines apply for the aforementioned document:
- Multiple donations can be merged by mentioning the different types of medical supplies and their amount. The benefactor can even replace the complete description of the donated goods by attaching the original receipt for the medical supplies to the document.
- One summarizing document/overview containing all the donations of one month will also be accepted by the VAT authorities, if the summarizing document is drawn up before the 15th day of the following month and reference is made to the month in which the medical supplies were actually donated.
- It is not required to register this document in the accounts of the benefactor, but it should be kept in case of VAT-audit.
Income tax consequences
If the donator is subject to corporate income taxes (resident and non-residents) or is subject to personal income tax (residents/non-residents) as a self-employed person, the donation will not qualify as an abnormal or benevolent advantage and the costs associated with the donated medical goods will be tax-deductible.
Also note that other natural persons subject to personal income tax (resident/non-resident) that wants to provide a donation in kind (i.e. medical devices and products useful in the fight against the coronavirus) to Belgian university hospitals and social welfare hospitals can exceptionally and temporarily receive a tax deduction amounting to 45% of the value of the donated goods (subject to some further limitations) if the donation exceeds a value of € 40. The value of the donation should be determined based upon the invoice received when purchasing the goods and should be provided to the hospital that receives the donation. If no such invoice is available, the market value should be determined by the hospital. The hospitals will provide the taxpayer with a tax certificate.
All VAT taxable persons submitting monthly VAT returns (incl. those who do not have a monthly VAT refund authorization or who are not considered to be ‘starters’), will be able to benefit from an accelerated refund of their VAT credit. As a result of this measure, the VAT credit will be refunded no later than 30 April 2020 (instead of 29 May 2020 or even 30 June 2020).
In order to benefit from the accelerated VAT refund, the following specific conditions should be met:
- VAT refund is requested by a VAT taxable person submitting monthly VAT returns;
- VAT return relating to February 2020 must be submitted by 3 April 2020 at the latest; and
- VAT return must be submitted through Intervat and the box ‘Request for refund’ (Aanvraag terugbetaling) must be ticked (VAT taxable persons can submit a corrective VAT return until 3 April 2020 in order to tick this box).
Note that, besides the specific conditions listed above, the general conditions to request a VAT refund remain applicable:
- Minimum refundable amount should be EUR 245;
- All VAT returns for the current calendar year must be submitted correctly;
- VAT authorities dispose of a bank account number of the VAT taxable person on which the refunds can be paid; and
- No objection against the refund (e.g. as a result of transfer of receivables).
Please note that this VAT credit can still be offset against other outstanding debts and can be subject to an audit afterwards.
The deadline of 3 April does not affect the possibility to submit VAT returns relating to February 2020 which do not result in a VAT credit or for which no refund is requested timely until 6 April 2020.
Any other question?
Should you have any further tax questions relating to the coronavirus, do not hesitate to reach out to our Tax team.
NatalieReypensPartner Attorney at Law
Natalie Reypens is a member of the Loyens & Loeff International Tax Services Practice Group and heads the Belgian Transfer Pricing Team. She is a partner in our Brussels office. She focuses on corporate and international tax law.T: +32 2 743 43 37 E: email@example.com
BertGeversPartner Attorney at Law
Bert Gevers is a local partner in our Brussels office. He heads of the Loyens & Loeff Indirect Tax Practice Group in Belgium, is a core member of the Corporate Investigations Team and co-heads the Food and Beverages Team.T: +32 2 743 43 18 E: firstname.lastname@example.org
BennoDaemenAssociate Attorney at law
Benno Daemen, attorney at law, is a member of the Loyens & Loeff International Tax Services Practice Group in Belgium. He is an associate in our office in Brussels and specialises in corporate income tax and international tax law.T: +32 2 773 23 67 E: email@example.com