Budget 2012: Program Law with second series of tax measures published and additional tax measures announced
A new Program Law was published in the Belgian Official Gazette of 6 April 2012. This Program Law contains a second series of tax measures that were announced in the Budget 2012. The government also announced a number of new measures at the occasion of the March budget control.
Program Law of 29 March 2012
The main tax measures in the Program Law relate to:
- The taxation of capital gains on shares for corporate tax purposes;
- Thin capitalization;
- The general anti-abuse measure;
- Changes to the new system regarding the benefit in kind for company cars;
- The reporting requirement regarding movable income.
These measures have been covered in the Ernst & Young Tax Alert of 27 January 2012 (please click here for the full text of this alert). The below only lists changes and updates compared to that Tax Alert.
The entry into application of the new thin cap rule is delayed following indications from financing centers that the new thin cap rules would decrease the attractiveness of Belgium as a location for intra-group financing activities (including cash pooling, factoring, …). The Finance Minister expressed his willingness to examine the concerns of these financing companies and the potential impact of the new rules on the investment climate. The new thin cap rule is set to enter into application on a date to be set by royal decree and on 1 July 2012 at the latest.
Benefit in kind for company cars
The benefit in kind for the private use of company cars will be determined on the same basis for all cars (new, second hand, etc.), i.e. based on the car list price of the car in case of a sale to a private individual, including options and actually paid VAT and not taking into account discounts. The government is currently looking for a database for the purpose of calculating this tax for second hand cars and new cars in situations when the car list price cannot be found on the invoice.
The basis for determining the benefit will decrease with 6% per year (to a level of 70% of the original car list value at the most).
The system incorporated by the Law of 28 December 2011 is amended accordingly.
These modifications apply to benefits granted as from tax year 2013. For payroll tax purposes, the new rules still only have to be applied as from 1 May 2012.
Solidarity levy on movable income
In the framework of the solidarity levy of 4% on movable income, the program law provides for a solution for the case in which the withholding agent does not have the necessary information to report the information regarding the payment to the competent section of the Finance Department or does not know the identity of the beneficiary of the income.
The system incorporated by the Law of 28 December 2011 is amended to allocate the reporting obligation and the withholding obligation to:
- The withholding agent for income from nominative securities;
- The paying agent for income arising from all other securities.
Also, some of the rules regarding movable withholding taxes (payment, collection, etc.) are made applicable to the solidarity levy in case of its application at source.
In the meantime, the tax authorities issued the specific form for the application of this levy. In principle, the form must be submitted to the tax authorities and the levy must be paid within 15 days as from the grant or the payment of the income. Given the delay in issuing the new form, however, the due date for submitting the form and paying the levy is set at 31 May 2012 for qualifying income granted or paid between 1 January 2012 and 15 May 2012.
Measures not yet included
Some of the measures announced in the Budget 2012 are still to be enacted.
This is e.g. the case for:
- The abolishment of the carry-forward of future excess NID and the changes for the NID carry-forward for existing stock excess NID;
- The conversion of tax deductions into tax reductions (personal income tax);
- The measures relating to pension taxation.
These measures will likely be included in the next budget law.
Additional measures after the budget control
As part of the additional EUR 2 bio that needed to be found to reach the projected deficit of 2.8% of the GNP, the government announced some additional tax measures. These have not yet been put in legislative texts.
Accelerated levy on life insurance payments and pension savings
Insofar tax breaks were claimed as from 1993 for payments for life insurances in the framework of retirement plans (e.g. group insurance), the life insurance payment at retirement age (or in the 5 years before) gives rise to a tax of 10%.
For the part of the pensions built up in a life insurance plan before 1993, the life insurance payment is taxed at 16.5%. The government now proposes to already levy 6.5% for the pre-1993 contributions now and to tax the remaining 10% at retirement age (or in the 5 years before).
The same treatment may be introduced at a later time for payments relating to pension savings in the framework of “pensioensparen/épargne-pension”.
Stock exchange tax
The stock exchange tax rates listed in the articles 121 and 122 Code of Miscellaneous Taxes will be increased from 0,22% to 0,25% (for transactions regarding financial instruments that are not subject to the 0.9% rate) and from 0,65% to 1% (for share buy-backs of capitalization shares in investment companies). The maximum amounts for these taxes will also be increased.
Other tax measures
- The contribution to the "Bijzonder Beschermingsfonds voor deposito's/Fonds spécial de protection des dépôts pour dépôts et assurances-vie" will be increased. The “abonnementstaks/taxe d’abonnement” on savings deposits will also be increased and will be made dependent from the loan-to-deposit ratio of the bank;
- The government will target the abuse of the withholding tax exemptions for foreign pension funds and non-residents in case of purchase-repurchase transactions and stock lending;
- The excises on tobacco products will be increased and the delay for the payment of these excises will be shortened with 1 week;
- The rules concerning VAT fines will be made more uniform and will be applied more consistently;
- The government will examine the feasibility of shortening the period to submit a tax return for inheritance tax purposes.
Ernst & Young welcomes the willingness of the government to repair the legislation relating to company car taxation and to the solidarity levy on movable income in order to increase its applicability.
The general anti abuse measure has been enacted as indicated in our previous alert of 27 th January. Undoubtedly this new provision will considerably impact tax planning going forward and create a vacuum of tax uncertainty in the short-medium term. We understand that the Belgian tax administration is preparing an administrative circular. Also it must be awaited how the Belgian ruling commission and jurisprudence will deal with this new measure. Within Ernst & Young we have constituted a special working group of legal specialists to deal with positions, opinions and interpretations.
Ernst & Young will follow-up on further developments and inform subscribers via Tax Alerts.