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The government reaches an agreement on the Budget 2018

The government reaches an agreement on the Budget 2018

In the context of the budget 2018, the federal government reached an agreement about various tax measures. The most important decisions are the reform of the tax on savings for individuals and the reduction of the corporate income tax rate to 20% for SME (on the first 100.000 euro) and to 29% in 2018 and 25% in 2020 for large companies.


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Tax on savings for individuals

The taxation of savings will be reformed. The traditional exemption of withholding tax on interests received on saving accounts up to 1.880 euro is reduced to 940 euro. A new exemption on the first 627 euro received, for income on shares (dividends), will be introduced.

An annual tax of 0.15% will be due on securities accounts as from 500.000 euro (for married couples this will be 1 Mio euro)

Finally, pension savings are further encouraged. The taxpayer will now have the possibility to save a higher yearly amount of 1.200 euro but in this case, the tax reduction is limited to 25%.

Reduction of the corporate income tax rate

The government also reached an agreement on the reduction of the corporate income tax rate.

Small enterprises

As from income year 2018 the corporate income tax rate drops to 20% on the first 100.000 euro profit of the SME (as defined in article 15 company code).To get the benefit of this reduced rate a minimum remuneration to a director of the company has to be paid.

Large companies

For large companies, the rate will be reduced in two steps. First to 29% as from income year 2018 and later to 25% as from income year 2020. The crisis contribution (3% additional tax) is gradually abolished.The rate reduction is funded by compensatory measures within the corporate income tax. Most important are the reform of the notional interest deduction (in the future only on the increase of the equity of the company) and the introduction of a minimum tax base via the limitation of a basket of deductions (losses carried forward, notional interest deduction, carry forward of dividend received deduction) for the portion above 1.000.000 euro. The amount above will only be deductible for 70%. This results in a minimum tax rate of a 7.5% for this higher part (with a corporate income tax rate at 25 %).

The detailed texts of the different measures still needs to be further elaborated.

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