Belgium - Budget 2012Overview of Tax Measures
Agenda►   Introduction►   Corporate tax measures►   Taxation of company cars►   Personal income tax measures►   Pension ta...
Introduction►   Government Di Rupo I: budgetary exercise of EUR 11.3    billion covering savings and additional income    ...
Introduction►    Tax measures: impact in 2012 (EUR 3,449 mio)                                                         EUR ...
Corporate tax – Notional interest deduction(old)►   Deemed deduction on qualifying Belgian GAAP equity    (reduced with it...
Corporate tax – Notional interest deduction(old)►   Mostly used by    ►    Former BCCs    ►    Belgian groups    ►    Germ...
Corporate tax – Notional interest deduction(old)►   Tax year 2010: NID used = 16,3 bio (PV-QP 25/07/2011)►   Tax year 2010...
Corporate tax – Notional interest deduction  (old)                                                                    Stra...
Corporate tax – Notional interest deduction►   Adopted (applicable as from TY 2013)    ►    NID rate         ►   Still bas...
Corporate tax – Notional interest deduction►   Modification still in the pipeline    ►     Abolishment of NID carry-forwar...
Corporate tax - Notional interest deductionExample - Existing NID carry-forwardTax year         Excess              Expire...
Corporate tax - Notional interest deductionExample - Existing NID carry-forward (cont’d)Tax year         Excess           ...
Corporate tax - Notional interest deductionExample - Existing NID carry-forward (cont’d)Tax year        Excess NID        ...
Corporate tax – Notional interest deduction►   Action points / points of attention    ►     Check your stock of excess NID...
Corporate tax – Thin capitalization (general)►   In many countries to prevent tax avoidance by excessive    leveraging►   ...
Corporate tax – Thin capitalization (currentregime)►   Two Thin Cap rules in Belgium: 7:1 and 1:1►   Current legislation: ...
Corporate tax – Thin capitalization (newregime)►   Modification still in the pipeline    ►     No longer limited to intere...
Corporate tax – Thin capitalization (newregime)►   In the „annex to the budget‟ it is mentioned that    ►     Leverage is ...
Corporate tax – Thin capitalization (new  regime) - Hybrid loan/security – PPL (annex)                                    ...
Corporate tax – Thin capitalization (newregime)►   Open questions - what about    ►     The definition of (net) equity (Ta...
Corporate tax – Thin capitalization►   Action points / points of attention    ►     Check your qualifying debt/equity rati...
Corporate tax – Notional interest deduction –PPL – Effective Tax Rate (ETR)                                               ...
Corporate tax – Notional interest deduction –PPL – Future?►   NID may under circumstances still be attractive for „low    ...
Corporate tax – Notional interest deduction –PPL – Future?►   PPL could possibly still be attractive    ►     Especially f...
Corporate tax – Capital gain on shares►   Modification still in the pipeline    ►     Taxation at 25% of capital gains on ...
Corporate and personal income taxCompany cars►   Adopted (applicable as from 1 January 2012)    ►     Change to the calcul...
Corporate and personal income taxCompany cars►   Change to the calculation formula for BIK company cars                   ...
Corporate and personal income taxCompany cars►   Change to the calculation formula for BIK company cars    (cont‟d)    ►  ...
Corporate and personal income taxCompany carsCar type                                                 Current BIK       BI...
Corporate and personal income taxCompany cars►    Example: Mercedes CLS 350 CDI I     ►    List price: EUR 71,126 (amortiz...
Corporate and personal income taxCompany cars►   Limitation of deduction of lump sum commuting cost of    EUR 0.15 per km ...
Corporate and personal income tax –Company cars►   Action points / points of attention    ►     Review your car fleet – co...
VAT – BIK – Comparison “old” and “new”             VAT          deduction            limits            “Old”              ...
VAT – BIK – Comparison “old” and “new”             VAT          deduction            limits           “New”               ...
VAT – BIK – Where are we?►   Company cars    ►     2011: “tolerance” to use old calculation methods          ►   No paymen...
VAT – BIK company cars – Action points►   No certainty at this stage which system will be applied to    calculate the VAT ...
Personal income tax – Stock options►   Adopted (applicable as from 1 January 2012)    ►     Increase of benefit in kind fr...
Personal income tax – BIK housing/utilities►   Modification still in the pipeline    ►     Increase of the BIK for heating...
Personal income tax – Tax deductions►   Adopted (applicable as from TY 2013)    ►     Abolishment of tax reductions for ec...
Corporate and personal income taxPensions►   Modification still in the pipeline    ►     Personal income tax          ►   ...
Personal income tax - Pensions►   Still in the pipeline: modification of treatment of payments    and contributions    ►  ...
Personal income tax - Pensions►   Still in the pipeline: modification of treatment of payments    and contributions (cont‟...
Corporate income tax - Pensions►   Modification still in the pipeline: mandatory externalization    of individual pension ...
Corporate income tax - Pensions►   Modification still in the pipeline: adaptation of 80%-rule    ►     Limitation of deduc...
Corporate and personal income taxPensions►   Action points / points of attention    ►     Provide for the necessary funds ...
Withholding tax►   Adopted (applicable to payments as from 1 January 2012)    ►     Increase of WHT rate on interest and r...
Withholding tax►   Increase of WHT rate for interest and reduced dividends    to 21%►   Exceptions    ►     Interest on qu...
Withholding tax►   Increase of WHT rate for interest and reduced dividends    to 21%►   Exceptions    ►     Distributions ...
Withholding tax►   Increase of WHT rate for interest and reduced dividends    to 21%►   Exceptions    ►     Interest on go...
Withholding tax►   Extra solidarity levy    ►     Extra levy of 4% (no municipality surcharge)    ►     Application, at th...
Withholding tax►   Extra solidarity levy    ►     What about interest and dividends subject to 0% withholding?          ► ...
Withholding tax►   Extra solidarity levy    ►     Computation of the EUR 20,020 threshold          ►   For the computation...
Withholding tax►   Extra solidarity levy of 4%                                                   Threshold Basis          ...
Withholding tax►   Extra solidarity levy (cont‟d)    ►     Obligations imposed on withholding agent: i.e.          ►   The...
Withholding tax►   Extra solidarity levy (cont‟d)    ►     Reporting to the National Bank          ►   No reporting requir...
Withholding tax►   Extra solidarity levy (cont‟d)    ►     Reporting by the National Bank to the tax authorities          ...
Withholding tax – Example (1)►    Tax assessment relating to 2012     ►    The taxpayer received          ►   Interest on ...
Withholding tax – Example (2)Income            Taxable basis         WHT rate                  Increased       Amount     ...
Withholding tax►   Ernst & Young point of view    ►     The rules on the solidarity levy constitute a hidden 25% WHT,     ...
Withholding tax – Comparison with theNetherlandsTotal investment capital                          5.000.000,00 €Dividend i...
Withholding tax►   Action points / points of attention    ►     Consider investment in following instruments in order to b...
Withholding tax – Personal income tax return►   Adopted (applicable to payments as from 1 January 2012)    ►     General r...
