Belgium: Legislation introducing loss carryback rules advances (COVID-19)

Belgium: Legislation introducing loss carryback rules

Parliament has approved legislation introducing a loss carryback regime as a response to the economic situation from the coronavirus (COVID-19) pandemic.


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Parliament has not approved the reserve fund for reconstruction, but could possibly do so before the parliamentary recess (21 July 2020).

Loss carryback rules

Companies in a tax paying position for financial year (FY) 2019 and expecting a loss for FY 2020 need to verify whether they qualify for the loss carryback. Enterprises (either subject to individual (personal) income tax or to corporate income tax) would, under the legislation, have the possibility to carry back the estimated loss of financial year 2020 and credit it on the taxable profit of the previous FY 2019. This measure is intended to allow companies to get a faster refund of tax prepayments or to pay less taxes for assessment year 2020.

The carryback, which can never be higher than the taxable profit (with corrections) of income year 2019, would be limited by a “double ceiling”—the losses to be borne by the company for income year 2020, and an absolute maximum of €20 million. The carryback, which technically works through a temporary exempt reserve, could be applied for income year 2019 and would be added back to the taxable income of the following income year, 2020.

  • The estimate of the loss of the company would need to be as close as possible to the actual loss, with a maximum tolerance of 10%. The exceeding difference would, in the following year, be taxed separately at a rate scaling up to 40% depending on the amount of the excess.
  • A specific provision could also eliminate the possible benefit of the reduction of the corporate income tax rate to 25% as from assessment year 2021.
  • The measure is accompanied by some conditions such as one that would limit the “cash out” situations such as by dividend distributions, capital reductions, and buy-back of shares. Having a subsidiary in a tax haven jurisdiction, as well as transactions with entities in tax havens that do not have economic substance, would also exclude the application of the carryback.
  • Lastly, specific rules would apply for companies when the accounting year does not follow the calendar year.

Read a June 2020 report prepared by the KPMG member firm in Belgium

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