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Corporate Tax Reform: Finally out of Starting Blocks

The Federal Government presented its “summer” agreement on socio-economic reforms, including the long-awaited corporate tax reform.

On 26 July, the Federal Government announced their plans for corporate tax reform, as part of a broader socio-economic agreement to improve Belgium’s competitiveness.

AmCham Belgium is pleased to see that the Government is sending a signal to the international business community by reducing headline corporate tax rates from the current rate of 33.99% to 29.435% (including a 1.5% crisis tax) in 2018 and 25% in 2020. As of 2020, corporations may benefit from the introduction of tax consolidation. SMEs will immediately benefit from a 20% tax rate on their first €100.000 of net income. The reform is a step in the right direction, but more can be done.

Compensatory measures – such as the limitation of the notional interest deduction commensurate with the increase of the taxpayer’s net equity of the average of preceding 5 years, the minimum tax rate of 7.5% on the taxable income in excess of € 1 million and effective taxation of tax adjustments upon tax audit without possibility to offset against available tax assets – are intended to make the whole exercise budget-neutral for the government. However, some of these measures could potentially result in cyclical economies having to pay a disproportionate share.

AmCham Belgium welcomes this reform as a first step, but believes further reform and rate reduction is needed to be impactful and lure international business to the country. The announced headline rates will not go low enough to put Belgium among the most attractive countries to invest. Furthermore, to make Belgium more competitive as a location for (regional) HQs and holding companies, the reform should foresee an increase of the participation exemption to 100%.

Belgium will continue to face stronger international competition and will be at a competitive disadvantage vis-à-vis other European countries, some of which already have reduced or shared their intentions to reduce their corporate taxation rates to substantially lower levels than those Belgium has announced.

Some proposed tax changes need to be further clarified to ensure tax certainty for companies. Positive tax measures, such as the introduction of tax consolidation in 2020, need to be put in legislation quickly. The measure of effective taxation of tax adjustments upon tax audit without possibility to offset against available tax assets will be tough for businesses as long as there is no system of effective “horizontal collaboration” between authorities and businesses in place.

We encourage the Government to keep moving forward in the right direction, funding further reductions in the corporate tax rate through lowering the current high level of public spending. We look forward to continue working in partnership with the Government as new details about the precise implementation will emerge after the summer, to obtain our common goal of creating a more prosperous and competitive Belgium.

AmCham Belgium thanks the members of its Legal & Taxation Committee for their ongoing efforts to communicate our position and advocate for business-friendly tax reforms.