On November 13, 2009, the Belgian Council of Ministers set the maximum level (cap) that companies may claim when using the Notional Interest Deduction for the tax years 2011 and 2012. This rate was set at 3.80 percent, while Small and Medium-sized Enterprises (SMEs) can claim a maximum rate of 4.30 percent.

The NID rate is currently based on the returns on a 10-year State bond, which fluctuates annually. The government estimates that capping the rates on 3.80 percent will result in savings (or, rather, additional income) for the Treasury of 200 million euro in 2010 and 300 million euro in 2011. However, as long-term rates stay at their current level, this measure should have no or very limited impact on companies.

On the other hand, due to the very low short-term interest rates, Belgian companies may avoid any taxation at all when engaging in short-term inter-company funding or investments. As a result and in spite of the capped NID rates introduced by the Belgian government, short-term financing within a group with a Belgian NID company continues to be highly favorable under present market conditions.

AmCham Belgium’s position
In order to stimulate investment and accelerate economic growth and business activity, AmCham Belgium has recommended in its publication, “Priorities for a Prosperous Belgium”, that the corporate taxation rate should be reduced to 25% in the short-term, while at the same time maintaining the Notional Interest Deduction.

Moreover, if Belgium wants to continue to attract foreign companies it is essential to maintain fiscal stability, since companies are not keen on investing in financially unstable environments. Changing the NID regime could prove both detrimental to Belgium’s perceived advantages to business and raise doubts as to the stability and consistency of its tax legislation.
 

Click here for more information about AmCham Belgium's Priorities for a Prosperous Belgium.