Withholding tax – Reimbursement►   Adopted    ►     Applicable to payments as from 1 January 2011 (retroactively)    ►    ...
Tax on conversion of bearer financialinstruments►   Adopted (applicable as from 1 January 2012)    ►     Tax on the conver...
Tax on conversion of bearer financialinstruments►   Adopted (cont‟d)    ►     Tax rate          ►   Conversion in 2012: 1%...
Tax on conversion of bearer financialinstruments►   Action points / points of attention    ►     Convert your financial in...
Combat against tax fraud►   Adopted: access for financial institutions to the national    register    ►     Helpful for fi...
Combat against tax fraud►   Adopted    ►     Attribution of probative value to the electronic documents of the tax        ...
Combat against tax fraudArt. 344, §1 ITC►   General anti-abuse provision adopted in 1993    ►     Re-characterization of t...
Combat against tax fraudArt. 344, §1 ITC / Supreme Court 10 June 2010                                       Management    ...
Combat against tax fraudArt. 344, §1 ITC / Supreme Court 10 June 2010                                   Management fee    ...
Combat against tax fraudArt. 344, §1 ITC - modification►   In the pipeline: modification of the general anti-abuse    prov...
Combat against tax fraudArt. 344§1 ITC - modification►   In the pipeline: modification of the general anti-abuse    provis...
Combat against tax fraudAbuse of management companies►   Tougher approach towards abuse of management    companies    ►   ...
Combat against tax fraudSecret commission tax►   309% levy on unreported remunerations, incl. BIK    ►     Reporting oblig...
Combat against tax fraudSecret commission tax►   309% levy on unreported remunerations, incl. BIK (cont‟d)    ►     Addend...
Combat against tax fraudSecret commission tax►   309% levy on unreported remunerations, incl. BIK (cont‟d)    ►     Addend...
Combat against tax and social fraud►   Modifications still in the pipeline    ►     Harmonization of investigative compete...
Miscellaneous►   Adopted    ►     VAT          ►   Increase of tax rate on pay TV from 12% to 21%          ►   Application...
R&D incentives have not been modified►   R&D incentives: confirmation of continuation (and, insofar    possible, extension...
Conclusion►   What‟s next?    ►     Next budget round in March (need for additional income / savings)    ►     Draft legis...
Ernst & Young                                                 Herwig Joosten                                              ...
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Belgium budget 2012

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The measures and possible impact of the Belgium budget 2012.

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Belgium budget 2012

  1. 1. Belgium - Budget 2012Overview of Tax Measures
  2. 2. Agenda► Introduction► Corporate tax measures► Taxation of company cars► Personal income tax measures► Pension taxation► Withholding tax measures► Tax on the conversion of bearer financial instruments► Combat of tax fraud► MiscellaneousPage 2 Belgian budget 2012 – overview of tax measures
  3. 3. Introduction► Government Di Rupo I: budgetary exercise of EUR 11.3 billion covering savings and additional income ► Hypothesis: economic growth of 0.8% ► Projected growth reduced to 0.5% (ECB, NBB/BNB) or less (Luc Coene) – need for additional EUR 1 to 2 billion ► Partially rejected by EU Commission (NID/WHT)► Budget plan partially put into legislation ► Submission via amendments by Members of Parliament► Second bill of program law probably to be submitted in January 2012 for remaining measures► New budget round in March 2012Page 3 Belgian budget 2012 – overview of tax measures
  4. 4. Introduction► Tax measures: impact in 2012 (EUR 3,449 mio) EUR (in mio) Percentage Notional interest deduction 1,620 + 45.6% Taxation of capital gains on shares 150 + 4.2% Company car taxation 200 + 5.7% Externalization pension provisions 30 + 0.8% Stock options 20 + 0.5% Benefit in kind housing, etc. 170 + 4.8% WHT increase and solidarity levy 917 + 26.0% Stock exchange tax 50 + 1.4% VAT pay-TV 84 + 2.4% VAT notaries and bailiffs 100 + 2.8% Excises 158 + 4.5%► Related measures (combat fraud, …): EUR 3,220 mio (2012-2014)Page 4 Belgian budget 2012 – overview of tax measures
  5. 5. Corporate tax – Notional interest deduction(old)► Deemed deduction on qualifying Belgian GAAP equity (reduced with items such as financial fixed assets & foreign branch-income, ...)► Deduction linked to 10 year OLO but capped to 3.8 % for tax years 2011 and 2012 ► Tax year 2012: 3.425 % (3.925 % for SMEs)► Full carry-forward but limited to seven yearsPage 5 Belgian budget 2012 – overview of tax measures
  6. 6. Corporate tax – Notional interest deduction(old)► Mostly used by ► Former BCCs ► Belgian groups ► German, French, Dutch, Scandinavian groups ► Existing (not new) US companies► Cannot be used against abnormal or benevolent incomePage 6 Belgian budget 2012 – overview of tax measures
  7. 7. Corporate tax – Notional interest deduction(old)► Tax year 2010: NID used = 16,3 bio (PV-QP 25/07/2011)► Tax year 2010: NID carry-forward = 12.6 bio► Estimated NID equity 2010: + 330 Bio (applying 4.973%) ► Unique measure? No! Netherlands, Luxembourg, Switzerland have quasi-similar measures ► Also other financing regimes and alternatives (EU & non-EU)Page 7 Belgian budget 2012 – overview of tax measures
  8. 8. Corporate tax – Notional interest deduction (old) Strategy Interest ► Deduction of deemed interest on equity Parent ( ) Loan Tax Analysis – Belgium ► No capital duties in Belgium ► Interest income is taxable at 33.99% but the Belgian ETR - (effective tax rate) is reduced by: – NID – FY 12.31.2011: 3.425% on qualifying risk capital significantly reduces ETR. – ETR depends on incoming interest rate Interest – Foreign tax credit for IWHT available ► Domestic WHT exemption for dividends to treaty parents Belgian NID Co (Foreign) Op Co ► Access to large treaty network and EU legislation to tackle IWHT Loan ► Withstands foreign CFC legislation (substance related) + - ► Considered EU state-aid compliant - ► NID is automatically applicable (no ruling required; easyNID and foreign tax credit and straight-forward; no beneficial ownership issues) ► Existing Belgian BCC company can be used ► With new US treaty’s LOB provisions ideal to finance US operations for Belgian & EU groups ► APA can be obtained from the Belgian ruling commission Page 8 Belgian budget 2012 – overview of tax measures
  9. 9. Corporate tax – Notional interest deduction► Adopted (applicable as from TY 2013) ► NID rate ► Still based on 10 year OLO but reduction of cap to 3% (3.5% for SME) ► Average 10-year bond rate 2011: 4.191% ► Budget note: reduction of cap to 3% for period 2012-2014 - as from 2015: NID rate will be determined by law ► Budgetary impact (together with measures regarding carry-forward): EUR 1,620 mio (+ 45.6% of the tax measures) ► Dropped from the earlier note Di Rupo: no exclusion of mandatory equity from NID basis (minimum capital and legal reserves)Page 9 Belgian budget 2012 – overview of tax measures
