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Belgium: Tax developments in response to COVID-19

General Information

This page offers an overview of tax developments being reported globally by KPMG member firms in response to the Novel Coronavirus (COVID-19).

The content will be updated regularly. However, due to the fast-moving pace of change, it may not always reflect the most current developments in a given jurisdiction. Please refer to the date of accuracy and refer to the relevant links, under additional information, for original source information.

Date accurate as of : 2 December 2020

A. Filing and payment of taxes

Businesses are (automatically) granted the following temporary extensions of the deadline to file tax returns and pay taxes:

Income taxes:

  • The payment of income taxes related to AY 2019 and established as from 12 March 2020 is automatically extended by 2 months.
  • The due date for filing corporate tax returns related to assessment year 2020 (companies ending their financial year on 31 December 2019 or later) is 7 months as from the end of their financial year. As an exception, for companies ending their financial year between 31 December 2019 and 31 March 2020, the due date is additionally extended to 16 November 2020.

VAT:

VAT-taxable persons that file quarterly or monthly VAT returns are not required to pay the “December advance deposit” (decembervoorschot / acompte en décembre ) this year. The December advance deposit would normally be payable by 24 December 2020 and would amount to the VAT due for the fourth quarter of 2020 for filers of quarterly VAT returns, or to the VAT due for December 2020 for filers of monthly VAT returns. The requirement normally also applies to VAT taxable persons that apply the presumptive lump sum regime. 

Support with tax debts

Businesses can also ask for other support from the tax authorities regarding their tax debts. This support includes 

  • A payment plan;
  • An exemption from late payment interest;
  • A waiver of fines for non-payment.

Specifically, this support can be requested for the following tax debts:

  • Corporate Income Tax and Income Tax on Legal Entities;
  • Value Added Tax;
  • Wage Withholding Tax;
  • Personal Income Tax.

Businesses are only eligible for this support if they are adversely affected by the Coronavirus crisis and if they are able to substantiate that (e.g. a drop in turnover, a serious drop in orders and/or reservations, as a result of domino-effect within a group , etc.). Businesses are not eligible for support if they are already facing structural payment difficulties.

Support is also conditional upon compliance with the timely filing of tax returns (with the given extensions). Support will be withdrawn if a collective insolvency procedure (e.g. bankruptcy) arises.

An application must be filed for each tax debt separately through a specific form. This application must be filed at the moment of receipt of the tax assessment or payment notice. The competent regional collection office serves as the single point of contact. The support measures have been extended until 31 December 2020.

B. Other measures taken by the federal tax authorities

  • Loss carry-back: businesses will, subject to limitations and conditions, have the possibility to carry-back the estimated loss of financial year 2020 and impute it on the taxable profit of the previous financial year 2019 (closing between 13 March 2019 and 31 July 2020). The carry-back, which technically works through a temporary exempt reserve, can be applied for income year 2019 and will be added back to the taxable income of the following income year, 2020. Some anti-abuse measures have also been included.
  • Equity reconstruction reserve: companies will be able to exempt part of their profit for the taxable periods 2021, 2022 and 2023 (linked to assessment years 2022, 2023 and 2024) by recording that profit on an exempt ‘reconstruction reserve’.

The amount is limited by a double ceiling: the accounting loss of income year 2020 and an absolute maximum of 20 Mio EUR.

However, equity and employment must be maintained:

  • The reconstruction reserve is taxable when there is a capital reduction, dividend distribution or liquidation; 
  • An employment condition also applies: the personnel cost for income year 2020 and the 3 following years should equal at least 85 % of the personnel cost paid in 2019. If not, (a part of) the reconstruction reserve will become taxable.

Companies that have a direct participation in companies located in tax havens or that make payments to tax havens that cannot be economically or financially justified, will be excluded from the regime.

*Companies with closing date between January 1st 2020 and July 31st 2020 can opt to apply this measure for the financial year closing in 2021 instead of 2020.

