Procedural changes in Belgian income tax law: increased importance of compliance
The Corporate Income Tax Reform Act of 25 December 2017 introduced various procedural measures that should encourage taxpayers to comply with their tax obligations.
Please find below an overview of the main procedural changes.
Minimum taxable basis in case of no or late corporate income tax return filing
If the corporate income tax return is not or not timely filed, the tax authorities can tax a Belgian taxpayer based on a minimum taxable basis. This minimum taxable basis equals EUR 34,000 as from 2018 and will increase to EUR 40,000 as of 2020. This amount will be indexed annually as from 2021. In the event of repeated infringements, the minimum taxable basis will be increased with a percentage ranging from 25% to 200%. The taxpayer maintains the possibility to provide evidence to the contrary. If no (sufficient) evidence is provided, this measure results in the following corporate income tax to be paid:
|Year||Minimus basis||Standard CIT rate||CIT (EUR)|
Effective payment on tax audit adjustments
In order to stimulate taxpayers to fulfil their duties in the field of corporate income tax compliance, no deduction of current year losses and deferred tax assets (e.g. carried forward tax losses) is allowed against a taxable basis determined as a result of a tax audit. An exception is made for the participation exemption for dividends received during the same taxable period. The new rule does not apply for infractions committed negligently and for which no tax increases are applied.
Not only in an M&A environment does an increased need for a thorough due diligence therefore arise. Also from a transfer pricing perspective it becomes even more essential that Belgian taxpayers have proper transfer pricing policies, transfer pricing studies and intercompany agreements readily available and that the taxpayer’s activities is aligned with such documentation. A quick scan performed by a third party could be helpful in this respect.
The rule applies as of tax assessment year 2019 (relating to the taxable period starting the earliest at 1 January 2018).
Late payment and moratorium interest
As of 1 January 2018, new rules apply with respect to late payment and moratorium interest in order to better reflect the economic reality. The new rules can be summarized as follows:
- Late payment interest (i.e. interest to the benefit of the tax administration) is decreased from the current 7% to a percentage that is based on the OLO amount on 10 years from the months of July, August and September. This percentage cannot be lower than 4% and not be higher than 10%.
Late payment interest will also become due in case the taxpayer converts the tax free reserve for spread taxation into a taxed reserve prior to the expiration of the reinvestment term. Also, if the reinvestment conditions for the exemption of capital gains realized on sea vessels is not met, late payment interest becomes due. This rule applies as of tax assessment year 2019 relating to the taxable period starting the earliest at 1 January 2018.
- Moratorium interest (i.e. interest to the benefit of the taxpayer) is decreased from the current 7% to a percentage that is 2% lower than the late payment interest. It cannot be lower than 2% and cannot be higher than 8%. This interest would start to accrue as of the first day of the month following the month during which a notice of default (e.g. a tax complaint or a request for ex officio relief) is sent to the tax authorities. The month of repayment is not included. No moratorium interest becomes due if the tax authorities do not have the necessary details for making the repayment.
Please note though that an action for annulment of these new rules has recently been brought before the Constitutional Court.
For more information on the Corporate Income Tax reform, reference is made to our Corporate Income Tax Reform brochure.
Christian ChéruyAttorney at Law
Christian Chéruy is a member of our International Tax Services Practice Group in Brussels. He is also part of the Belgian Tax Controversy and Litigation Team. Christian is a former local managing partner and non-executive Chairman of the Loyens & Loeff Benelux Board.T: +32 2 743 43 03 E: firstname.lastname@example.org
Natalie ReypensPartner 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