Belgium: Pending tax legislation, earnings stripping rules and implementing non-cooperative jurisdictions list

Belgium: Pending tax legislation

The federal government submitted to Parliament three draft laws containing several tax measures—including provisions for the implementation of the EU list of non-cooperative jurisdictions—expected to be approved before year-end.

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Other measures in the pending legislation concern:

  • Exemption from paying wage withholding tax with regard to the training of employees
  • Interest deduction limitation (“earnings stripping rules”)
  • Investment deduction for small and medium-sized enterprises (SMEs)


EU list of non-cooperative jurisdictions

Since 2017, the EU regularly updates a list of non-cooperative jurisdictions. The list (as of October 2020) contains the following jurisdictions: American Samoa, Anguilla, Barbados, Fiji, Guam, Palau, Panama, Samoa, Seychelles, Trinidad & Tobago, the U.S. Virgin Islands, and Vanuatu. Read TaxNewsFlash

Under the pending legislation, a presence on the EU list would have repercussions for Belgian tax purposes, as follows:

  • Any entity with legal personality established in a jurisdiction on the EU list at the end of the tax period would be deemed to be a legal construction (from assessment year (AY) 2021).
  • A foreign company on the EU list at the end of the tax period could be considered as a controlled foreign corporation (CFC) regardless of the participation and taxation conditions (from AY 2021).
  • Dividends from companies established in a jurisdiction on the EU list at the end of the tax period would not qualify for the dividends-received deduction (applicable to dividends paid/attributed beginning 1 January 2021).
  • The reporting obligation for payments to tax haven jurisdictions would be extended to payments to persons established in a jurisdiction that is on the EU list at the moment of payment (applicable to payments beginning 1 January 2021).


Exemption from paying wage withholding tax—training employees

Under another measure, effective 1 January 2021, an exemption from paying wage withholding tax would apply to the salary of employees who have followed (formal and informal) training for at least 10 days during an interrupted period of 30 calendar days, provided that the training is not required by law, regulation, or collective labor agreement.

The number of uninterrupted periods would be limited to 10 days for the same employee with the same employer. The exemption would be calculated on the salary of the calendar month in which the training is completed, and would equal 11.75% of a taxable salary of maximum €3,500.
 

Interest deduction limitation (“earnings stripping rules”)

Companies issuing real estate certificates and leasing and factoring companies would no longer be excluded from the earnings stripping rules, as from AY 2021. Some technical changes regarding the calculation of excessive borrowing cost and earnings before interest, taxes, depreciation, and amortization (EBITDA) would also be made.
 

Investment deduction small and medium-sized enterprises (SMEs)

An investment deduction at a rate of 25% would be extended until 31 December 2022. A carryforward of the unused deduction would be available for two years (instead of one year) related to investments made in 2019-2021.
 

Miscellaneous

  • The scope of the reduced value added tax (VAT) rate of 6% for the demolition and reconstruction of real estate would be broadened during the period from 1 January 2021 until 31 December 2022. Read TaxNewsFlash
  • Bank account balances would be transferred to the central point of contact within the National Bank beginning 31 December 2020.
  • Certain coronavirus (COVID-19) measures would be extended until 31 March 2021, such as:
    • Reduced VAT rate of 6% on mouth masks and hydroalcoholic gels
    • Exemption of regional and local premiums
    • Exemption of 120 hours of overtime with employers in crucial sectors


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

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