Summer agreement: more than corporation tax alone

You will no doubt have discovered from one of the many news stories that the federal government reached an agreement on 26 July 2017 on the corporation tax overhaul and its decreased rates. Other measures resulting from this ‘summer agreement’ are the tax on securities accounts, the expansion of flexible jobs, the option to make the rental of property subject to VAT and the reform of the tax on savings, with the emphasis on encouraging investments in shares. The overhaul shall take place in two stages, with the first series of measures to take effect next year and the second phase scheduled for 2020. 

At present it remains a political agreement, and the actual impact and timing of the various fiscal measures shall only become clear once the technical details have been hammered out and translated into legislation. Below we sketch out an overview of the major changes to the tax rules, based on information publicly available at present. 

More than corporation tax alone​

Measures concerning self-employed persons 
As we understand it, self-employed persons will be confronted with a few restrictions that to date only applied to companies, in particular relating to car expenses and when ceasing operating (one can no longer change the use of business assets for the purpose of avoiding paying tax). On the flipside, self-employed persons can receive an additional benefit through a reform of the flat-rate professional expenses. What this overhaul will look like is as yet clear as mud, but the authorities have referred to ‘harmonising’ the regulations for wage-earners and the self-employed. 

Specific measures concerning penalties 
The penalty for not submitting a tax return is to be increased, with the minimum lump sum profit that one can be taxed on in the event of non-submission rising – in two stages – from €19,000 to €40,000 (article 182.2 of the Royal Decree/Income Tax Code 1992). Of course the reduction of the corporation tax rate shall somewhat temper the financial consequences of this stiffer penalty. Moreover, it is intended that additional tax payable resulting from an audit will effectively have to be paid. This additional tax once again constitutes a minimum taxable base, with losses, for example, no longer being deductible. The authorities hope that this will spur taxpayers to ‘correctly’ declare all matters. 

The basic interest rate for advance payments will be raised from 1% to 3%, so companies that do not make advance payments will end up paying more. On the other hand, the moratorium interest and the late payment interest rates will be adjusted, with the fixed interest rate of 7% to be abolished and the rate to be linked to the OLO interest rate (linear bonds), with a minimum interest rate of 2% on rescheduled payments. Interest on late payments will always be 2% higher than that for rescheduled payments, which means that you can no longer benefit from paying ‘too much’ tax for the sole purpose of receiving more interest on postponed payments when the taxman has to pay you back.   

Amended taxation on savings 
A ‘subscription tax on securities accounts’ is set to be introduced in 2018. Investors with one or more securities accounts totalling €500,000 or more in value (to be assessed per taxpayer) will be taxed at a rate of 0.15% of the value of the securities accounts. The levy targets shares, bonds and funds, with pension savings funds and unlisted shares being exempted. The tax exemption for regulated savings accounts will be lowered from €1,880 to €940, a factor that will be particularly noticeable for the modal saver in the event of future jumps in the interest rate. On the other hand, there will be an exemption on the first €627 in received dividends. The authorities are hoping to encourage citizens to not only look at traditional savings accounts but at other options too, in particular increased investments in venture capital.  

Savings for pensions are also set to become more flexible, with a choice of either saving €1,200 with a tax deduction of 25% (€300) or saving the traditional sum of €940 with a tax deduction of 30% (€282). At approximately the same deduction – in absolute terms – you will be able to end up with a larger final sum. These most notable measures are combined with ones that may be less salient but are no less important, including the raising of the stock exchange taxes (from 0.27% to 0.35% for shares and from 0.09% to 0.12% for bonds). The so-called Cayman tax is also to be sharpened up so that ‘double structures’ and other schemes can be tackled. 

More flexible jobs 
The flexible jobs system (called ‘flexi-jobs’), which until now has only been in place in the hospitality industry, will be extended as of 1 January 2018 to almost ‘all commercial activities’ – retail trade, self-employed retailers, foodstuff retailers, large retailers and department stores. The authorities used a baker, a newsagent and a hairdresser as examples. People working in any of these businesses who also have a fully-fledged job elsewhere can now work tax-free (with no restrictions). The system will also be open to pensioners. 

Furthermore, there will also be a similar tax-exemption – albeit limited to an income of €6,000 per annum – for all income derived from leisure activities and certain jobs in the non-profit sector, as well as for services performed by private individuals for other individuals. More good news is that the option of VAT-deduction for the construction or purchase of buildings intended for rental is to be introduced. In principle, the renting out of property is VAT-exempt (with a number of exceptions), which means that one is not entitled to deduct VAT, but one will now have the option of having property rental subjected to VAT so that the deduction can be guaranteed.

The authorities hope that this will ‘end the competitiveness handicap suffered by Belgian operators’. The authorities also hope to make it more appealing from a tax perspective to have employees share in a company’s profits, and the tax shelter for startups is to be extended to ‘growth companies’. We eagerly await the legislation that will set out the summer agreement in practical terms. We will certainly keep you updated.  

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