New federal government agreement - Corporate income tax measures

On Friday 31 January 2025, the five political parties expected to constitute a new Belgian federal government reached an agreement on their policy for the coming five years. The agreement includes a series of measures relating specifically to corporate income tax.

The overall objective of the reform is to strengthen the purchasing power of working people, increasing the competitiveness of our economy and stimulate working and entrepreneurship. Through specific incentives and measures, the investment climate should improve with a focus on environmental transition and the sustainability of the economy.

To this end, the tax system should be simplified, made more transparent, user-friendly and rely on a fair contribution. The latter would in particularly be achieved through an increase of the tax-free allowance for individual tax purposes and by introducing a 10% levy for individuals on capital gains on shares and certain other financial assets (see alert New federal government agreement - Capital gains tax & tax reforms for investors | EY - Belgium).

Furthermore, a series of measures aim to create a better relationship between the taxpayer and tax administration aiming for more legal certainty and cooperation.

We briefly outline the key measures relating to corporate income tax below and refer to our other alerts for topics relating to private investors and forthcoming alerts on tax procedural measures, indirect tax matters and personal income tax matters (Tax alerts | EY - Belgium).

The measures that will come into effect during this legislative term will all be implemented in 2026 (general principle). The government also intends to refrain from introducing retroactive tax regulation.
 

The dividend received deduction regime to be transformed in a real exemption but with some increased thresholds

The current Belgian dividend received deduction on qualifying dividends is in fact a deduction of a company’s taxable income basis which does not lead to the same outcome as a full exemption of income.

The deduction will be replaced by an exemption but the thresholds for the exemption will increase for non-SME’s (small and medium sized companies as defined by the Belgian tax code). For non-SME, investments as of 10% will continue to qualify but investments below 10% will only qualify if they are accounted for as financial fixed assets (new condition) with an acquisition value of at least 4 million Euro (as opposed to 2.5 million Euro). We understand that the shareholding will also need to qualify as financial fixed asset.

As a result of this change, the group contribution regime will also be more effective for companies and groups with important dividend income.

It should however be monitored if and to which extent this change could also affect the capital gain exemption on shares.
 

DBI-BEVEK/SICAV RDT

Capital gains on DBI-BEVEK/SICAV RDT will be taxed at 5% and creditable withholding tax can only be credited if the company meets the (increased) minimum remuneration condition for the company directors.
 

Group contribution regime to be broadened

The Belgian group contribution regime includes some strict rules to allow companies within a group to share profits and loss through a group contribution. Today, companies can only perform such group contributions when they are “directly related” for at least 90%. The agreement states that this will be extended to “indirectly” related companies.

The current regime also requires a qualifying relationship for at least 5 years in order to be able to benefit from a group contribution. There is no specific mention of shortening this period, but it is mentioned that new companies will no longer be excluded. This likely implies that for newly established (and acquired?) companies such a group contribution may become available as from the first financial year.

Changes to the dividend received deduction (see above) and the contribution regime are also expected to resolve inefficiencies relating to dividend income.
 

Exit tax on migrations

The emigration of a company will be treated as a deemed liquidation for tax purposes. It is expected that this measure refers to the levy of a withholding tax on the deemed dividend distribution as corporate income exit tax provisions are already in place.
 

No automatic tax penalty of 10%

The tax authorities systematically apply a tax penalty of 10% in case of a tax audit adjustment. Besides the higher tax on the adjustment, the application of this penalty also leads to a separate taxable basis for these adjustments without the possibility to set-off this tax basis against current year operational losses or carried forward tax attributes. This approach has recently been challenged in court (see previous alert No 10% tax increase in case of a first mistake - Practical consequences | EY - Belgium).

The agreement announces that this automatic and systematic tax penalty should be reformed and not be applied for the first infraction in good faith.

It further states that the denial to offset current year losses should only apply in case of repeated infractions with penalties of 10% or higher. It seems to indicate that the compensation with carried forward losses would not be allowed.

A spontaneous change by a taxpayer of his filing position should also be possible without incurring penalties.
 

Disallowed expenses reformed

There are several announcements related to the simplification of the disallowed expenses.

The agreement indicates that research will be done to introduce an optional but simplified approach to determine disallowed expenses.

The complex method to determine disallowed car expenses will be reviewed and simplified and the current transition rules applicable to hybrid cars will be revisited.

• The maximum deduction percentage for hybrid cars remains at 75% until the end of 2027. After that, a decrease of the percentage to 65% in 2028 and to 57.5% in 2029.
• Exception on limited deductibility for hybrid cars with emissions of a maximum of 50 grams/km. If the percentage according to the deduction formula is higher than 75%, the higher percentage may be applied until the end of 2027.
• Fuel costs of hybrid cars remain 50% deductible until the end of 2027.
• Electric consumption costs of hybrid cars receive the same deductibility as that for electric models.
   

Investment deduction regime to be simplified and improved

A series of measures relating to the investment deduction regime is announced.

• Investment deduction will be unlimited carried forward.
• The percentages for the increased investment deduction for energy, mobility and environment will be harmonized to 40%.
• Simplification of the green investment deduction, especially for investments in energy transition.
• In the environmental list, the restriction regarding financial support from the European government for CCS-CCU investments will be removed.
• Abolition of the regional certificate requirement for investments in R&D Investment deduction for research and development.
• Covenant between the competent federal administration regarding R&D and the tax administration with clear criteria on how to cooperate to guarantee loyalty of the administrations and maximum assurance of legal certainty for the taxpayer.
• Possibility of recognition as a research center for companies to provide them with certainty about a stable tax legal framework in the long term.
   

Accelerated depreciation

For certain investments, in research and development, defense, and energy transition the possibility will be created to create an accelerated depreciation. For non-SME companies, this would be a temporary regime allowing a depreciation of 40% in the first year of acquisition while for SME’s the possibility will be (re-) introduced to apply a double declining depreciation method.
 

Minimum remuneration for company directors (for application of the reduced CIT rate)

SME’s can only benefit from the lower corporate income tax rates if they comply a.o. with a minimum management remuneration. This remuneration will be increased from 45,000 to 50,000 Euro (amount will be indexed) and may only consist of up to 20% of the in benefits in kind.
 

Other selected tax measures

The agreement includes a series of other measures relating specifically to corporate income tax:

• The legally permitted maximum contribution for meal vouchers will be increased (from € 8 to € 12). The deductibility of the employer's cost will be correspondingly increased. Other existing vouchers (eco vouchers, culture vouchers, etc.) will be phased out.
• A framework for costs proper to the employer will be established as soon as possible.
• The social liability exemption will be eliminated.
• Form No. 270 MLH (rental annex) will be eliminated as soon as possible and will be replaced by a less administratively burdensome alternative, taking into account the information already available to the administration.
• The rules regarding transfer pricing documentation, particularly for SME’s will simplify focus on the essentials.
• Maritime industry: exemption from withholding tax, in line with European State Aid rules, for payments in the context of a bareboat chartering (conditions linked to greening of the Belgian fleet vessels)
• Belgium aims to implement international agreements on a digital tax, which will make large digital multinationals taxable even without a physical presence in Belgium. If no agreement can be reached at European or international level, Belgium will unilaterally develop a digital tax by 2027 at the latest.
• Increase tax certainty by publishing an annual list of tax havens and clarification that the legislation is based on the existing list as of January 1 of each year (so that the countries do not vary throughout the year).