The tax laws for the end of 2023 were passed today. The draft programme law had been submitted to the Chamber on 23 November 2023 and the draft law containing various tax provisions has been submitted on 19 October 2023. They will come into effect on 1 January 2024.
The programme law
1. For Corporations
Modification of the annual tax on credit institutions
The annual tax for credit institutions will be adjusted to 0.17581% for the taxable base exceeding EUR 50 billion. The introduction of fines for any passing on of this tax to customers aims to ensure that this tax remains solely the responsibility of credit institutions, thus preventing its transfer to clients.
Adaptations of anti-abuse provisions
The revisions aim to introduce an extended criterion of interdependence between Belgian and foreign taxpayers benefiting from advantageous tax regimes, encompassing various forms of economic, managerial or structural dependence. These adjustments aim to strengthen predictability and legal certainty.
Since 2012, measures for fiscal transparency have included country-by-country reporting and the expansion of the European "Code of Conduct" group, aligning with the jurisprudence of the EU Court of Justice to prevent abuses and maintain a fiscal balance among member states.
Specialised Real Estate Investment Funds
Specialised Real Estate Investment Funds (FIIS) are institutional entities exclusively investing in real estate. They are reserved for institutional or professional investors. Registration as an FIIS confers tax advantages but entails a 15% exit tax upon fiscal liquidation.
If an FIIS violates the rules, the Federal Public Service of Finance can strike it off, removing its tax advantages. These funds have a limited lifespan of ten years, renewable by decision of the shareholders, and can be withdrawn before this period. This theoretically creates the possibility of obtaining a reduced tax rate on exempt reserves or latent capital gains through an FIIS whose registration is swiftly withdrawn or liquidated. The government proposes adding an additional 10% tax if the FIIS is not registered for at least five years, or if the shares are not retained after a contribution.
Controlled Foreign Company (CFC)
The 2017 reform introduced the CFC regime in the Tax Code. This regime aims to directly tax the income obtained by the CFC, chargeable to the company that controls it. Since 2017, this regime exclusively taxed the undistributed profits of foreign companies.
The project now envisages taxing all passive incomes of low-taxed companies and also requires evidence of real economic activity. This transition involves a redesign of the criteria defining an entity as a CFC and authorises the taxation of profits, except upon proof of substantial activity. This project regulates the exemption of foreign taxes to avoid double taxation. A new CFC reporting obligation is planned to improve administrative efficiency.
Cayman Tax
The programme law on the Cayman Tax aims to tax Belgian residents founding legal structures abroad unless they prove prior taxation in Belgium.
The main taxes of this reform include the introduction of a 50% threshold, the creation of an "exit tax," the broadening of the "founder" definition, and the taxation at 30% of untaxed distributed income. Despite this, doubts persist regarding its validity and compliance with European law; reservations from the Council of State signal a risk of constitutional annulment.
Deduction of annual taxes on credit institutions, collective investment undertakings, and insurance companies
The programme law of 26 December 2022, introduced a partial restriction of the deductibility of annual taxes for credit institutions, collective investment undertakings, and insurance companies. Since 1 January 2023, these taxes are considered non-deductible professional expenses up to 80% for corporate tax and non-resident/corporate tax.
The government is considering increasing this non-deductibility to 100%.
2. Measures Common to Individuals and Corporations
Modification of the registration duty rate applicable to the establishment and transfer of emphyteusis and superficies rights
As of 1 January 2024, the registration duty rate for contracts establishing or transferring an emphyteusis or superficies right increases from 2% to 5%. This increase applies to deeds executed from this date, unless preceded by a previous private agreement, subject to proving the authenticity of this date. Deeds prior to 1 January 2024, with a certain date, remain subject to the current tariff.
VAT rate on demolition and reconstruction of buildings
Two VAT tariff schemes exist for demolition and reconstruction in Belgium. The first offers a reduced VAT rate of 6% in 32 urban areas since 2007, without specific social requirements. The second, valid until 2023, applies this reduced rate everywhere except in urban areas, including the delivery of renovated housing for developers meeting specific social conditions.
Article 58 of the programme law replaces these schemes, requiring a close link between demolition and reconstruction to benefit from the reduced VAT rate, excluding projects without a reconstruction intention and extending the scheme to the entire territory. These measures aim to support construction and housing social policies, extending the temporary scheme until 2023 to maintain the existing rates.
The law containing various tax provisions
Compensatory inheritance tax levied on private sector legal entities
The program law is not the sole influencer of the fiscal legislative landscape in this year's culmination. The government is contemplating, for instance, an augmentation in the compensatory annual inheritance duty imposed on non-profit associations, private foundations, and international non-profit associations.
To reiterate, every legal entity (such as non-profit organizations, various levels of public administration, public religious associations, and intermunicipal entities) that maintains its registered office, principal establishment, management headquarters, and does not conduct operations for profit in Belgium, is subject to a tax on the annual net global income, encompassing real estate revenues, capital incomes, movable property, and certain miscellaneous incomes.
Furthermore, legal entities falling within the private sector (non-profit associations, international non-profit associations, and private foundations) are subject to an annual tax on their assets at a rate of 0.17%. The proposed bill now envisages the imposition of a progressive rate, with the marginal rate set at 0.45% on the portion of capital exceeding EUR 500,000. Certain institutions benefit from exemption from this tax, notably healthcare organizations and medical facilities. This increase might dissuade the establishment of larger foundations, diminish their social impact, and prompt relocations to countries offering more favorable tax regimes.
