The Belgium Government has introduced a raft of new tax regulations for corporations and individuals that will come into force in 2014.
There are four changes to the tax regulations that will be most relevant to Vistra’s private and corporate clients:
1. New ‘Fairness Tax’ on corporate dividends
The new Fairness Tax will affect large companies starting in the 2014 tax year – the tax will be levied on distributed corporate dividends. This new corporate income tax will be levied at a rate of 5.15% (5% plus a 3% ‘crisis surcharge’) on the company distributing the dividends.
The new tax will not apply to small and medium-sized enterprises (SMEs), but will apply to Belgian branches of foreign companies.
The Fairness Tax is not deductible from corporate income tax and is subject to a system of voluntary advance payments.
The tax will only apply if, in a given tax period, dividends have been distributed by the company, and (part or all) of the taxable profit is offset against any notional interest deductions and carried forward tax losses.
2. New ‘Liquidation bonus’ on dividends
From 1 October 2014, the rate of ‘withholding tax’ (WHT) on corporate dividends paid as a result of the liquidation of a company will increase from 10% to 25%. Companies can distribute reserves in their annual accounts (approved before 1 April 2013) as a dividend at a rate of 10% (rather than 25%) provided this is done before 30 September 2014 and that the reserves are converted directly to statutory capital via a capital increase. This capital will be treated as paid up capital and can be tax-free distributed to individuals provided it remains in the company for eight years (four years for SMEs).
Companies whose accounting period ends between 1 October 2013 and 30 March 2014 should register the increase in corporate capital in front of a public notary before 31 March 2014.
3. Reduced withholding tax rate on SME dividends
From 1 July 2013, cash contributions into SMEs for new ordinary shares are eligible for a reduced WHT rate of 20% and 15% on dividend distributions. Where dividends are distributed out of the profits of the third accounting year the rate is 20%, while a lower rate of 15% applies to the fourth accounting year (and onwards) from the date of the contribution.
4. Reporting of private legal entities
From the 2014 tax year onwards, a new personal income tax reporting requirement comes into force affecting private individuals who are founders or beneficiaries of legal entities (such as Trusts, Anstalten, Foundations, Partnerships, etc). The new reporting obligation is similar to those already in force for individuals with bank accounts or life insurance contracts abroad.
For more information, please contact Vistra Belgium.