The rapid spread of the coronavirus (Covid-19) leads to far-reaching measures at home and abroad.
These measures may have (sometimes unexpected) tax consequences. Below, we cover various tax related questions that taxpayers may have.
1. My business is mandatorily closed due to governmental measures. Is the compensation that I might receive taxed?
The Belgian Governments initially ordered that restaurants, bars, etc. are closed, both on weekdays and during the weekend. Other businesses (e.g. retail stores) could remain open on weekdays. The Belgian Government has now announced that almost all shops must close. In order to mitigate the financial impact for these companies, the Flemish Government announced that businesses in the Flemish region can request a compensation. Businesses which are mandatorily closed entirely are entitled to a lump-sum compensation of €4,000 while businesses which can remain open on weekdays are entitled to a compensation of €2,000. If companies are required to remain closed after 4 April, they are entitled to an additional compensation of €160 per day. The Walloon government foresees a lump-sum indemnity of €5,000 for businesses and €2,500 for businesses that have to change their opening hours. Funds are also made available in the Brussels region for similar measures. These compensation payments are not taxed.
2- My company may face financial difficulties due to the Corona pandemic. Are there any support measures with respect to the payment of taxes ?
The Federal Tax Authorities have announced to grant an automatic extension of the payment date for VAT and wage withholding taxes of 2 months. Consequently, these payment dates are automatically extended as follows:
Type taxpayer
VAT – extended payment date
Wage withholding tax – extended payment date
Monthly return – February 2020
20 May 2020
13 May 2020
Monthly return – March 2020
20 June 2020
15 June 2020
Quarterly return – Q1
20 June 2020
15 June 2020
With respect to the payment of corporate income tax, personal income tax (resident and non-resident) and legal entities tax, the usual payment terms are automatically extended with a period of 2 months (in addition to the normal payment term) for all taxes assessed as of 12 March 2020.
Companies facing financial difficulties as a direct result of the Corona virus pandemic, regardless of their activity or sector, can additionally request a number of tax and social security support measures from the Federal Tax Authorities, which should allow companies to bridge these temporary financial difficulties.
All Belgian registered businesses (both companies and self-employed individuals) are entitled to these measures if it can be shown that they have incurred nuisance from the spreading of the Corona virus and the correlating measures, which can be either direct (e.g. significant decrease in turnover) or indirect (as a consequence of a chain-reaction, e.g. partner companies suspending business). Companies which are in structural financial distress (i.e. companies already facing financial difficulties prior to the Corona outbreak in Belgium) can in principle not benefit from these measures.
The support measures consist of (i) a further deferral of payment, (ii) a waiver of late payment interest and (iii) a waiver of late payment fines. These measures can be requested for VAT, wage withholding tax, corporate income tax, personal income tax and legal entities tax. A company can request to apply (one or more of) these measures using a form specifically issued for this purpose and should submit a separate request for each individual debt. The form can be found on the website of the Federal Tax Authorities here. In principle, a request can only be lodged after the receipt of an assessment notice or a request for payment. Application of these measures should in any case be requested on 30 June 2020 at the latest.
It should be noted that these supportive measures are conditional upon the timely, correct and complete filing of the relevant tax return. Hence, it is of utmost importance that the relevant tax formalities (e.g. VAT return, income tax return) are duly and timely complied with. In this respect, the Tax Authorities have announced a general extension of the filing deadline. Reference is made to question 3 below.
Next to these specific measures, companies should also reassess their corporate income tax prepayment schedule: if the expected profit for the pending financial year will significantly decrease, the amount of the prepayments should be decreased accordingly. In addition, it could be considered to postpone the first tax prepayment (due on 10 April at the latest for companies having an accounting year starting 1 January) and (if necessary) make an additional prepayment in the second or third quarter.
In addition to the above, measures are also announced at the regional levels. The Flemish Government has for example also announced that the road tax collection for assessment year 2020 is postponed for businesses by four months and the assessment notices with respect to immovable property tax (onroerende voorheffing / précompte immobilier) which are usually issued in the first semester will be delayed for businesses. This means de facto that the payment of immovable property tax is deferred for companies active in the Flemish Region. The Walloon region foresees for example a suspension of all (regional) tax payments as the deadlines will be extended by the period corresponding to the crisis.
3- I need to file a tax return and my filing deadline is approaching. Is any extension possible ?
The Tax Authorities have announced a general extension of the filing deadline: the filing deadline for corporate income tax returns (resident and non-resident) and legal entities tax returns which should have been filed between 16 March 2020 and 30 April 2020, has been extended until 30 April 2020.
Also for VAT purposes, the filing deadlines have been extended. The extended filing deadlines are shown in the below table:
Type taxpayer
Extended filing date
Monthly return – February 2020
6 April 2020
Monthly return – March 2020
7 May 2020
Quarterly return – Q1
7 May 2020
The deadlines for the filing of intra-community reports is extended to the same dates. Furthermore, the general deadline for the annual filing of the VAT client listing is extended until 30 April 2020.
Due to the fact that notary offices and heirs may currently not be able to complete all the formalities to file an inheritance tax return in time, also the Flemish Tax Administration announced to be willing to flexibly allow postponement, provided this is requested in time. For inheritance tax returns for which the normal filing period expires between 13 March 2020 and 5 April 2020 no tax increase will be charged if the return is filed later and a postponement was requested in time.
4- I have employees living cross-border. What are the tax consequences if they work at home ?
Although income from employment is generally taxable in one’s 'home' state, employees which are active in a cross-border context (e.g. Dutch residents working in Belgium or vice-versa) are often taxed in the country in which they are economically active (the 'work' state), provided that a minimum amount of the (professional) time is effectively spent in that country (specific conditions apply depending on the country in question).
