Belgian tax law already provided for a debt-equity ratio of 7:1 for interest on loans paid to companies incorporated in tax havens or subject to a particularly favorable tax regime. As a result, the interest related to that part of the loan which exceeded 7 times the debtor's qualifying equity (= the sum of the retained earnings at the beginning of the taxable period and the paid-up capital at the end of the period), was not tax deductible.
The new debt-equity ratio has been set at 5:1 and is now also applicable on interest on loans granted by group companies. As a result, interest on intra-group loans exceeding 5 times the equity of the debtor company, will no longer be tax deductible.
Various exceptions to this new debt-equity ratio will apply (e.g. public bonds, certain types of leasing companies).
Please note, however, that the new debt-equity ratio has not yet entered into force because of some unresolved issues. A Royal Decree will determine the effective date, which would be at the latest on July 1st, 2012.
