End-of-year laws containing tax provisions published
On 31 December 2013, some new end-of-year laws containing new tax provisions were published in the Belgian Official Gazette, amongst which:
- Program law (I) – click for the full text (in Dutch / in French)
- Law containing miscellaneous tax and financial provisions – click for the full text (in Dutch / in French)
These laws contain numerous tax measures, the most important ones of which are treated below. Furthermore, it should be noted that some other (minor) laws with tax provisions were published on that same date.
A. Program law (I)
1. One-time investment deduction for small companies
Under certain conditions, the legislator reintroduces the one-time investment deduction for 2014 and 2015 for small companies, as defined by the Belgian Company Code, and sets the rate at 4%. The application may be extended for later years by Royal Decree.
The measure only applies to ordinary investments. Investments for which one can already benefit from a special investment deduction regime (such as energy saving investments), are not eligible for the measure.
The general conditions of the investment deduction apply, meaning that only newly acquired or newly generated fixed assets qualify. These assets must relate directly to the existing or planned economic activity of the company and not merely to the statutory corporate objectives. Items that would have to be excluded from the calculation basis of the notional interest deduction (‘NID’) (based on article 205ter ITC 1992), are also not eligible for the application of this one-time investment deduction (such as the net asset value of real estate inhabited by the company director).
Any excess investment deduction can only be carried forward for one taxable period.
The above mentioned investment deduction cannot be applied simultaneously with current year NID (the use of stock NID is allowed).
2. Other relevant measures
- The exemption at the level of the employer of an amount equal to 20% of the salaries paid to young people following part-time education and for which employers receive a “stagebonus/bonus de tutorat”, is increased to 40% of said amount;
- In order to motivate employers within the restaurant and construction sector to report the correct overtime done by their employees, the number of hours qualifying for the existing partial professional withholding tax exemption for overtime has been increased from 130 hours to 180 hours. The tax reduction in the personal income tax has been modified accordingly;
- For companies organizing night- and shift work in a so-called “volcontinu arbeidssysteem/système de travail en continu”, the professional withholding tax exemption is increased with 2.2 percentage points;
- The tax credit for low income earners will be increased to 14.40%;
- The law also determines the levies for the pharmaceutical sector (levy on marketing and levy on the turnover) for 2014.
These measures enter into force as from 1 January 2014, except for the tax incentives related to the personnel working in the construction sector and the tax credit for low income earners, which will take effect as from 1 April 2014.
Finally, in the framework of social security, it is noteworthy that the law provides for the reduction of the employers’ social contributions for hiring a fourth and a fifth employee.
B. Law containing miscellaneous tax and financial provisions.
1. Corporate income tax
Notional interest deduction
The Belgian legislator aligns the rules relating to the notional interest deduction (NID) with the judgment of the Court of Justice of the European Union (CJEU) of 4 July 2013 in the Argenta Spaarbank-case (click here for the relating tax alert).
The NID is a tax deduction for corporate taxpayers based on their adjusted net equity. Typical adjustments were, among others, the net assets used by a foreign permanent establishment (PE) (1) and the net assets invested in real estate (2) located in countries with which Belgium has concluded a double tax treaty (DTT). According to the CJEU, the exclusion from the NID base of the net assets of the PE located in another member state of the European Union constitutes a restriction of the freedom of establishment as Belgian companies are dissuaded from establishing branches in other member states.
The Belgian legislator abolishes both exclusions, which generally enlarges the basis of the risk capital on which the rate is applied for the calculation of the NID.
However, in order to limit the consequences from a budgetary point of view, the NID will be subject to new limitations depending on the country in which the foreign PE or the real estate is situated:
- PEs or real estate situated in a member state of the European Economic Area of which the income is exempted in Belgium based on a DTT: the NID to be deducted in Belgium will be reduced with the NID portion relating to the net assets attributed to the PE or real estate to the extent that it is lower or equal to the positive result derived from these assets. In case the NID portion related to these assets exceeds the result derived from them, the excess can be deducted from the result in Belgium;
- PEs or real estate situated in a state outside the European Economic Area of which the income is exempted based on a DTT: the calculated NID to be deducted in Belgium will be reduced with the NID portion relating to the net assets attributed to the PE or real estate. This applies as from tax year 2014.