  10. 10. Corporate tax – Notional interest deduction► Modification still in the pipeline ► Abolishment of NID carry-forward for future excess NID!!! ► Limitation of deduction of existing stock excess NID ► Last operation of the tax return/calculation (after deduction of tax losses and before application of the tax rate) ► Maximum deduction: 60% of residual taxable base ► No limitation for first mio EUR ► Carry-forward for excess to next taxable period (+1) ► Carry-forward expected to be limited to seven years (exception: period of limitation is extended when excess NID is unused due to 60% limitation) ► Problem when large tax loss carry-forward? ► ETR upon use is > 13%, effect on deferred tax assets?Page 10 Belgian budget 2012 – overview of tax measures
  11. 11. Corporate tax - Notional interest deductionExample - Existing NID carry-forwardTax year Excess Expire Balance Extended Losses NID date expire date NID2007 1,000 2014 0 N/A 3002008 1,200 2015 1,200 N/A 02009 900 2016 900 N/A 02010 1,100 2017 1,100 N/A 02011 800 2018 800 N/A 0Total 5,000 4,000 300Tax year 2014 EURTaxable basis before deduction of excess NID 700NID carried forward – 2007 -700Taxable basis after deduction of excess NID 0Page 11 Belgian budget 2012 – overview of tax measures
  12. 12. Corporate tax - Notional interest deductionExample - Existing NID carry-forward (cont’d)Tax year Excess Expire Balance Extended Losses NID date expire date NID2007 0 2014 0 N/A 3002008 1,200 2015 120 2016 02009 900 2016 900 N/A 02010 1,100 2017 1,100 N/A 02011 800 2018 800 N/A 0Total 4,000 2,820 300Tax year 2015 EURTaxable basis before deduction of excess NID 1,300NID carried forward – 2007 0NID carried forward – 2008 -1,180 (1,000 + 60% of 300)Taxable basis after deduction of excess NID 120Page 12 Belgian budget 2012 – overview of tax measures
  13. 13. Corporate tax - Notional interest deductionExample - Existing NID carry-forward (cont’d)Tax year Excess NID Expire date Balance Extended Losses NID expire date2007 0 2014 0 N/A 3002008 120 2015 0 2016 02009 900 2016 8 2017 02010 1,100 2017 1,000 N/A 02011 800 2018 800 N/A 0Total 3,300 2,800 300Tax year 2016 EURTaxable basis before deduction of excess NID 1,020NID carried forward – 2008 -120NID carried forward – 2009 -892Taxable basis after deduction of excess NID 8 (40% of 20)Page 13 Belgian budget 2012 – overview of tax measures
  14. 14. Corporate tax – Notional interest deduction► Action points / points of attention ► Check your stock of excess NID and projected profits to verify whether action needs to be undertaken to accelerate the use of excess NID ► Review your treasury policy and forecast taxable spread ► Consider possible impact on the deferred tax assets (e.g. valuation allowance) ► Limit percentage to 3%, only short-term funding ► Consider finance alternatives (or second treasury center)Page 14 Belgian budget 2012 – overview of tax measures
  15. 15. Corporate tax – Thin capitalization (general)► In many countries to prevent tax avoidance by excessive leveraging► Reduction of possibility to deduct interest for tax purposes► Thin Cap limitations depend on debt/equity, cash-flow, Ebitda, possibility of debt recharacterization or a combination thereof► Some Thin Cap apply to all debt, some to related party debt only► Intercompany debt has many definitions, so does equityPage 15 Belgian budget 2012 – overview of tax measures
  16. 16. Corporate tax – Thin capitalization (currentregime)► Two Thin Cap rules in Belgium: 7:1 and 1:1► Current legislation: specific 7:1 Thin Cap applies where the beneficial owner of the interest is a person that is not subject to tax or if the income is subject to a tax regime that is significantly more advantageous compared to the Belgian tax regimePage 16 Belgian budget 2012 – overview of tax measures
  17. 17. Corporate tax – Thin capitalization (newregime)► Modification still in the pipeline ► No longer limited to interest paid to beneficial owner who is not subject to income tax or who is subject to a far more beneficial regime for interest income ► Change of thin cap ratio from 7:1 now to 5:1 ► Only for intra-group loans ► Definition of group in accordance with BCC rules ► Condition for BCC regime purposes ► Companies under central management as a result of participations ► Participation (direct or indirect) at least 20% in share capital or voting rights ► Estimated budgetary impact EUR 100 mio (part of combat of fraud and correct application of the law) ► Thin Cap is more restrictive in other EU and OECD countries, e.g. Germany, France, US, China, the Netherlands, FrancePage 17 Belgian budget 2012 – overview of tax measures
  18. 18. Corporate tax – Thin capitalization (newregime)► In the „annex to the budget‟ it is mentioned that ► Leverage is best combined with NID that will going forward not be higher than 3% ► There is an indication that now NID is changed, many large companies have the intention to put up constructions with low capitalisation ► The example of a PPL is given with a „picture‟ ..., yet all PPL were ruled by the tax authorities, providing legal certaintyPage 18 Belgian budget 2012 – overview of tax measures
  19. 19. Corporate tax – Thin capitalization (new regime) - Hybrid loan/security – PPL (annex) PPL - Hybrid ► The use of a hybrid financing instrument creates a tax deduction in the debtor’s country as the instrument qualifies as debt, while it results in tax-exempt income in the recipient country, where the instrument Parent qualifies as equity ► Intermediate country (debtor of hybrid instrument) on lends the funds realizing a taxable spread Tax Analysis – Luxembourg/Netherlands ► No income pick-up at level Lux /Dutch Co (“equity characterization” ) ► Lux / Dutch DWHT exemption / reduction based on domestic law LuxCo Tax Analysis – NetherlandsSubscription NL Dividend ► Hybrid loan considered equity from a Dutch / Lux tax perspective,to PPL/PPS ► Interest income on hybrid loan should be treated as dividend for Dutch / Lux tax purposes and should therefore be exempt under participation exemption rules Tax Analysis – Belgium Belgium Interest ► Interest deduction at level Bel Co (debt characterization of profit (former NID co) participating loan or security) ► No Belgian IWHT on payments to Lux / Dutch Co ► A small at arm’s length taxable spread required at level Belco ► Broad Treaty Network Loan On the basis of a Belgian / Luxembourg / Dutch ruling with full transparency OpCo EU context? Page 19 Belgian budget 2012 – overview of tax measures
  20. 20. Corporate tax – Thin capitalization (newregime)► Open questions - what about ► The definition of (net) equity (Tax Equity or Belgian GAAP)? ► EU context ? Lankhorst -Hohorst? ► Net debt (financial institutions, treasury and securitisation entities)? ► Debt guaranteed by group-companies? ► Factoring? Renting? FX intercompany loans that are potentially swapped? ► Financial Fixed Assets or other shares qualifying for the dividend received deduction? ► “5” – only loans where interest is non-taxable or tax exempt at the level of the beneficiary?Page 20 Belgian budget 2012 – overview of tax measures