  • Companies will benefit from an increased bonification for prepayments made during Q3 (6,75% instead of 6%) and Q4 (5,25% instead of 4,50%) for financial years closing between 30 September 2020 and 31 January 2021 provided there is no dividend distribution, capital reduction or repurchase of shares between 12 March and the end of the financial year, no variable remuneration has been paid between 12 March and the end of the taxable period and the taxpayer, between 12 March 2020 and the end of the taxable period, holds no direct participation in or makes no payments exceeding 100.000 EUR to a company located in a tax haven (unless the payments were made in the context of real and genuine transactions resulting from legitimate financial or economic needs). The percentage of the increase and the due dates do not change. 
  • The ruling commission introduced a special ‘fast track’ procedure for the home work allowance of 126,94 EUR (129,48 EUR as from 1 April 2020). All employees working at home due to special Corona measures will be entitled to the maximum amount of 126,94 EUR without a distinction in function categories. The new home work allowance will replace the current ‘office’ allowance if applicable. The ruling can be obtained in a few days, following a special procedure.
  • A circular letter (NL/FR) confirms that the COVID-19 is an exceptional and specific circumstance which justifies the exemption of write-downs on commercial receivables held on companies that show a delay in payment of the receivables, resulting directly or indirectly from actions taken by the federal government. 
  • For the purpose of the earnings stripping rules, specific payment modalities granted for loans concluded before 17 June 2016 must, under certain conditions, not be considered as a fundamental change. Such loans will still qualify for the grandfathering regime and thus fall outside the scope of the earnings stripping rules.
  • Contributions for supplementary pensions paid during Q2-2020 for employees in temporary unemployment are deemed to have been paid in execution of pension contract (condition for deduction of contributions).

Tax reliefs for donations:

Temporary tax reliefs are provided with respect to qualifying donations. Qualifying donations include (i) medical aid devices and their auxiliary parts; as well as (ii) protective gear and clothing for care providers and patients. Medicines are excluded from the scope of the tax reliefs. 

Qualifying beneficiaries include: 

(i) governmental institutions and other public bodies that have a role in the redistribution of the goods;

(ii) hospitals and care institutions providing VAT-exempt health care services, institutions providing VAT exempt care services to elderly, children or disabled, as well as institutions providing school and university education;

(iii) humanitarian charitable institutions; and 

(iv) institutions approved by the Customs and Excise Authorities to import certain goods into Belgium with exemption from VAT and customs duty based on the decision of the European Commission of 3 April 2020. These institutions may only use the goods for the purposes of making them available free of charge to persons affected by COVID-19 or to persons involved in the fight against COVID-19. 

The tax reliefs apply to donations made in the period between 1 March 2020 and 31 December 2020. 

Accordingly, businesses are not required to pay VAT on the qualifying donations. At the same time, the costs incurred in relation to the donated products are tax deductible for corporate (business) income tax purposes. Additionally, for personal income tax purposes, a temporary tax credit is available for the in-kind donation of medical products to hospitals with a value of at least Euro 40. The tax credit amounts to 60% of the actual value of the donation in-kind, with maximum of 20% of net income, applicable to donations in 2020.

Similar tax relief is provided for donations of desktop computers, laptops and tablets to schools and universities in Belgium. The relief applies to both new and used computers. Mobile phones (smartphones) and other tools of communication are excluded.

VAT exemption for the importation of goods in the fight against the COVID-19 disease until 30 April 2021:

By Circular 2020/C/54 of 17 April 2020, a temporary VAT exemption is provided for the importation of goods that: (i) are declared for consumption in Belgium by governmental institutions or other charitable institutions as admitted by the Minister of Finance; and (ii) are intended for consumption in Belgium in the fight against the COVID-19 disease. This VAT measure is based on the decision of the European Commission (2020/491) of 3 April 2020. A similar measure applies also for customs duties. The conditions for the application of the customs duty exemption apply mutatis mutandis for the application of the above VAT exemption. 

