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The 2016 budgetary measures: has the mountain given birth to a mouse?

Monday 17 October 2016

The budgetary negotiations were a tough nut to crack, but the government finally reached consensus on the 2016 budget. The budget savings of 3.006 billion euros entails measures that are 70 percent cuts, 20 percent new revenue (read: taxes) and 10 percent ‘miscellaneous’.

The anticipated reform of the corporation tax, the capital gains tax on shares and the use of savings to support SMEs and start-ups were separated from the budget. The government announced it would subject these matters to ‘further study’.

Below we provide a concise overview of the most important measures.

1. Taxes: 592 million euros. 

1.1. Withholding tax raised from 27 percent to 30 percent.

Withholding tax on dividends from shares and securities will be raised from 27 percent to 30 percent as of 01 January 2017. This means that the withholding tax has increased twofold over the last five years! The authorities expect another 40 million euros in revenue this year (through the anticipatory payment of dividends) and 385 million euros next year.

In anticipation of the increase, it must still be investigated whether it is still expedient to pay out income from moveable property this year.

It remains unclear whether there will be increases for the liquidation reserve and the so-called VVPRbis shares (dividends from certain SME shares).

1.2.Mobility budget/fuel cards.

Aside from the existing tax on the private use of a company car (the benefit in kind), there will be an additional tax on company cars with fuel cards. This tax is payable by the employer and it is estimated that it will generate in the region of 100 million euros.

While this tax is to be linked to the mobility budget, it remains unclear how this will be done in concrete terms.

What is however clear is that company cars will be the subject of further debate (and possibly taxation) in the next few years.

1.3. Taxes on stock exchange transactions to be extended.

The much-criticised speculation tax will be dumped and the ceiling for the tax on stock exchange transactions is to be doubled, while its application will be extended to those trading on foreign platforms. The expected revenues are 76 million euros. 

1.4. Inter-group profits on shares.

Within the scope of striving to create a fair tax system, the government is looking to tackle situations where holding companies ‘channel’ inter-group profits (profit on shares sold by an operating company to its holding company).

This is expected to bring in 31 million euros. We are not yet sure how the government intends to tackle this and which measures are being considered, but we will pay close attention to any developments.

2. The savings.

The majority of the savings are being sought in the healthcare sector, with further major savings coming from the departments of Justice and Home Affairs, which are to be bolstered as departments of authority.

Meanwhile, only 75 percent of the money dedicated to welfare will be spent.

Then there are also reforms for the (civil service) pensions, and the bridging pension will become pricier.

3. Miscellaneous.

Greater dividends from private public partnerships (Belfius and BNP Paribas) are expected to be collected.

The fight against social and fiscal fraud is to be ratcheted up further, which includes 94 new jobs at the BBI (the Special Tax Inspectorate) and 12 additional measures as a result of the Panama Papers and other similar affairs.

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