The draft bill of 19 October contains provisions relevant for insurers

On 19 October 2023, a draft law containing various tax provisions has been submitted to the Belgian Federal Parliament.

The draft law contains a number of measures which are relevant for the insurance sector.

1. Extension of the definition of “charges” for Insurance Premium Tax

Based on the current reading of article 1761 of the Code of Various Duties and Taxes, Insurance Premium Tax (IPT) is calculated on the insurance premium itself, further increased by the contributions of the employer and the employee increased with the charges.

The draft law provides that the definition of  “charges” will be widened to also include indemnities for insurance related services which are VAT exempt on the basis of article 44, § 3, 4° of the Belgian VAT code.

The aim is to avoid going forward that certain types of services rendered by insurance brokers on the basis of a separate contract would fall outside the scope of VAT and would also not be subject to IPT (or to avoid that these would be subject to both IPT and VAT). As a basic principle, insurance brokers and intermediaries will be liable for the IPT on these services and will be obliged to file IPT returns. The law however provides for a mechanism to shift this obligation to the insurance company.

Services relate to reinsurance contracts will not be affected by this new measure as reinsurance contracts are outside the scope of IPT.
 

2. Taxation of income stemming from capitalization contracts

A specific provision will be included to regulate the taxation of income generated by capitalization contracts which are linked to internal or external investment funds, but do not generate recurring fixed income. This will be done by means of an amendment of article 362 bis ITC/92. A typical example of the these capitalization contracts are the Luxemburg Branch 6 contracts.

These rules are only applicable to tax payers that hold the investment in the context of a professional activity (which will always be the case for corporate tax payers).

The Belgian Income tax code qualifies the income from this type of contracts as “accrued interest”. In specific for capitalization contracts, the accrued interest which will be taxable on an annual basis is defined as follows:

The positive difference between

• The value of the receivable on the insurance company represented by the capitalization contract at the end of the taxable period (which is to be proportionally reduced in case of a partial surrender)

Reduced by

• The premiums paid in the framework of the contract

Furthermore, the taxable basis needs to be reduced by the amount of “accrued interest” already taxed during a previous taxable period.
 

3. Digitization of filing formalities

The tax authorities are currently also working on the modernization of the filing process for the taxes in scope of the Code of Various Duties and Taxes.

To enable the future online filing of the returns for the taxes covered in the Code of Various Duties and Taxes,  the draft law already provides that as from 1 January 2025, tax payers will be able file the tax returns for the miscellaneous taxes and duties via an online platform.

We understand that detailed regulations will be included in a Royal Decree.

Although no detailed information is already made available, we understand that the key headlines of the new filing process will be as follows:

Besides the monthly IPT returns, the following taxes are in scope:

• Tax on the stock exchange transactions
• Annual tax on the securities accounts
• Tax on the boarding of an aircraft
• Annual tax on profit sharing
• Tax on long term savings
• Tax on posters/displays
• Annual tax on credit institutions; insurance enterprises and investment companies (net asset tax)

Although no detailed information or draft legislation is made available, we understand that the key headlines of the new filing process will be as follows:

Online filing of the returns is expected to be possible from 1 January 2025 onwards and will become the standard procedure for companies with a Belgian company number at a date to be further determined by the King (expected to 1 January 2028 at the latest).

Once online filing will be the standard process, filing of the returns on paper will however be still allowed as a back-up process for a number of specific cases (e.g. when no Belgian company number is available, which may be the case for foreign insurers which are liable for Belgian IPT), the current practice of sending a scanned copy of the paper return will no longer be accepted.

Once the online filing of the return has been carried out, payment details (including structured reference) will be provided by the online filing tool.

The new returns will require more details to be disclosed compared to the current versions of the returns to be filed, especially in relation to exemptions applied.

The new returns will provide the possibility to make corrections to prior returns filed within a 6 month period (except for the returns which are only filed on an annual basis).
 

4. Other provisions relevant for the insurance sector

The following more general measures in the draft law may also be relevant for the insurance sector

Reporting of payments to blacklisted jurisdictions on the form 275F

Since a number of years, Belgian companies have to report payments made to blacklisted jurisdictions on the form 275F to be filed with the corporate tax return provided the aggregated amount of all payments together exceeds 100.000 EUR on an annual basis.

The countries in scope of this reporting obligation are either listed on

• The OECD Global Forum list
• The specific Belgian list of countries without taxation or with low taxation
• The EU list of non-cooperative jurisdictions.

To avoid that corporate tax payers would try to time their payments to blacklisted jurisdictions to remain under the threshold of 100.000 EUR per financial year, corporate tax payers will need to take into account the short term debts to blacklisted jurisdictions on top of the amounts effectively paid.