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30 November 2011


What are the tax consequences of the 2012 Belgium Budget Agreement ?



Scope :  direct and indirect taxes - income tax - corporate and individual taxpayers - budget agreement - tax measures for 2012



It has only been a couple days since the Belgian government finally agreed on the proposed budget plan. While the legal specifics have not yet been made available to the public, we can already give you an idea of what the new year will bring for Belgian taxpayers…



A. In regard to companies


There will be a capital gains tax on shares sold by companies within one year from the date of their acquisition. The capital gains tax will be 25 pct. (expected return is 150 million EUR).


The famous notional interest deduction will be limited to 3 pct. (expected return is 963 million EUR). For Small and Medium-sized Companies the deduction will be capped at 3.5 pct. The Budget Agreement also includes some additional terms: a carry forward of excess NID from one accounting year to the next will no longer be allowed as from 2012. Excess NID-carry-forwards from the past can only be deducted in the subsequent years up to 50 pct. of the subsequent years’ income (expected return is 557 million). Thin capitalization will also be introduced with a ratio of 1 over 5.


No other significant measures have currently been announced, but an additional 720 million EUR will be made available to strengthen the fight against tax evasion and social fraud. This will inevitably result in a stricter monitoring and enforcement of current social and tax legislation.


Furthermore, the government also expects a return of 250 million EUR due to the lifting of the banking secrecy.



B. In regard to private individuals


The current withholding tax rates of 15 pct. for interest and 25 pct., resp. 15 pct. or 10 pct. for dividends and profit distributions, are bound to be reformed.


The withholding tax on interest and dividends will be 21 pct. (private investment income). The tax on the final distribution in case a company is liquidated remains unchanged for now at 10 pct., but not for repurchases of own shares. The 15 pct. withholding tax on government bonds is retained. For the foreseeable future, the tax rate of dividends also remains at 25 pct.


By way of a budget crisis measure, there will be a tax increase of 4 pct. on the withholding tax of 21 pct. on all movable income that exceeds 20,000 EUR (a return of 917 million EUR is to be expected for these two measures). The taxpayer can obtain a refund of the 4% (25% - 21 pct.) excess withholding tax withheld on his or her interest and dividend income up to EUR 20,000. Such refund is to be claimed in the annual
income tax return.


The tax exemption on the first EUR 1,770 interest from regulated saving accounts is to be maintained (it is still unclear whether measures will be taken to prevent the (illegal) practice of extending the exemption to interest from multiple saving accounts for an aggregate amount exceeding the EUR 1,770 threshold).


Company cars are once more targeted and will also be subject to a tax increase. As the central criteria for this will be the pollution level and the initial purchase price of the vehicle, it is obvious that the higher company vehicle class is targeted (expected return is 200 million EUR).


The taxable benefit in case stock options are granted, will increase from 15 pct. (or 7.5 pct.) to 18 pct. (or 9 pct.)(expected return is 20 million EUR). Further details have not yet been clarified.


The benefits in kind granted to company managers are also targeted, especially real estate property made available to the manager and the taxable fringe benefits for heating and electricity will be taxed significantly higher (almost double of what is currently the case) (expected return is 150 million EUR).


The tax rates for pensioners may be remodeled in parallel to the measures aiming at increasing the age when employees/managers can retire as pensioners. Details are still to be confirmed.


On the other hand, there will be no capital gains tax in respect to private individuals (only companies) and the proposal of introducing a wealth tax (i.e. a levy of a 0.5 pct. on the taxpayer’s estate, other than real property, exceeding a given threshold) has been abandoned.



C. In regard to VAT and excise duties


VAT on pay TV will increase from 12 pct. to 21 pct. (expected return is 84 million EUR).


As they were previously exempt, bailiffs and notaries will now be subject to VAT (expected return is 100 million EUR). Oddly enough this change will not be introduced for lawyers, which clearly creates a situation of unfair competition in comparison to the other legal professions.


We have to emphasize that apparently bailiffs and notaries (as well as lawyers in the nearby future) will only be subject to VAT for the activities they are in competition with other service providers (e.g. notary selling real estate, lawyer giving an advisory opinion).


A severe increase in excise duties on tobacco and alcohol (expected return is 158 million EUR).



D. Other relevant measures


The price for the so-called ‘service cheques’ will be increased with one euro as from 2013. The tax benefit remains.


The tax free allowance that every taxpayer in Belgium is entitled to, will be increased with 125.00 EUR in 2013 and with 250.00 EUR in 2014.


The tax on stock exchange transactions will be increased with 30 pct. (expected return is 50 million EUR).



As soon as the legal framework for these 2012 tax measures has been published, we will bring you a more detailed summary.



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