Considering the general advice of the Belgian (and foreign) authorities to telework to the largest extent possible, the period spent in the work state by these employees could significantly decrease, which could potentially limit the work state’s right to tax the professional income, or even entirely shift this right to tax to the home state of the employee concerned. It is thus very important to keep record of the days that the employee(s) concerned have worked from their home office, in order to assess any changes to the applicable tax regime.
Specific agreements have been made regarding employees commuting between Belgium on the one hand, and Luxembourg, respectively France on the other hand. Employees commuting between Belgium and Luxembourg are taxable on their professional income in the work state if any professional activity physically carried on outside this work state is limited to a period of maximum 24 days, unless force majeur can be shown. In light of the current limitations on travel, the Belgian and Luxembourg authorities have expressed their intention to qualify the present situation as such force majeure: the period spent by the employee in his home state for the purpose of teleworking, will not be considered for the calculation of the aforementioned 24-day limitation. A similar agreement has been reached between France and Belgium on the 30-day rule under the Belgium-France tax treaty. For both tax treaties, this measure is effective as of March 14 and applies until further notice.
5- Does my employees' home office abroad constitute a permanent establishment ?
Employers could be faced with unexpected tax implications as a consequence of (longer periods of) teleworking. Indeed, if the employee’s home office in another country would be available to the employer with a certain degree of permanence (the so-called 'fixed place of business'), and the employee is exercising the activities of the company through that home office, it could constitute a permanent establishment of the employer. However, in order to qualify as a permanent establishment, the employer should have the employees’ home office at its disposal, meaning that it is able to organize its business activities from this location (the so-called material permanent establishment).
It should be reiterated that an employee’s home office does not automatically qualify as a 'fixed place of business', since such home office is often not 'at the disposal' of the company. Whether or not a home office constitutes a location that is at the disposal of the company depends on the factual circumstances, whereby a number of hallmarks are generally considered, such as the address of the home office which is identified as the address of the company, the continuous use of the home office for business purposes, access of the employer or specific reimbursement of expenses for the use of the home office (note that this list is not exhaustive). The place of business should also have a certain degree of permanence to be considered 'fixed'.
In addition to the material permanent establishment, a so-called agency permanent establishment can be equally recognized if the employee of a foreign-based company is working from home and in his/her regular course of business habitually concludes contracts on behalf of the employer, in relation to its core business (or playing the principal role in the conclusion thereof).
Although these exceptional circumstances preclude employees to work according to their regular schedules or from their regular places of business, it is at present unclear whether the Tax Authorities will apply a pragmatic approach in this respect.
If you have obtained a tax ruling in the past confirming that the home office of a Belgian employee does not constitute a permanent establishment in Belgium on the condition that the employees’ activities are carried out from the home office only 1 or 2 days per week, we suggest to contact the ruling commission in view of confirming that the validity of the ruling is not affected.
6- My employees are working at home due to the governmental measures. Can my employees receive a tax-free allowance to cover their costs caused by teleworking?
Due to the measures taken in the fight against the coronavirus, the Ruling Commission is willing to provide a ruling confirming that the employer can temporarily give its employees, regardless of their job category, a tax-free allowance of up to €126,94 per month to cover the costs caused by teleworking, such as heating, electricity, paper,...
The Ruling Commission has prepared a standard application for this. This draft application can be found here. The Ruling Commission announced to handle the ruling request within a short timeframe.
7- Can my business cover the VAT already paid to the Belgian State on advanced payments for supplies of goods or services to customers ?
In accordance with Belgian VAT law, an advance payment triggers VAT becoming due. If the intended transaction afterwards does not take place (e.g. the agreement is cancelled by the customer or following a government corona prevention measure), a refund of the VAT on the advance payment could be requested.
Please also take into account that an actual VAT refund claim ultimately depends on the provisions of your contract with your customer.
8 - Can my business cover the VAT already paid to the Belgian State on supplies of goods or services which afterwards have been cancelled by the customer ?
In the event a contract is terminated by the customer before the actual supply of goods or services, a refund of the VAT could be requested in accordance with the Belgian VAT Code. Such a VAT refund claim does of course require that the VAT has already been (partially) paid by your company before the cancellation/termination of the contract.
Again, take into account that an actual VAT refund claim ultimately depends on the provisions of your contract with your customer.
9- What if my business has retained the advance payment by my customer due to his cancellation/termination of the contract/ transaction?
The retention by your business of the advance payment made by your customer following the cancellation/termination of the transaction/contract is not subject to VAT. Since such retention is to be considered as solely indemnifying your business for any damage incurred as a result of the cancellation/termination of the transaction/contract, no VAT is due.
The VAT that would already have been paid to the Belgian State on the advance payment could be recovered up to the amount of the advance payment that would be retained (and is agreed upon) as cancellation/termination fee.
10 - My company is dealing with multiple customers who cannot pay their (outstanding) debt for supplies of goods or services. Can my business recover the VAT on these supplies made to such customers ?
In the event that the price would remain (partially) unpaid after the goods or services were supplied and the underlying contract itself would not be annulled, your business could request for a refund of the VAT paid to the Belgian State in relation to the totally or partially lost claim/debt.
Such refund would in principle require that your company can prove that the claim/debt has remained unpaid - despite having used all possible means to obtain payment of the claim/debt – and that therefore the loss of the claim/debt is certain and indisputable. The question whether a claim/debt could be considered as ‘certain and indisputable’ depends on the circumstances and facts of each case. For example, in the event that the claim/debt would have been lost for reason that the customer has become bankrupt, such claim/debt would be considered as ‘lost and indisputable’ (and thus a refund could be requested) at the date of the judgment pronouncing the bankruptcy of the customer.