  21. 21. Corporate tax – Thin capitalization► Action points / points of attention ► Check your qualifying debt/equity ratio to verify whether equity needs to be reinforced ► Consider an equity increase, if required, e.g. by contribution shares into share capital ► Consider restructuring intercompany leveraging if funding is provided by a related entity not subject to tax on the interest income ► The exact situations in which the 5:1 would apply are not yet known but it will likely be a “soft” measurePage 21 Belgian budget 2012 – overview of tax measures
  22. 22. Corporate tax – Notional interest deduction –PPL – Effective Tax Rate (ETR) Finco ETR overview 20,0% 15,0% NID 10,0% 5,0% PPL 2ETR 0,0% -5,0% PPL 1 -10,0% -15,0% -20,0% 2,00% 2,50% 3,00% 3,50% 4,00% 4,50% 5,00% 5,50% 6,00% ETR -17,0% -6,8% 0,0% 4,9% 8,5% 11,3% 13,6% 15,5% 17,0% Intercompany Financing Rates ETR 0,98% 1,19% 1,33% 1,43% 1,51% 1,57% 1,62% 1,65% 1,69% ETR -1,06% 0,28% 1,18% 1,82% 2,30% 2,68% 2,98% 3,22% 3,42% NID - capped NID rate of 3% PPL 1 – 6% equity – 94% PPL PPL 2 – debt/equity ratio of 5-to-1Page 22 Belgian budget 2012 – overview of tax measures
  23. 23. Corporate tax – Notional interest deduction –PPL – Future?► NID may under circumstances still be attractive for „low yield‟ financing, that is for short-term € or USD funding, cash-pooling, factoring or sub-financing of a main group treasury center …► Possibly some „budget-savings‟ as existing „NID built up‟ will likely be spread out over a much longer period, but far from certain► Intercompany loan conditions are best set to match 3% cap – no longer NID carry-forwardPage 23 Belgian budget 2012 – overview of tax measures
  24. 24. Corporate tax – Notional interest deduction –PPL – Future?► PPL could possibly still be attractive ► Especially for higher yield financing (> 3%) ► Even after introduction of the proposed 5:1 debt/equity ratio ► But potentially the „new general anti-abuse‟ article could affect PPLs ► Recently, the ruling commission has put these structures on hold (awaiting the modification of the Thin Cap rule and the general anti-abuse provision (Art. 344, §1 ITC)) ► What happens with existing rulings?► Belgian & foreign groups with Belgian treasury centers might consider other EU-OECD alternativesPage 24 Belgian budget 2012 – overview of tax measures
  25. 25. Corporate tax – Capital gain on shares► Modification still in the pipeline ► Taxation at 25% of capital gains on shares held for less than one year (exception to principle of tax exemption of capital gains) ► Capital losses remain non-deductible ► Potential exception for trading and investment companies as securities are considered stock?► Action points / points of attention ► Structure your shareholding to meet the one year period ► Consider other (sub)holding structure for short-term investments ► Consider fixing the book value at current fair market valuePage 25 Belgian budget 2012 – overview of tax measures
  26. 26. Corporate and personal income taxCompany cars► Adopted (applicable as from 1 January 2012) ► Change to the calculation formula for benefits in kind (BIK) for company cars ► Limitation to deduction of lump sum commuting cost ► Additional disallowed item related to company car costsPage 26 Belgian budget 2012 – overview of tax measures
  27. 27. Corporate and personal income taxCompany cars► Change to the calculation formula for BIK company cars BIK = car‟s list price x CO2 coefficient x 6/7 ► Car list price: amount invoiced, including VAT and options, but excluding rebates and discounts ► Amount invoiced: also for second hand cars and leased cars ► Leased cars: amount invoiced, including price of the option to buy ► Private kilometers are not relevant anymorePage 27 Belgian budget 2012 – overview of tax measures
  28. 28. Corporate and personal income taxCompany cars► Change to the calculation formula for BIK company cars (cont‟d) ► CO2 coefficient ► Basic coefficient ► 5.5% for emission ► 95 g/km (diesel engine) ► 115 g/km (fuel engine) ► Higher CO2 emission levels ► Increase with 0.1% per gram (maximum coefficient: 18%) ► Lower CO2 emission levels ► Decrease with 0.1% per gram (minimum coefficient: 4%) ► Minimum amount BIK ► EUR 1,200 (2012 – tax year 2013) ► Formula will be reviewed annually to take into account the evolution of the CO2 emission levelsPage 28 Belgian budget 2012 – overview of tax measures
  29. 29. Corporate and personal income taxCompany carsCar type Current BIK BIK new regime (7,500 km)Audi A6 3,0 TDI EUR 2,397.75 *EUR 3,640.37BMW X5 xDrive30D 245 EUR 3,363.75 EUR 7,380.21Mercedes-Benz CLS 350 CDI I EUR 2,742.75 EUR 7,254.85Mini One D EUR 1,707.75 **EUR 1,200.00 * See below ** Minimum BIK► Example: Audi A6 Diesel ► List price: EUR 42,900 ► CO2 level: 139 g/km ► CO2 coefficient: 5.5% + 4.4% = 9.9% ► List price x CO2 coefficient x 6/7 = EUR 3,640.37Page 29 Belgian budget 2012 – overview of tax measures
  30. 30. Corporate and personal income taxCompany cars► Example: Mercedes CLS 350 CDI I ► List price: EUR 71,126 (amortization in five years) ► CO2 level: 159 g/km ► CO2 coefficient: 5.5% + 6.4% = 11.9% ► List price x CO2 coefficient x 6/7 = EUR 7,254.85 BIK 2011 BIK 2012 % 2011 2012 Amortization (14,225.20 30% 4,267.50 4,267.50 EUR/Y) Benefit in kind 2,742.75 7,254.85 - Fuel (30%) 822.82 2,176.45 25% - 205.70 - 544.11 - Other car expenses (70%) 1,919.93 5,078.40 30% - 575.98 - 1,523.52 Disallowed expense 3,485.82 2,199.87 Additional disall. exp. (17%) 1,233.32 Total non deductible 3,485.82 3,433.19Page 30 Belgian budget 2012 – overview of tax measures
  31. 31. Corporate and personal income taxCompany cars► Limitation of deduction of lump sum commuting cost of EUR 0.15 per km to taxable benefit in kind ► Previously based on the administrative commentary► Disallowed item company car costs (corporate tax) ► 17% of benefit in kind (car‟s list price x CO2 coefficient x 6/7) ► Disallowed item is minimum taxable base ► No tax deductions : DRD, NID, tax losses, investment deduction, …Page 31 Belgian budget 2012 – overview of tax measures
  32. 32. Corporate and personal income tax –Company cars► Action points / points of attention ► Review your car fleet – consider alternatives ► Reconsider the remuneration package of employees/directors involved (e.g. minimum salary threshold to benefit from the corporate income tax rate for SME) ► Consider having the lease taken on by the employee, reimbursing the employee for the lease and reimburse the professional mileage of the employee (if the amount is considerable) instead of providing free use of a company car ► Compare effect on BIK with calculation tool on our website (http://www.ey.com/BE/en/Services/Tax/Calculate_new)Page 32 Belgian budget 2012 – overview of tax measures
  33. 33. VAT – BIK – Comparison “old” and “new” VAT deduction limits “Old” 45, 2 45, 2 75% Always 50% limitation + 50% Payment of VAT 25% based on BIK Company usePage 33 Belgian budget 2012 – overview of tax measures
  34. 34. VAT – BIK – Comparison “old” and “new” VAT deduction limits “New” 50% 45, 2 limitation 75% 50% New 25% limitation Company usePage 34 Belgian budget 2012 – overview of tax measures
  35. 35. VAT – BIK – Where are we?► Company cars ► 2011: “tolerance” to use old calculation methods ► No payment of VAT on BIK if company use equals or exceeds 50% ► 2012: decision would remain but with calculation per company instead of per car ► No decision taken yet► Immovable property (pm): decision remains in force ► Also for 2011► Quid other BIK?Page 35 Belgian budget 2012 – overview of tax measures
