Budget 2013: bill containing “miscellaneous tax provisions” adopted in the House of Representatives
The bill containing tax and financial provisions was adopted in the House of Representatives on 16 May 2013 (please click here for the full text of the bill).
The bill contains the legislative translation of a broad range of tax measures in the framework of the 2012 economic stimulus plan and the 2013 budget.
Below, you will find an overview of the most important tax measures.
Research and development
As announced in the 2012 economic stimulus plan, the government decided to further reaffirm Belgium as an innovation friendly country and hence to increase the attractiveness of different tax incentives relating to research and development In this framework, the bill provides for:
- The increase of the payroll tax exemption for researchers from 75% to 80% (applicable as from the first day of the month following the month of publication of the law in the Belgian Official Gazette); thus an additional cost reduction for employing researchers in Belgium is being created;
- A definition for “qualifying research and development projects and programs for the payroll tax exemption” and a notification procedure for such projects and programs. These projects and programs will have to be notified to the Government department of Science, which will decide whether or not they qualify for the payroll tax exemption. Existing ones will not have to be notified until 31 December 2014. As from 1 January 2015, they will have to meet all applicable conditions;
- For small and medium sized enterprises (SME’s), the Patent Income Deduction requirement to have a research center that constitutes a branch of activity is abolished (as from tax year 2014).
Corporate income tax
Notional interest deduction
As previously announced in the 2013 Budget, the bill modifies the calculation method for determining the NID rate.
As from tax year 2014, the NID rate will be based only on the OLO rate of the third quarter (the months July, August and September) of two years prior to the tax year, instead of the OLO rate for the entire year. For tax year 2014 (i.e. accounting years ending between 31 December 2013 and 30 December 2014), this means that the NID rate will amount to 2.742% (+0.5% for SME’s). Changes made to the accounting years of a company as from 21 November 2012 will not be opposable to the tax authorities.
The maximum rate of 3% (3.5% for SME’s) remains applicable.
The Belgian Tax Shelter provides for a tax incentive to companies that invest in the production of European audiovisual works. A company investing in the production of European audiovisual works may benefit from a tax exemption on its profits corresponding to 150% of the funds invested (subject to certain limitations)
The bill includes modifications to the tax shelter regime, such as:
- a definition of “direct production costs and indirect production costs” (applicable to framework agreements concluded as from 1 July 2013);
- A maximum of 30% of the budget may be allocated to expenses that are not directly linked to the production (applicable to framework agreements concluded as from 1 July 2013);
- The part of the budget that must be spent in Belgium will be reduced from 150% to 90% (applicable to framework agreements concluded as from 1 July 2013);
- The maximum period for making expenses and for the ownership requirement for animation films will be extended from 18 months to 24 months.
Secret commissions tax
The bill aims at enhancing the legal certainty regarding the application of the 309% secret commissions tax (which might apply to certain payments/expenses which are not properly reported).
The bill will add a second legal exception to the application of the secret commission tax, applicable as from tax year 2014.. As a result, the secret commissions tax will not apply when:
- the beneficiary has spontaneously reported the payment in his tax return (this exception currently already exists) - the payment will be deductible at the level of the payor;
- the beneficiary has not spontaneously reported the payment in his tax return, but the income was nonetheless taxed at the level of the beneficiary , and with the consent of the latter, within the 3-year assessment period – in this case, the payment will not be deductible at the level of the payor.
These legal exceptions are also introduced for the so-called “legal entities tax”, albeit that the consent of the beneficiary to be taxed is not required for the second exception.
Furthermore, the Explanatory Memorandum to the bill clarifies that the secret commissions tax will also not apply in the following situations:
- In case of excessive expenses for which it is not clear whether or not they constitute benefits in kind;
- In case of small miscalculations and bona fide mistakes for which the payor identifies the beneficiary within the 3-year assessment period (taxation at the level of the beneficiary and deductibility at the level of the payor);
- In case the payor does not identify the beneficiary of the benefits in kind when a final tax is levied at the level of the beneficiary within the 3-year assessment period.
Conversely, the secret commissions tax will apply when no final tax is levied at the level of the beneficiary within the 3-year assessment period.
Personal income taxation
Credit/refund of movable withholding tax
Beneficiaries the professional income of which is exempt in Belgium, will no longer be entitled to the credit and refund of the movable withholding tax in case they choose to report the movable or miscellaneous income in their income tax return. The legislator believes that this is not the category of people who should benefit from the globalized taxation of the income.
This measure will apply to income attributed or paid as from 1 January 2013.
Tax credit for low income earners
The bill provides for an increase of the tax credit for low income earners for statutory civil servants and employees benefiting from the “werkbonus/bonus à emploi”. Non-resident individuals with an abode in Belgium and non-resident individuals earning at least 75% of their professional income in Belgium, will also benefit from this increase.
This measure will apply as from tax year 2014.
Non-residents income taxation
Tax credit for professional investments
The tax credit for professional investments made in Belgium by certain self-employed (article 289bis ITC 1992), is extended to non-residents with an abode in Belgium and non-residents who earn at least 75% of their professional income in Belgium.
This measure will apply as from tax year 2013.
These are the most relevant procedural measures included in the bill:
- In principle, companies and legal entities will be obliged to submit their tax return electronically as from tax year 2015 (unless an earlier start is foreseen by the government);
- The bill provides a legal base for the tax authorities (as from tax year 2013) to send tax assessments electronically upon the request of the taxpayers and deals with the impact of this delivery method on the determination of the statutes of limitation (to introduce a tax claim, etc.);
- In the framework of the notification requirement for financial institutions to the Belgian National Bank, the bill will allow the government to determine which types of accounts and contracts will have to be notified;
- The bill delegates to the government the power to determine the scales of the administrative fines for income tax purposes and the conditions under which they apply;
- A penalty up to five years imprisonment is introduced for “serious tax fraud”, without requiring that the serious tax fraud is also organized – provisions relating to “serious tax fraud” are also inserted in anti-money laundering legislation via another draft bill of law;
- The bill contains rules relating to the access of taxpayers to their personal files in case they are subject to investigation.
Value added tax
The main VAT measures in the bill relate to:
- The exclusion from joint liability in case of good faith or proof of absence of mistake or negligence for the exemption relating to custom warehousing;
- Provisions in the framework of the membership of Croatia to the European Union;
- The exemption of teaching activities in private institutions with not-for-profit objectives;
- The ratification of royal decrees relating to VAT rates.
- Extension of the stock exchange tax exemption for transactions with Belgian treasury certificates and OLOs, to transactions with such instruments emitted by another Member State of the European Economic Area;
- Insurance premium tax exemption in case of a transfer to a new group insurance scheme by an employer, upon bankruptcy or dissolution of the insurance company and termination of a group insurance scheme;
- Increase of the annual tax on collective investment vehicles, credit institutions and insurance companies;
- Miscellaneous provisions in the field of excise duties on alcohol and other products.
EY welcomes several measures, particularly those that aim at improving the tax incentives relating to research and development, and creating more legal certainty.
Please remember that several other new measures have been announced after the 2013 budget control (please click here for the Tax Alert on this matter), which have not yet been included in this bill.
EY Tax Consultants will follow-up on further developments and inform you via our Tax Alerts