There has been a great deal of hullaballoo in the media in recent months concerning the possible overhauling of the corporation tax system, and for many this was a tense time as they waited to see whether or not these comprehensive reforms would be introduced together with the new year.
But it is now evident from the draft Programme Act, which was published on 7 December 2016, that the thorough overhaul has been put on ice for now.
The major changes to corporation taxes as of 1 January 2017 involve the increase of withholding tax, which we already covered in our last edition, the adjustment to the tax on inter-group profits on shares, increased taxation for company vehicles, the scrapping of the speculation tax and the wider scope of the taxes on stock exchange transactions. We shed light on these changes below.
1. Company vehicles to be more expensive as of 1 January 2017
40% taxable benefit in kind in the non-deductible expenses for reimbursing fuel costs
As of 1 January 2012 a new non-deductible expense was introduced, equal to 17% of the benefit in kind added for use of company vehicles for private purposes.
After 1 January 2017 this non-deductible expense will be increased to 40% of the benefit in kind for those vehicles for which fuel expenses are reimbursed by the company. The draft act does not specifically address fuel cards, which means that other means of reimbursement, such as expense claims, are also being targeted. Moreover, the 40% rate will also apply if the employer only covers a part of the fuel expenses.
Just like the current 17%, the 40% of the benefit in kind is the minimum taxable base for the company, given that no tax deductions can be applied. This means that even loss-making companies could see their corporation taxes head northwards.
Own contribution benefit no longer relevant
Originally it was only those benefits that were reported in form 281 or in the wage certificate that were targeted, and those benefits that were wholly or partially reduced by means of an own contribution did not have to be subjected to the 17% rate, either in their entirety or for part thereof.
This distinction is now set to end, with all benefits henceforth to be subjected to the 17% or 40% rate, irrespective of whether or not an own contribution has been paid. Examples include those benefits that are processed through the current account or that are offset by means of invoicing or through salary payments.
Reference CO2 emissions for 2017
For cars powered by a petrol, LPG or natural gas engine, the reference CO2 emissions is to decrease to 105 g/km. For diesel-powered vehicles the figure stands at 87 g/km.
This decrease will in turn also result in an increase when it comes to taxable benefits in kind.
Company vehicles are just getting costlier for companies
The above tax measures are only the first step towards the overhaul of the mobility budget. It is moreover looking like becoming a general trend that the approach to company vehicles by the tax authorities will become a permanent feature for making up the budget deficit. This means that CO2 emissions and the taxable benefits in kind with regard to these vehicles will in the future be even more significant factors when it comes to deciding on the composition of a company fleet.
In light of these new changes, we believe this is a good time to analyse your company’s current fleet and to take these new factors into account when buying or leasing new vehicles.
2. Tax on inter-group profits on shares
In terms of the contribution of shares from one company to another company by a natural person acting within the framework of the normal management of their private capital, the increase to the fiscally paid capital resulting from such a contribution is to be reinterpreted.
As of 1 January 2017 only that part that is equal to the purchase price of the contributed shares will be deemed to be fiscal capital. This means that the fiscal capital will no longer be equal to the actual value of the shares at the time of the contribution.
The difference between the purchase price and the actual value of the shares will henceforth qualify as a taxed reserve in the capital. When the capital is distributed at a later stage, that portion that pertains to the taxed reserves will then be subject to 30% withholding tax or to a corresponding once-off rate as part of the personal income tax.
The clear intent of the authorities is to use this restriction to prevent inter-group profits being paid out tax-free to the contributor by means of a future capital decrease.
The draft act does not distinguish between contributions to Belgian and foreign companies.
3. Speculation tax to go, while taxes on stock exchange transactions to be extended
The speculation tax that was introduced last year as a levy on the fast sale of listed shares is to be scrapped, after a very short existence indeed.
But the scope of the tax on stock exchange transactions is to be widened to include investments abroad, while the current ceiling for the tax is to be doubled.
Starting on 1 January 2017 the following maximum sums will be applicable under the draft act:
- €1,300 for the sale and purchase of bonds
- €1,600 for the sale and purchase of other securities
- €4,000 for the sale and purchase of capitalisation shares
In principle, the above changes have to be published by the end of this month in order to take effect from 1 January 2017.
We will keep you updated.