  36. 36. VAT – BIK company cars – Action points► No certainty at this stage which system will be applied to calculate the VAT deduction for company cars► Action required by companies once a final decision is published by the VAT authorities ► Decide to comply or not with calculation methods proposed by the VAT authorities (most probably fixed per company) ► Comparison with actual situation (work-home distances, different categories of employees, amount of costs involved, possible VAT impact, etc.) ► Abandon 50% deduction (downwards – upwards)? ► VAT calculation for the past ► VAT calculation for 2011: pay VAT on BIK or (only) limit VAT deduction to 50%? ► Revise previously taken positions?Page 36 Belgian budget 2012 – overview of tax measures
  37. 37. Personal income tax – Stock options► Adopted (applicable as from 1 January 2012) ► Increase of benefit in kind from 15% to 18% of the value of the underlying shares ► Increase of reduced benefit in kind from 7.5% to 9% of the value of the underlying shares ► Applicable to stock options offered as from 1 January 2012 ► Reference point is date of offer (text of the law: “offertes / aangeboden”), not date of grant (text of justification to the amendment: “toegekend / attribuées”)Page 37 Belgian budget 2012 – overview of tax measures
  38. 38. Personal income tax – BIK housing/utilities► Modification still in the pipeline ► Increase of the BIK for heating from EUR 1,480 to EUR 1,820 ► Increase of the BIK for electricity from EUR 740 to EUR 910 ► Increase of the BIK for free housing for house with a notional income exceeding EUR 745 ► Currently: 100/60 x notional income x 2 ► 2012 : 100/60 x notional income x 3.8 ► Amounts to be subject to indexation annually► Action points / points of attention ► Reconsider the remuneration package of employees/directors involved (e.g. minimum salary threshold to benefit from the corporate income tax rate for SME)Page 38 Belgian budget 2012 – overview of tax measures
  39. 39. Personal income tax – Tax deductions► Adopted (applicable as from TY 2013) ► Abolishment of tax reductions for ecological investments (solar panels, …), except for investments in isolation of roofs► Modification still in the pipeline ► Conversion of deductions into tax reduction at 45% ► Deduction for only own dwelling, deduction for child care expenses and gifts ► Exception: alimony payments remain tax deduction ► Other tax reductions (life insurance, own dwelling taxation (old regime), etc.): tax reduction at 30% instead of tax reduction at adjusted average tax rate (between 30% and 40%)Page 39 Belgian budget 2012 – overview of tax measures
  40. 40. Corporate and personal income taxPensions► Modification still in the pipeline ► Personal income tax ► Modification of tax treatment of pension payments ► Modification of tax treatment of personal pension contributions (2nd and 3rd pillar) ► Corporate income tax ► Mandatory externalization of pension provisions ► Modification of the 80% rulePage 40 Belgian budget 2012 – overview of tax measures
  41. 41. Personal income tax - Pensions► Still in the pipeline: modification of treatment of payments and contributions ► Pension payments (second pillar): increase of tax rate on payments (part relating to employer contributions) ► Current situation ► Payment at ages 60 to 64: 16.5% ► Payment at age 65: 10% ► New situation ► Payment at age 60: 20% ► Payment at age 61: 18% ► Payment at age 62 to 64: 16.5% ► Payment at age 65: 10%Page 41 Belgian budget 2012 – overview of tax measures
  42. 42. Personal income tax - Pensions► Still in the pipeline: modification of treatment of payments and contributions (cont‟d) ► Personal pension contributions (second and third pillar) ► Current situation: tax reduction at adjusted average tax rate (between 30% and 40%) ► New situation: tax reduction at 30%► Actions points / points of attention ► Postpone your pension payment to age 65 (tax at 10%) or ages 62-64 (tax at 16.5%) ► Alternatively: organize your pension payment before entry into force for taxpayers at age 60 or 61 (if possible, depending on date of entry into application)Page 42 Belgian budget 2012 – overview of tax measures
  43. 43. Corporate income tax - Pensions► Modification still in the pipeline: mandatory externalization of individual pension promises (financing via internal provisions is no longer allowed) ► Existing internal provisions: externalization within three years ► Insurance premium tax ► 4.4% on new insurances ► 1.75% insurance tax in case of externalization of internal pension provisionsPage 43 Belgian budget 2012 – overview of tax measures
  44. 44. Corporate income tax - Pensions► Modification still in the pipeline: adaptation of 80%-rule ► Limitation of deductibility of complementary pension contributions based on amount of pension payment upon retirement ► Currently: cap of 80% of last annual gross salary ► Introduction of an additional cap: pension of the highest public official (gross EUR 72,480.72 per year or EUR 6,040.06 per month)Page 44 Belgian budget 2012 – overview of tax measures
  45. 45. Corporate and personal income taxPensions► Action points / points of attention ► Provide for the necessary funds for externalization ► Revise pension plans to meet the adapted 80% limitation ► Consider reducing your periodic income required to meet the former 80% reduction, considering the lower maximum cap that applies going forward ► Consider the possibility for back-service individual pension promises for tax year 2012 (depending on date of entry into application of new rules) ► Consider potential consequences as regards transition from the old to the new regimes, taking into account built-up reserves (to be analyzed under the new law)Page 45 Belgian budget 2012 – overview of tax measures
  46. 46. Withholding tax► Adopted (applicable to payments as from 1 January 2012) ► Increase of WHT rate on interest and reduced WHT rate on dividends ► Introduction of a solidarity levy ► Introduction of novel reporting requirements for withholding agentsPage 46 Belgian budget 2012 – overview of tax measures
  47. 47. Withholding tax► Increase of WHT rate for interest and reduced dividends to 21%► Exceptions ► Interest on qualifying savings accounts: 15% on interest exceeding the exempt amount (EUR 1,830 for 2012) ► Interest on debt instruments issued prior to 1 March 1990: 25% ► Royalties: 15% ► Liquidation boni: 10% (other than boni paid by EU passported funds that are invested for more than 40% in debt claims: 21%) ► Share buy-back boni: 21% (0% for share buy-backs executed through the stock exchange (cf. 264bis ITC) or done by corporate funds (cf. art.21, 2° ITC) (0% WHT) that are not EU passported funds that are invested for more than 40% in debt claims (21% WHT)Page 47 Belgian budget 2012 – overview of tax measures