  • The supply, intra-Community acquisition and import of mouth caps and hydroalcoholic gels are subject to the reduced VAT rate of 6% in the period between 4 May and 31 December 2020.
  • A temporary exemption is granted for 120 hours of overtime pay in critical sectors (to be extended to 220 hours). An exemption also applies to company surcharge or additional allowance in case of restart of work with previous employer. Certain compensation for student labor will not be considered as means of existence. Some allowances for temporary unemployment will only be subject to a wage withholding tax rate of 15%.
  • For the purposes of the tax reduction for child care: some days where child care was paid for, but no effective child care happened, will be considered as qualifying days of actual child care.
  • A temporary extension of certain due dates and increase of exempt amounts is granted regarding the tax shelter for audiovisual work and podium work.
  • The due date for paying the company contribution is postponed from 30 June to 31 December 2020.
  • An extension is granted of the due date of the payment of annual insurance tax.
  • Tax relief is granted in the field of registration duties (notary proxy, conversion of mortgage mandate, etc.).
  • Restaurant and catering services are subject to the reduced VAT rate of 6 percent in the period between 8 June 2020 and 31 December 2020. This temporary VAT rate reduction does not apply to the serving of beers with an effective alcohol by volume rate in excess of 0.5 percent vol. and other beverages with an effective alcohol by volume rate in excess of 1.2 percent. The measure pertains to all permanent or temporary establishments that perform restaurant- or catering services. It also applies when only beverages are served without food (if combined with sufficient relevant ancillary services) in any possible drinking establishment (e.g. cafes, taverns).
  • Heavily impacted sectors, which had to resort to temporary unemployment, can benefit from a partial exemption of payment of wage withholding tax for 3 months.
  • Employers can grant a consumption voucher of 300 EUR to their employees which they can use for the purchase of goods and services in heavily impacted sectors such as the horeca, the culture sector etc. The voucher is 100% deductible and tax-free.
  • Reception costs: 100% deduction between 8 June and 31 December 2020.
  • Investment deduction: increase of rate from 8 to 25% for investments between 12 March and 31 December 2020 (only for small companies) (to be further extended to 31 December 2022) and carry-forward of unused investment deduction possible for two years (instead of one year) for investments in 2019 (to be further extended to investments in 2020-2021).
  • Tax reduction for acquisition of new shares of small companies of which the turnover dropped by more than 30% between 14 March and 30 April 2020.

Additional Information

Cross-border workers taxation:

  • Belgium has concluded mutual agreements with the Netherlands and Germany to prevent cross-border workers from being adversely affected by the coronavirus (COVID-19) pandemic and subject to tax disadvantages. Due to the travel restrictions caused by COVID-19 measures, cross-border workers have been at risk that their employment income becomes fully taxable in their country of residence. The mutual agreements with the Netherlands and Germany aim to provide that cross-border workers will not suffer from any tax disadvantages by working from home. Days worked from home will be assimilated to days worked in the country where the individual would normally have worked. This means that, despite working from home, the employment income can continue to be taxable in the country of work. 
  • Similar agreements have also been concluded with France and Luxemburg. Different rules apply for resident taxpayers of France benefiting from the Belgian-French tax regime for frontier workers[3]. These frontier workers are allowed to work a limited number of days outside of the frontier zone without this affecting their tax situation. The authorities confirmed that the COVID-19 pandemic is a situation of force majeure, beyond the control of the employer and the employee. Days worked from home as a consequence of COVID-19 will not be taken into account for the calculation of the days worked outside of the frontier zone.
  • The agreements apply until 31 December 2020.

