Corporate income tax reform in Belgium has brought many changes. One measure that tends to be easily overlooked is the increase of the corporate income tax surcharge as a result of insufficient prepayments. For closings as from 31 December 2018 and later, the increase in the corporate income tax surcharge will have a considerable impact on the tax liability of companies of all types and sizes.
For the assessment year 2018 (financial year ended as from 31 December 2017), a surcharge rate of 2.25 % on the tax liability of a company applied. However, no surcharge was owed if the amount was lower than 0.5% of the tax payable or did not exceed €80. As the effect of this surcharge was often rather limited, certain companies opted to make no prepayments.
The corporate income tax reform changed the regime on prepayments. For financial years starting from 1 January 2018 and later (assessment year 2019), the surcharge rate has been increased to 6.75%. The applicable credit rate also has been adjusted—for the first quarter, a credit of 9% will apply, for the second quarter 7.5%, for the third quarter the rate is 6%, and for the last quarter 4.5%. Moreover, the tax increase will also be due even if it does not exceed 0.5% of the initial corporate income tax or €80.
Thus, prepayments are considerably more important for companies that are interested in avoiding an extra tax liability. Companies considering a prepayment before 10 April 2018, or companies wanting to reevaluate the strategy on eventual excess prepayments made in 2017 need to consider requesting the assistance of a tax professional before the end of March 2018.
Read a March 2018 report prepared by the KPMG member firm in Belgium
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