  48. 48. Withholding tax► Increase of WHT rate for interest and reduced dividends to 21%► Exceptions ► Distributions by non-Belgian funds organized as a co-ownership pool of assets (cf. FCP/GBF) that have not provided a breakdown in accordance with article 321bis ITC: 25% ► Dividends distributed by residential REITS: 0% ► Dividends other than ► Dividends distributed on VVPR shares ► Dividends distributed by Belgian corporate investment funds: 25 %Page 48 Belgian budget 2012 – overview of tax measures
  49. 49. Withholding tax► Increase of WHT rate for interest and reduced dividends to 21%► Exceptions ► Interest on government debt securities issued and underwritten between 24 November 2011 and 2 December 2011: 15% (cf. art. 534 ITC) ► Doubts regarding compatibility with principle of non-discrimination and EU free movement of capital ► Finance Minister: no problem since not limited to Belgian state bondsPage 49 Belgian budget 2012 – overview of tax measures
  50. 50. Withholding tax► Extra solidarity levy ► Extra levy of 4% (no municipality surcharge) ► Application, at the option of the beneficiary ► At source (standard); or ► Through assessment (optional) via reporting to the National Bank at the request of the beneficiary ► Application at source ► 4% on the amount exceeding EUR 20,020 ► Applicable to the net amount of interest and dividends exceeding EUR 20,020 (in 2012), excluding ► Dividends and interest payments subject to the 10 or 25% rate of WHT ► Interest paid on government debt securities issued and underwritten between 24 November 2011 and 2 December 2011; and ► Interest from qualifying savings accountsPage 50 Belgian budget 2012 – overview of tax measures
  51. 51. Withholding tax► Extra solidarity levy ► What about interest and dividends subject to 0% withholding? ► Income contemplated by article 21 (liquidation and share buy-back boni paid by corporate funds and certain income from life insurances) are items carved-out from article 17 and should therefore not be subject to the levy ► Interest and dividend income otherwise exempt from withholding tax /solidarity levy (e.g. dividends paid by a residential REIT or boni on share buy-backs executed through the stock exchange) is not explicitly excluded but the exclusion could be defended on the basis of the new Article 174/1, §3 ITC (“The provisions of Title VI in relation to withholding tax are applicable to the solidarity level except when provided otherwise”) ► Title VI contains the domestic exemptions from WHT and constitutes the legal basis of the exemptions laid down in the RD ITC ► It would have been clearer to specifically refer to exempt interest and dividend income in the definition of the scope of the solidarity levyPage 51 Belgian budget 2012 – overview of tax measures
  52. 52. Withholding tax► Extra solidarity levy ► Computation of the EUR 20,020 threshold ► For the computation of the threshold account must be taken of all interest and dividend income obtained by the taxpayer with the exception of ► Liquidation boni contemplated by article 171, 2°, f) ► Interest paid on government debt securities issued and underwritten between 24 November 2011 and 2 December 2011 ► Interest and dividends contemplated by article 21 ITC ► The threshold has to be assessed on an annual basis ► In case the threshold is exceeded, one must first set-off the interest and dividends that have not been subject to the 4% levyPage 52 Belgian budget 2012 – overview of tax measures
  53. 53. Withholding tax► Extra solidarity levy of 4% Threshold Basis Interest 25%  X Due if Dividends 25%  X sum >20,020 € Interest 21% (I)   4% on I + D for amount exceeding Dividends 21% (D)   threshold Tax-exempt interest from X X savings accounts Liquidation boni X XPage 53 Belgian budget 2012 – overview of tax measures
  54. 54. Withholding tax► Extra solidarity levy (cont‟d) ► Obligations imposed on withholding agent: i.e. ► The issuer in the case of Belgian sourced income with the exception of securities held in the X/N system for which the BNB is the WHT agent ► First intermediary or subsequent financial institution in case of application of art. 261, 2°, b) ITC, for foreign sourced income ► In the case of Belgian securities, this is bound to create problems as ► Issuer does not know identity of beneficiary ► How can beneficiary exercise option for the 4% at source ► How can the issuer/BNB satisfy its reporting obligations vis-à-vis the NBB? ► Financial intermediary may need to withhold and report on behalf of the WH agent or alternatively, issuer may want to apply 4% by default to avoid reportingPage 54 Belgian budget 2012 – overview of tax measures
  55. 55. Withholding tax► Extra solidarity levy (cont‟d) ► Reporting to the National Bank ► No reporting requirement for interest/dividends on which the solidarity levy was applied ► No reporting required of liquidation boni contemplated by art.171, 2°, f) ITC and interest paid on government debt securities issued and underwritten between 24 November 2011 and 2 December 2011 and of interest and dividend income exempt pursuant to article 21 ITC ► Reporting is only required with a view to the application of the solidarity levy and these income items count for the threshold computation ► All other interest and dividend income contemplated by article 17, §1, 1° and 2° as well as the identification data of the recipients of the income must be reported (e.g. dividends paid by a residential REIT or boni related to share buy-backs performed on a stock exchange which, for the boni, seems impossible)Page 55 Belgian budget 2012 – overview of tax measures
  56. 56. Withholding tax► Extra solidarity levy (cont‟d) ► Reporting by the National Bank to the tax authorities ► Communication to the tax authorities at their request only (for example when the taxpayer requests a refund of 4% levy) ► Automatic communication to the tax authorities if more than EUR 20,020 reported to the National Bank ► Practical aspects to be laid down in a Royal DecreePage 56 Belgian budget 2012 – overview of tax measures
  57. 57. Withholding tax – Example (1)► Tax assessment relating to 2012 ► The taxpayer received ► Interest on qualifying savings accounts (WHT exemption of EUR 1,830 for 2012) ► Other interest subject to 21% WHT ► The taxpayer did not request the application of the 4% levy at sourceCase Exempt WHT of 15% WHT of 21% 4% levy on1. EUR 1,830 EUR 1,000 EUR 13,000 02. EUR 1,830 EUR 6,000 EUR 15,000 EUR 9803. EUR 1,830 EUR 1,000 EUR 18,000 04. EUR 1,830 EUR 21,000 EUR 3,000 EUR 3,000Page 57 Belgian budget 2012 – overview of tax measures
  58. 58. Withholding tax – Example (2)Income Taxable basis WHT rate Increased Amount WHT?Interest on EUR 8,170 15% N/A EUR 1,225.50qualifying (EUR 10,000 -savings account exemption of first bracket of currently EUR 1,830)Other interest EUR 20,000 21% 4% on amount EUR 11,699.20and dividend interest and exceeding EUR (currentlyreduced WHT EUR 30,000 20,020 EUR 7,500) dividendsOther dividends EUR 40,000 25% N/A EUR 10,000Total EUR 98,170 EUR 22,924.70 (currently EUR 18,725.50)Page 58 Belgian budget 2012 – overview of tax measures
  59. 59. Withholding tax► Ernst & Young point of view ► The rules on the solidarity levy constitute a hidden 25% WHT, especially for investors aiming to preserve anonymity ► The rules on the solidarity levy establish a de facto “vermogenskadaster / cadastre des patrimoines”► Effective Date ► In case attributed or made payable as from 1 January 1 2012 ► No relief for interest accrued prior to 2012 ► e.g. Zero coupon bond issued in 2002 and maturing in 2012: entire amount of the issue discount will be subject to the new rulesPage 59 Belgian budget 2012 – overview of tax measures
