Belgian parliament approves new wave of tax measures and announces a fiscal “bazooka” for businesses

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EY Belgium Tax
20 May 2020
Subject Tax alert
Categories Covid-19
Jurisdictions Belgium

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On 20 May 2020, the Belgian federal Parliament approved a draft bill introducing a new wave of tax measures to support Belgian taxpayers suffering from the Corona outbreak. Furthermore, the Belgian tax authorities extended the deadline for companies with a financial year-end between 1 October 2019 and 30 December 2019 for filing their (non-resident) corporate income tax return. Finally the Belgian Government agrees on a fiscal ‘bazooka’ for business heavily suffering from the economic fallout of the COVID-19 outbreak.

New wave of tax measures

  • Donations in kind

    Donations of mouth masks, protective gear and diagnostic kits to certain public institutions (such as hospitals, universities, elderly care, etc.) are fully deductible for tax purposes provided that these donations are made between 1 March 2020 and 31 July 2020. This was already communicated by the Belgian Minister of Finance in a circular letter (2020/C/46). The donation of medical supplies will not result in VAT adjustments.

    Furthermore, also computers donated to schools between 1 March 2020 and 1 September 2020 will be treated accordingly for tax purposes.

  • Tax exemption for compensation payments

    Compensations granted by the regional or municipal authorities (between 15 March 2020 and 31 December 2020) to taxpayers for the mandatory closure of certain businesses are fully exempt from income tax.

  • Tax prepayments: financial years deviating from the calendar year

    A corporate tax increase of 6.75% will be applied to the extent that insufficient tax prepayments are made. Making corporate tax prepayments results in a tax credit which reduces this tax increase incurred if no tax prepayments would have been made.

    However, companies affected by the Corona outbreak are likely to have insufficient liquidity to make such tax prepayments. Previously, the Belgian federal government decided to increase the tax credit for corporate tax prepayments from 6% to 6.75% in the third quarter (deadline: 12 October 2020) and from 4.5% to 5.25% in the fourth quarter (deadline: 21 December 2020). This measure does not apply for companies making a capital reduction, distributing a dividend or performing a share buy-back between 12 March and 31 December 2020. (See previous alert)

    Belgian Parliament now adopts similar measures for companies having a financial year that deviates from the calendar year – in particular for financial year-ends between 30 September 2020 and 31 January 2021. These companies can also benefit from an increased tax credit in their third (6.75%) and fourth (5.25%) quarter. The same restrictions apply (no dividends, capital repayments or share buy-backs between 12 March 2020 and the last day of their respective taxable period).

    In addition, the law stipulates that companies cannot benefit from the increased tax credits if (i) variable remunerations or other benefits are granted to management (daily management, executive directors, president of the board, etc.), if (ii) payments are made to tax havens (unless these payments can be justified by valid business reasons) or if (iii) the company directly holds a share participation in a company located in a tax haven.

  • Tax shelter: period to incur expenses is extended

    The tax shelter regime foresees a conditional tax exemption for Belgian companies or establishments investing in audiovisual works or performing arts. The amount of the final tax exemption is based on the amount of qualifying expenses incurred by the production company within the European Economic Area and the direct and indirect expenses incurred in Belgium. The production company has a 18-month period (as from signing the agreement between the producer and investor) to incur those expenses. Besides other changes to ease the fulfillment of the many requirements in a timely way, this period is now extended with 12 months provided that the production company can prove that damage was suffered as a direct result of the Corona measures imposed by the federal government.

  • Other measures

    Finally, the bill includes a wide range of various other tax measures:

    • Tax exemption overtime: up to 120 voluntary overtime hours performed by employees in critical sectors (during the period from 1 April 2020 to 30 June 2020) are exempt from income tax.
    • Tax-free sum for students: remuneration received by students for student work performed in the second quarter of 2020 will not be taken into account for calculation the tax-free sum.
    • Deductibility of premiums regarding to suspended employment contracts: contributions and premiums of supplementary insurance paid voluntarily between 1 March 2020 and 30 June 2020 in which the execution of the employment contract is fully or partially suspended due to the Corona measures taken by the federal government remain tax deductible.
    • Annual tax relating to premiums, employer’s contributions or personal contributions due between 16 March 2020 and 30 June 2020 shall be payable no later than the 20th day of the month following the month in which the premiums or contributions were paid.
    • Statutory benefits paid or granted to temporarily unemployed staff are subject to a professional withholding tax of 15% (without reduction) instead of 26,75%, insofar as this income is paid or granted from 1 May 2020 until 31 December 2020.

    In case of any further questions in this respect, please contact your EY person of contact.

Extended filing deadlines for corporate income tax returns

Companies with a financial year end between 1 October 2019 up to and including 30 December 2019 can benefit from an extended filing deadline for the (non-resident) corporate income tax returns and legal entities tax returns. These tax returns should be filed within 7 months (irrespective when the shareholders meeting is scheduled) as from the first day of the month following the financial year-end.

Furthermore, companies are allowed to postpone the general shareholders meeting (approving the financial statements) with maximum 10 weeks and under certain conditions. If the company is subsequently not in a position to submit the tax return in due time, an individual extension on the aforementioned deadline can be requested.

Fiscal “bazooka”

Next to the financial “bazooka” put in place several weeks ago in order to safeguard the liquidity position of COVID-19 affected businesses through eased bank financing, the government recently decided to launch a fiscal “bazooka”, i.e. a set of 2 tax measures aimed at providing tax relief in order to increase both liquidity and solvability of the latter businesses. Although still at the early stage of the legislative process, it is our understanding that these measures would allow a so-called ‘carry-back’ of current-year losses. More specifically, both for companies and self-employed individuals, expected losses of the current taxable period could be imputed on the taxes due relating to profits of the previous taxable period. This would also allow to reclaim tax prepayments already paid in 2020.

The second measure would consist of a so-called ‘recovery reserve’ for companies to help safeguard their solvability suffered due to the COVID-19 outbreak. In practice it would mean that during 3 consecutive taxable periods relating to tax years 2022, 2023 and 2024, companies would be allowed to secure profits corresponding to the amount of losses they have incurred In 2020, under the conditions of maintaining their equity position as well as their existing employment level.

We will provide more details on these measures as more information will become clear further in the legislative process. In case of any further questions with regard to the adopted measures, please contact your EY person of contact.