Belgium: Extension of tax credit for loans to SMEs in Walloon region (COVID-19)
Belgium: Extension of tax credit for loans to SMEs
A loan program (referred to as the “coup de pouce”) has been available in the Walloon region since 2017, and similar to Flemish and (and more recently) Brussels counterparts, the program provides a tax advantage in the form of a tax credit when individuals lend money to qualifying small and medium-size enterprises (SMEs) and to the self-employed in Wallonia.
The coronavirus (COVID-19) pandemic and the resulting economic crisis is currently affecting Belgian businesses, with many encountering financial problems. In this context, given that any source of additional funding would provide relief, the Walloon government announced that it is strengthening the attractiveness of the "coup de pouce" loan program so as to promote economic recovery by allowing companies to strengthen their solvency through private savings.
The “coup de pouce” loan program provides a source of additional private financing by strengthening the attractiveness of such loans for lenders, who can benefit from a tax credit of 4% of the average amount loaned for the first four years and 2.5% for subsequent years.
There are certain conditions to be met, including:
- The term of the loan must be for four, six or eight years.
- In principle, full or partial early repayment of the loan is not allowed; the loan is to be repaid in one payment at the end of the loan’s term.
- There are ceilings on the amounts of these loans; a lender can loan a maximum of €50,000 and a borrower can borrow a maximum of €100,000. These amounts may be the subject of a single loan or several loans.
- The interest rate on the loan cannot exceed the legal interest rate in effect on the date of the loan. For the year 2020, the interest rate is a minimum of 0.875% with a maximum of 1.75%. When paying interest, the borrower must withhold the withholding tax (30%) on the gross amount of interest. The withholding tax is, thus, final for the lender.
Read a November 2020 report (French) prepared by the KPMG member firm in Belgium
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