The summer accord 2017
The summer accord: selected tax repercussions
You have no doubt read and heard a lot about the summer accord on the reform of corporate income tax on which the federal government reached agreement on 26 July. This reform consists of a number of adjustments to corporate income tax spread over two phases. The first phase of adjustments will launch next year; the second follows in 2020. The ultimate goal is to make Belgium more attractive for foreign investors.
The measures that the federal government has taken are part of a political accord. No legal texts are available but that is being worked on.
Most businesses in Belgium are SMEs, so tax incentives are mainly oriented to them. We examine a selection of the most important adjustments.
Lower corporate income tax
The corporate income tax rate will finally be reduced. This is necessary to bring Belgium more into line with the rates imposed by neighboring countries.
The basic rate will be cut from 33% to 29% in 2018 and to 25% in 2020. The rate for SMEs will be even lower. They benefit from a rate of 20% on the first €100,000 of taxable profit. The ‘crisis contribution’ will also be phased out. It will be reduced from 3% to 1.5% in 2018 and abolished completely in 2020.
SMEs are businesses that have not exceeded the following limits in the last two financial years:
- Annual average number of employees: 50
- Annual turnover (excl. VAT): €9,000,000
- Balance sheet total: €4,500,000
To benefit from the reduced rate, SMEs must pay at least one manager – natural person at least €45,000 per year or an amount at least equal to the taxable profit. Until now this was €36,000. This obligation does not apply to businesses formed less than four years ago.
The 13% dividend rule will disappear, so smaller businesses will not lose the reduced rate if they pay out more than 13% of the paid-up capital in dividends.
The government has decided to offset the lower rates by introducing a minimum tax for businesses with profits in excess of €1 million.
This is combined with the limitation of certain tax deductibles, such as losses carried forward and notional interest. It will only be possible to deduct these in full up to the first €1 million. Any amount above €1 million will be deductible at 70%.
Higher investment deduction
The one-off investment deduction of 8% on new investments made from 1 January 2018 will be temporarily increased to 20% (for two years). The aim here is to encourage businesses and the self-employed to invest.
Notional interest deduction
The deduction for risk capital or notional interest deduction has been in the news a lot in recent months. So it is striking that this will not be abolished. The calculation basis has seen some tinkering, however. It will be limited to the weighted average of the growth of the risk capital over the past five years.
A decision not to pay corporate income tax in advance will entail extra costs: the base rate to determine the tax increase percentage is rising from 1% to 3%.