Tax alert

Brexit – Belgian Federal Government approves transitory tax rules

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EY Belgium Tax

1 Mar 2019
Subject Tax alert
Categories Corporate tax
Jurisdictions Belgium

On 1 March 2019, the Belgian Federal Government approved draft rules in order to mitigate the tax consequences of a “hard Brexit”. The draft rules will be submitted to the Belgian Parliament as a series of amendments to the bill of Law regarding the withdrawal of the UK from the EU which was presented recently.

On 29 March 2017, the United Kingdom (UK) notified the European Council of its intention to withdraw from the European Union (EU). In the absence of an agreement on an orderly exit, the UK will no longer be a member state of the European Union as of 29 March 2019. This withdrawal has an important impact on the application of certain Belgian tax rules, as various tax provisions refer to the notions of ‘member state of the EU or of the EEA’. After a hard Brexit these provisions would no longer apply to the UK.

The new draft rules provide for a transitory period up to 31 December 2019 in relation to certain tax provisions. During the transitory period, the UK would be deemed to remain a member of the EU for direct tax purposes and for the application of registration and succession duties, as well as for certain other taxes. As a result, the consequences of a so-called “hard Brexit” would be mitigated pending a final solution for all relevant tax provisions. The deemed EU membership during the transitory period would only apply if the UK provides for reciprocal measures.

On the basis of a delegation by Parliament, the Belgian Federal Government would be able to lengthen or shorten the transitory period and take further measures, subject to conditions.

Please note that the transitory period does not apply to VAT, customs or excise duties. Therefore, the draft rules will not mitigate the indirect tax impact of a Brexit on the supply chain or in relation to other operational matters