New government unfolds general tax plans
With the announcement of a political agreement between seven political parties, Belgium has a new government.
Although the reached agreement is generally very ambitious, at this stage, the concrete measures relating to taxation remain quite vague or refer to initiatives that were already agreed upon under the former temporary government.
Part of the already announced measures is the so-called reconstitution reserve. It was the second part of two measures representing the ‘COVID-19 - fiscal bazooka’, of which only the first (the carry-back’ of current-year losses – see prior EY alerts: here & here) passed the legislative process.
The reconstitution reserve will be part of the so-called ‘relaunch and transition plan’ aimed at stimulating the economy, increasing the competitiveness and supporting strategic sectors, further to the COVID-19 crisis.
The reconstitution reserve is a relaunch measure focusing on safeguarding the liquidity and solvability of companies. During 3 consecutive taxable periods relating to tax years 2022, 2023 and 2024, companies would be allowed to create a special reserve corresponding to the amount of losses suffered in 2020 under the condition of maintaining their equity position as well as their existing employment level. Companies making payments to companies located in tax havens (unless supported from an economic perspective) or having share participations in companies situated in tax havens, will be excluded.
With regard to general tax policy the agreement is very general and no specifics are included.
The new government would prepare a broad tax reform aimed at modernizing and simplifying the tax system, making it more fair and neutral, while focusing on increasing the employment ratio, supporting climate ambitions, entrepreneurship and stimulating investments. This would entail a reduction of the taxation on labor income but budgetary neutrally, through a broadening of the taxable basis whereby reference is made to changing the alternative remuneration (e.g company cars) and asking a fair contribution from those who have the bigger capacity.
The current tax regularization regime would end by 31 December 2020.
With regard to tax audits and tax evasion procedures, a ‘fiscal charter’ and code of conduct of mutual respect and professionalism would be introduced in order to improve the relations between the tax administration and the entrepreneurs.
On an international taxation level, the government underwrites the OECD initiatives relating to taxation of the digital economy. Moreover, if no international agreement can be found in this regard within the OECD or EU, the government aims at introducing a digital service tax by 2023.
Other international tax reform initiatives will be supported by the Belgian government. Reference is made to the further implementation of European anti-tax avoidance directives, review of the Code of Conduct (broadening of the definition of harmful tax practices) and our existing VAT regime, the introduction of a common consolidated corporate tax base and a financial transaction tax. The government also supports the introduction of a so-called minimum taxation for multinationals (as proposed under Pillar 2 of the OECD Global Anti Base Erosion proposal “GLoBe”).
No further details on the tax policy are outlined and we expect more details in the course of the weeks to come and will inform you accordingly.