  60. 60. Withholding tax – Comparison with theNetherlandsTotal investment capital 5.000.000,00 €Dividend income 50,00%Interest income 50,00% WHT rate Belgium prior to 2012Interest 15%Dividends 25% WHT rate Belgium as from 2012Interest income up to EUR 20,000 21%Interest income exceeding EUR 20,000 25%Dividendq 25% Annual dividend Tax in Belgium prior Tax in Belgium as Annual revenue Annual interest income Tax in the Netherlands income to 2012 from 2012 3,00% EUR 75,000 EUR 75,000 EUR 30,000 EUR 36,700 EUR 59,746.33 4,00% EUR 100,000 EUR 100,000 EUR 40,000 EUR 49,200 EUR 59,746.33 5,00% EUR 125,000 EUR 125,000 EUR 50,000 EUR 61,700 EUR 59,746.33 6,00% EUR 150,000 EUR 150,000 EUR 60,000 EUR 74,200 EUR 59,746.33 7,00% EUR 175,000 EUR 175,000 EUR 70,000 EUR 86,700 EUR 59,746.33 8,00% EUR 200.000 EUR 200,000 EUR 80,000 EUR 99,200 EUR 59,746.33 9,00% EUR 225,000 EUR 225,000 EUR 90,000 EUR 111,700 EUR 59,746.33Page 60 Belgian budget 2012 – overview of tax measures
  61. 61. Withholding tax► Action points / points of attention ► Consider investment in following instruments in order to benefit from a beneficial tax treatment and anonymity ► Branch 21/branch 23 life insurance products (longer than eight years or payment >130%) ► Capitalization beveks/sicavs that are not EU passported or that do not invest for more than 40% in debt instruments ► Savings accounts (15% on part exceeding EUR 1,830) ► Consider liquidating your company before the next budget roundPage 61 Belgian budget 2012 – overview of tax measures
  62. 62. Withholding tax – Personal income tax return► Adopted (applicable to payments as from 1 January 2012) ► General reporting requirement for movable income in personal income tax return, even after application of WHT (Art. 313 ITC) ► All movable income, including copyright income, miscellaneous movable income, etc. ► Exception: interest/dividends for which solidarity levy of 4% was applied ► BUT: application of solidarity levy on entire amount (not only on part exceeding EUR 20,020) – reporting in tax return required for reimbursement of excess tax (4% on first bracket of EUR 20,020 = EUR 800.80) ► No application of additional municipality tax: art. 466 ITC will be amended in a later lawPage 62 Belgian budget 2012 – overview of tax measures
  63. 63. Withholding tax – Reimbursement► Adopted ► Applicable to payments as from 1 January 2011 (retroactively) ► Reduction of period of limitation for reimbursement request for undue movable WHT and payroll tax from ten years to five yearsPage 63 Belgian budget 2012 – overview of tax measures
  64. 64. Tax on conversion of bearer financialinstruments► Adopted (applicable as from 1 January 2012) ► Tax on the conversion of bearer financial instruments into dematerialized financial instruments or registered financial instruments ► Ratio: avoidance of mass dematerialization at the end of 2013 ► Scope ► Bearer financial instruments from Belgian issuers ► Excluded: instruments with maturity date before 1 January 2014 ► Taxable basis ► Listed instruments or instruments in Multilateral Trading Facilities: last listed value before deposit ► Non-listed claims: nominal value of the claim ► Shares in bevek/sicav: last inventory value before deposition ► Other: accounting value on the day of the depositionPage 64 Belgian budget 2012 – overview of tax measures
  65. 65. Tax on conversion of bearer financialinstruments► Adopted (cont‟d) ► Tax rate ► Conversion in 2012: 1% ► Conversion in 2013: 2% ► No conversions after 2013 ► Constitutionality questioned by State Council ► Change of position compared to 2005 Law on dematerialization (possibility of conversion before end of 2013 without cost/tax) ► No reasonable justification for breach of expectations and different treatment (avoidance of massive dematerialization at the end of 2013)Page 65 Belgian budget 2012 – overview of tax measures
  66. 66. Tax on conversion of bearer financialinstruments► Action points / points of attention ► Convert your financial instruments in 2012 to avoid additional 1% tax ► Opt for dematerialization of bearer shares benefiting from the reduced dividend WHT instead of conversion into registered shares (in view of the continued application of the reduced dividend WHT rate)Page 66 Belgian budget 2012 – overview of tax measures
  67. 67. Combat against tax fraud► Adopted: access for financial institutions to the national register ► Helpful for financial institutions to meet their obligation to communicate info to National Bank when banking secrecy is lifted ► Identity of the client ► Numbers of accounts and contracts ► Lifting of banking secrecy for Belgian tax authorities in case of ► Clues of tax evasion ► Intention of tax authorities to tax on the basis of “tekenen en indiciën van gegoedheid/signes et indices d‟aisance” ► Lifting of banking secrecy on simple request in case of request for information by foreign tax authoritiesPage 67 Belgian budget 2012 – overview of tax measures
  68. 68. Combat against tax fraud► Adopted ► Attribution of probative value to the electronic documents of the tax administration ► Possibility for the tax administration to establish the existence of infractions of the income tax code in “processen-verbaal/procès- verbaux”Page 68 Belgian budget 2012 – overview of tax measures
  69. 69. Combat against tax fraudArt. 344, §1 ITC► General anti-abuse provision adopted in 1993 ► Re-characterization of transaction(s), when aim of legal characterization of the parties opted for is tax avoidance ► Taxpayer may prove legitimate needs of a financial or economic nature for the chosen legal characterization ► Application in Supreme Court case law ► Cases relating to e.g. back-to-back transaction (subletting), disproportional share buy-back, split sale of usufruct and bare ownership, … ► Initially strict legal approach : re-characterization must have similar legal consequences (impossible for one-step transactions and difficult for step-by-step transactions unless (near-)simulation) ► New wind (more economic approach) in Supreme Court decision of 10 June 2010 (cf. infra)Page 69 Belgian budget 2012 – overview of tax measures
  70. 70. Combat against tax fraudArt. 344, §1 ITC / Supreme Court 10 June 2010 Management services A B C Management fee Management fee BEF 500,000/month BEF 190,000/month► Situation ► Management contract A-B: B does day-to-day management of A and other company (fee: BEF 500,000 per month per company) ► Management contract B-C: C does day-to-day management of A and other company (fee: BEF 190,000 per month per company) ► B ► Loss-making company without equipment or assets ► Completely dependent on C for performance of management activitiesPage 70 Belgian budget 2012 – overview of tax measures