As from tax year 2014, withholding tax and advance tax prepayments are made creditable and refundable vis-à-vis the fairness tax.
The European Investment Bank has been added to the list of institutions-beneficiaries of interest income in article 56 ITC 1992 that do not trigger the interest deduction limitation of article 55 ITC 1992 at the level of the payer (applicable to payments as from 1 January 2014).
2. Personal income tax
Benefit in kind – company cars
One of the elements within the formula to calculate the benefits in kind for company cars (introduced in 2012) relates to the CO2-emission of the car compared to a reference value. For determining this reference value, one had to rely on the value applicable in the calendar year preceding the taxable period. As the reference value for 2013 was only published in April 2013, the correct calculation of the benefit in kind for payroll tax purposes in the beginning of 2013 was impossible. Therefore, the reference period has now been changed to the period between 1 October and 30 September of each year, so as to assure that the reference value will be available prior to the start of a new calendar year. This applies to the benefits granted as from 1 January 2014.
The application in time of the tax reduction for energy-friendly housing has been aligned with a judgment of the Constitutional Court, which found the original transitory regime for the abolishment of this tax reduction to be incompatible with the non-discrimination principle.
The law also clarifies the application of the 2013 mid-year reduction of the maximum amount of the tax reduction for service vouchers from EUR 2,720 to EUR 1,380. The explanatory memorandum to the law lists the following hypotheses:
- If expenses for service vouchers exceeded EUR 2,720 in the first half of 2013, the tax reduction of EUR 2,720 applies – expenses made in the second half of 2013 do not give rise to any additional reduction;
- If expenses for service vouchers in the first half of 2013 exceeded EUR 1,380 but not EUR 2,720, the tax reduction applies for the expenses made during that period (even in excess of EUR 1,380) but the expenses in the second half of the year do not give rise to an additional reduction;
- If expenses for service vouchers in the first half of 2013 do not reach EUR 1,380, the expenses made in the second half of the year give rise to an additional reduction to the maximum of EUR 1,380.
The law contains the following VAT measures:
- Certain types of intra-Community acquisition of goods are currently treated as exempt transactions, so that they must be reported in the VAT return. In order to reduce the administrative burden, they will be treated as transactions that are not subject to VAT as from 1 January 2014, as a result of which the transactions must no longer be included in the VAT return;
- The law implements the exception to the VAT exemption for leases for the lease of permanently installed equipment and machinery.
Like for VAT purposes, the law gives the income tax authorities the right to take the books and documents of the taxpayers along with them to their office for their audit. The taxpayers are given protection in this regard, which is also extended for VAT purposes.
The law extends the possibility to get an ex officio relief for numerous types of tax reductions (applicable to requests for ex officio relief pertaining to tax year 2014 and following).
Moreover, following a judgment of the Constitutional Court of 16 May 2013, the law extends the notification requirement of the tax authorities in case they send a request for information to a financial institution to the case in which this is the result of a request for information from foreign tax authorities (with some differences compared to the notification requirement in case of a request for information by the Belgian tax authorities).
- The law regarding the “thematische volkslening/prêts-citoyen thématiques”, which provides for a withholding tax of 15% on the interest on qualifying loans as from 1 January 2014 (click for the full text of the law in Dutch / in French);
- The law regarding the deductibility of regional taxes and levies, which deals with the deductibility of mileage levies (click for the full text of the law in Dutch / in French).
These laws in general contain very few major tax reforms.
As far as the modification of the NID regime is concerned, it should be remarked that the State Council questions the compatibility of the modified regime with the EU freedom of establishment.
EY Tax Consultants hopes you had great holidays and wishes you a prosperous and healthy 2014!