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The 2024 budget was agreed on by the Belgian government on 9 October 2023. The government will make an additional effort of 1.2 billion euros, on top of the effort already decided in last year's budget drafting. This budgetary exercise was necessary to keep the Belgian budget credible and in line with the objectives set out in the EU Stability and Growth Pact.
Below we provide a high-level overview of the most important tax measures in the budget agreement, as announced by the Finance Minister Vincent Van Peteghem. The legislative texts still need to be finalized, so the precise impact of the announced tax measures is not entirely clear at this moment.
Corporate income tax measures
Real estate fund investments
The conditions for holding a real estate investment fund will be tightened. According to the press release, the Finance Minister mainly struggles with the short-term character of real estate fund investments. Waiting for the draft legislative text to be released, it is expected that a certain minimum holding period will be introduced to maintain the benefit of the currently existing advantageous Belgian tax regime for real estate investment funds.
Combatting international tax evasion
Further to the introduction of the EU Anti-Tax Avoidance Directive (ATAD), Belgium introduced a controlled foreign company (CFC) legislation in 2018, targeting artificial constructions that are set up with the essential purpose of obtaining a tax advantage. Based on the current rules, the non-distributed profits should be realized by the CFC in the context of a non-genuine (series of) arrangement(s), set up with the essential purpose of obtaining a tax advantage (determination on a transfer-pricing basis in order to apply (option B that ATAD provides for). In other words, the CFC rules apply when there is a mismatch between the ownership of certain assets and risks undertaken by the CFC on the one hand and the exercise of significant people functions relating to these assets and risks by the controlling Belgian entity on the other hand.
As a budget measure and in the context of the increased fight against international tax avoidance, the CFC rules will be further tightened. Hence, it may be expected that Belgium will opt to apply Option A of the ATAD going forward, which generally provides for a stricter approach. In addition, it remains to be seen whether the Finance Minister uses this opportunity to also address the concerns about the Belgian CFC rules raised by the European Commission (being an inconsistent implementation of the ATAD in Belgian domestic law). This case is still pending with the European Court of Justice (C-215/23).
Finally, the anti-abuse rules combatting international tax evasion will also be sharpened, based on which the Belgian tax deductibility of certain cross-border expenses can be challenged by the Belgian tax authorities more easily.
Investment deduction
The complex rules with respect to the application of the investment deduction will be simplified and a significant increased investment deduction will be introduced for socially responsible and sustainable investments.
Non-deductibility of the banking tax
The Government requires an increased contribution from financial institutions, by making the currently existing banking tax, tax on credit institutions and tax on investment funds a non-deductible cost. In addition, the banking tax will become progressive so that larger financial institutions (having a higher amount of saving accounts) are required to pay more tax.
Personal income tax measures
Cayman tax
Also in the context of the fight against international tax avoidance and based on a report of the Belgian Court of Audit1, the so called Cayman tax will be adapted. Shortly put, the Cayman tax is a set of rules in the Belgian income tax Code which mainly provide for the taxation of income that is not directly received by a Belgian individual resident, but that is received by a legal structure of which the Belgian individual resident is the owner or beneficiary (i.e. a tax transparency rule). The Court has recommended adapting the legislation on certain points, improving access to data, centralizing any relevant knowledge, following up and evaluating the audits more thoroughly and assessing the Caiman tax as a whole.
Indirect Tax measures
Home demolition and reconstruction
The VAT rate for home demolition and reconstruction remains at 6% for individuals. This does not apply to those who engage with a construction promoter, as there the VAT will be raised again to 21%
Solar panels
The temporarily reduced VAT on the installation of solar panels will go from 6% to 21% again from 1 January 2024. Only for heat pumps, the reduced VAT rate of 6% will be extended for another year. All this applies only to houses that are not older than 10 years. For houses older than 10 years, the VAT rate remains at 6% anyway.
Excise taxes on tobacco and e-liquids
Existing excises on tobacco and e-liquids will be increased. Professional diesel is becoming more expensive. The recovery of excise duties will be reduced by 10 euros per 1,000 liters.
More and stricter tax audits
Tax audits on non-profit organizations (subject to legal entity income tax and being exempt from corporate income tax) and special corporate income tax regimes will be stricter going forward. Furthermore, tax audits in the football sector will be increased, in particular tax audits on financial transactions between football clubs and sports agents.
In case of any further questions with regard to this alert or for more insights about the announced measures, please do not hesitate to reach out to your trusted EY person of contact.
1 https://www.ccrek.be/EN/Publications/Fiche.html?id=cc6b9a13-2c7b-4355-987e-5cf8dd8fa06c