  71. 71. Combat against tax fraudArt. 344, §1 ITC / Supreme Court 10 June 2010 Management fee BEF 190,000/month A B C Gift BEF 310,000/month► Reclassification ► Reclassification of the different (artificial) stages of a transaction into different classification possible provided same transaction from an economic point of view (substitution of parties possible) ► Re-characterization must have similar non-tax legal consequences ► Result: re-charaterization into payment of management fee by A directly to C and gift from A to BPage 71 Belgian budget 2012 – overview of tax measures
  72. 72. Combat against tax fraudArt. 344, §1 ITC - modification► In the pipeline: modification of the general anti-abuse provision (Art. 344, §1 ITC) ► No text or plans available yet ► Different positions in doctrine after Supreme Court decision ► Position 1: no new provision needed ► More economic approach ► Purely theoretical and non-essential non-tax legal consequences are not to be taken into account for the reclassification ► Position 2 ► No change in approach ► Supreme Court decision deals with an extreme situation ► Almost simulation ► Interposition of B ≈ “naamlening / prête-nom”Page 72 Belgian budget 2012 – overview of tax measures
  73. 73. Combat against tax fraudArt. 344§1 ITC - modification► In the pipeline: modification of the general anti-abuse provision (Art. 344, §1 ITC) (cont‟d) ► Possible approach : “wetsontduiking / fraude à la loi” ► Avoidance of the application of tax law ► Through legal and non-simulated legal acts ► Approximating to taxable acts ► While there is no other explanation for those legal acts than tax avoidance► Compare ► Art. 1, §10 VAT CodePage 73 Belgian budget 2012 – overview of tax measures
  74. 74. Combat against tax fraudAbuse of management companies► Tougher approach towards abuse of management companies ► Not aimed at management companies in se ► Aimed at abuse of management companies ► Combat of turbo-usufruct transactions ► Combat against avoidance of social security regime for employees and abuse of benefits ► Private expenses ► Cf. supra: company cars, BIK for heating and electricity ► Cfr. infra: tougher application of secret commission taxPage 74 Belgian budget 2012 – overview of tax measures
  75. 75. Combat against tax fraudSecret commission tax► 309% levy on unreported remunerations, incl. BIK ► Reporting obligation on specific forms: 309% secret commission tax if not reported ► Past administrative tolerance: no application of 309% ► Classification as disallowed expense ► Booking on the beneficiary‟s current account (post factum) ► Internal administrative instruction (27 July 2011): strict application of 309% unless ► BIK is reported on the specific forms and in the beneficiary‟s tax return ► BIK is included in the beneficiary‟s filed tax return even though it is not reported on the specific form; or ► The beneficiary pays the invoiced amount of the benefit, or the value of the benefit is added to the beneficiary‟s current account in the year during which the benefit is grantedPage 75 Belgian budget 2012 – overview of tax measures
  76. 76. Combat against tax fraudSecret commission tax► 309% levy on unreported remunerations, incl. BIK (cont‟d) ► Addendum to internal administrative instruction of 27 July 2011 transitory period until 30 June 2012 ► BIK taxed on lump sum basis + cell phone ► Tax authorities may decide not to apply the secret commission tax to BIK discovered prior to 1 July 2012, which are not (sufficiently) reported, provided taxation in the hands of the beneficiary is still possible ► Other BIK (not discovered prior to 1 July 2012 ) ► The secret commission tax applies unless BIK are spontaneously reported by the beneficiary prior to 1 July 2012Page 76 Belgian budget 2012 – overview of tax measures
  77. 77. Combat against tax fraudSecret commission tax► 309% levy on unreported remunerations, incl. BIK (cont‟d) ► Addendum to internal administrative instruction of 27 July 2011: strict application of 309% as from 1 July 2012 ► No application of secret commission tax on benefits which are recorded on the current account of the beneficiary in the year during which they have been granted ► No longer accepted: not submitting the appropriate forms and waiting until the tax audit to record the amount of the current account ► Elements to take into account by the tax authorities when assessing whether or not to apply the secret commission tax ► Good faith of the taxpayer who has simply forgotten or has mistakenly not reported the benefit ► Exceptional nature of the failure to report and the materiality of the error ► New administrative tolerance: no 309% when no reporting due to reasonable (but wrong) classification as social/cultural advantage by grantorPage 77 Belgian budget 2012 – overview of tax measures
  78. 78. Combat against tax and social fraud► Modifications still in the pipeline ► Harmonization of investigative competencies ► Strengthening of anti-money laundering provisions ► Reporting requirement for foreign accounts (to the National Bank) ► Increased combat of the abuse of the self-employed status, use of fake companies, abuse of companies (main target on management companies) ► Increase of maximum penal fines for tax fraud from EUR 125,000 to EUR 3 mio ► And many other measures …Page 78 Belgian budget 2012 – overview of tax measures
  79. 79. Miscellaneous► Adopted ► VAT ► Increase of tax rate on pay TV from 12% to 21% ► Application of VAT to notaries and bailiffs ► Increase of excises on tobacco ► Bank tax ► Tax on the energy sector ► Increase of the stock exchange tax (tax rates and maximum amounts)Page 79 Belgian budget 2012 – overview of tax measures
  80. 80. R&D incentives have not been modified► R&D incentives: confirmation of continuation (and, insofar possible, extension) of tax measures ► Wage withholding tax exemption ► Investment deduction for R&D ► Patent income deduction ► Exemption of regional grants► Belgium remains attractive R&D/IP locationPage 80 Belgian budget 2012 – overview of tax measures
  81. 81. Conclusion► What‟s next? ► Next budget round in March (need for additional income / savings) ► Draft legislation for remaining items to be submitted to Parliament ► NID carry-forward ► General anti-abuse measure (Art. 344, §1 ITC), ► Thin cap ► Hopefully, clarification of practical application of solidarity levy of 4% on interest/dividends (especially regarding application at source)Page 81 Belgian budget 2012 – overview of tax measures
  82. 82. Ernst & Young Herwig Joosten Tel.: +32 2 774 91 00Assurance | Tax | Transactions | Advisory Email: herwig.joosten@be.ey.com2012 Ernst & Young Transaction Advisory ServicesAll rights reserved.About Ernst & YoungErnst & Young is a global leader in assurance, tax,transaction and advisory services. Worldwide, our152,000 people are united by our shared valuesand an unwavering commitment to quality. Wemake a difference by helping our people, ourclients and our wider communities achieve theirpotential.Ernst & Young refers to the global organization ofmember firms of Ernst & Young Global Limited,each of which is a separate legal entity.Ernst & Young Global Limited, a UK companylimited by guarantee, does not provide services toclients.For more information about our organization,please visit www.ey.com/be.Follow us: twitter.com/EY_BelgiumPage 82 Belgian budget 2012 – overview of tax measures

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