Additional Information

Flemish Government measures

  • When businesses suffer a loss of turnover of at least 60%, they can apply for a tax-free premium as a compensation (‘New Flemish protection mechanism’)
  • The conditions and tax incentives linked to the ‘Winwinlening’ (loans) are loosened and made more attractive. A similar regime will be introduced for share participations (‘vriendenaandelen’). 
  • Individuals investing in the Flemish ‘Welvaartsfonds’ can benefit from a tax reduction. The shares in the fund are also subject to reduced inheritance tax. Businesses can go to the fund for a capital increase or a loan.
  • Registration and inheritance tax: extension of deadlines to comply with tax obligations until 31 January 2021 (declaration of inheritance, registration of act, conditions of favorable regimes)
  • The assessment notices regarding immovable withholding taxes for businesses will only be sent as from September 2020 (instead of May) – payment can be deferred for 4 months
  • Businesses can defer payment of road taxes for 4 months
  • Flexibility in judging requests for payment plans
  • The Flemish legislator has introduced an additional possibility for the heirs of a deceased person whose inheritance contains an investment portfolio of listed securities. The heirs already had the choice to declare in the inheritance tax return (1) the value of these securities at the date of death, (2) one month after the date or (3) two months after the date of death.
  • The Flemish legislator has now introduced a temporary possibility to opt for the value these securities have three months after the date of death. This additional option is available if the deceased passed away between 13 September/October/November 2019 (depending on the place of death of the deceased) and 30 September 2020. If the heirs filed the inheritance tax return before 21 April 2020, they can file a new return in which they can ask to modify their previous choice in order to make use of this new possibility.

Walloon Government measures

Tax Measures

  • Immovable withholding tax assessment notices for AY 2020 are postponed to August/September.
  • Inheritance tax and registration duties: suspension of the deadlines to comply with tax obligations (filing, payment, conditions of favorable regimes, procedure).
  • Tax on automatic entertainment devices, which particularly affects the horeca sector, will be reduced by 1/12 per month or part of a month of mandatory closure.

Other measures

  • (Very) small businesses suffering an impact from the decisions of the National Security Council can ask for a tax-free compensation of 5.000 EUR.
  • Mobilization of regional agencies (SOWALFIN, SOGEPA-Wallonie Santé Group, SRIW) via loans (e.g. « ricochet loan »), guarantees, frozen reimbursements, etc.

Brussels Government measures

  • The postponement of the payment deadline for road taxes and immovable withholding tax.
  • Inheritance tax and registration duties: suspension of the deadlines to comply with tax obligations (filing, payment, conditions of favorable regimes).
  • Support (premiums, loans, …) for affected sectors (horeca, events, cultural sector, …).
  • Tax incentive for loans by individuals to SMEs (proxi-loan).
  • Government guarantees on bank loans.
  • The accelerated treatment of grants of expansion support for certain sectors (horeca, tourism, culture and events).
  • The abolition of the regional City Tax for 2020.

Tax measures as part of the Recovery Plan (tax measures by the new federal government):

The ‘reconstruction reserve’:

Companies will be able to exempt part of their profit for the taxable periods 2021, 2022 and 2023 (linked to assessment years 2022, 2023 and 2024) by recording that profit on an exempt ‘reconstruction reserve’.

The amount is limited by a double ceiling: the accounting loss of income year 2020 and an absolute maximum of 20 Mio EUR.

However, equity and employment must be maintained:

  • The reconstruction reserve is taxable when there is a capital reduction, dividend distribution or liquidation;
  • An employment condition also applies: the personnel cost for income year 2020 and the 3 following years should equal at least 85 % of the personnel cost paid in 2019. If not, (a part of) the reconstruction reserve will become taxable.

Companies that have a direct participation in companies located in tax havens or that make payments to tax havens that cannot be economically or financially justified, will be excluded from the regime.

*Companies with closing date between January 1st 2020 and July 31st 2020 can opt to apply this measure for the financial year closing in 2021 instead of 2020.

Investment deduction: Extension of rate of 25% to the end of 2022 (applicable to SMEs);

VAT: Extension for two years of the reduced rate of 6% for the demolition and reconstruction of housing;

The new government has agreed on an investment package of 4,7 billion EUR (in digitalization and sustainability).