Belgium tax: 2010 budget measures affect companies

The 2010 Belgian budget proposals presented on 13 October 2009 contain a number of tax measures that will affect companies doing business in the country. The measures take effect in 2010, unless stated otherwise.


Corporate income tax

- The rate for the notional interest deduction will be fixed at 3.8% for tax years 2011 and 2012.

- Dividends received deduction regime:
     . The lump sum participation requirement will be increased from EUR 1.2 million to EUR 2.5 million (the alternative participation requirement of 10% in the share capital of the subsidiary will remain unchanged);
and
     . The participation requirement will be extended to banks, insurance companies and stock exchange companies.

- Only 75% (rather than 100%) of fuel expenses will be tax deductible.

- The CO2-based thresholds used to determine the level of tax deductibility of expenses related to company cars will be tightened to take into account the progress made in limiting CO2 emissions in the motor vehicle industry.

- A 120% tax deduction will be introduced for costs related to electric vehicles without CO2 emissions and charging installations for electric cars will be amortizable over two years and will benefit from an increased investment deduction. These measures will apply in the period 2010-2012 with a possibility to extend the measure after that period.

- Measures to combat tax fraud:
     . The general anti-abuse provision will be rewritten along the lines of the anti-abuse provision in the 2008 act implementing the EC Merger Directive to make it more effective and to increase legal security;
     . Payments made (directly or indirectly) to tax havens and uncooperative jurisdictions will have to be reported; and
     . Payments made (directly or indirectly) to uncooperative jurisdictions will not be tax deductible.


Value added tax

- The VAT rate on meals in the restaurant and catering industry will be reduced to 12%. In return, the government is requiring a commitment from employers regarding employment.

- The reduced 6% VAT rate, which already applies to the construction industry for the first installment of EUR 50,000 on the purchase or construction of a new dwelling, will be extended until the end of 2010. However, the reduced VAT rate will apply only if a building permit for the construction is submitted before April 2010.

- The sale of land will be subject to VAT (21%) if the land is sold with a building. This measure will bring Belgium into compliance with the 2008 ECJ decision in the Breitsohl case (C-400/98). The new measure will be implemented after consultation with the regions and become applicable in 2011.

- To facilitate electronic invoicing, electronic invoices will be put on an equal footing with paper invoices by implementing technology-neutral VAT invoicing requirements.

- If a taxpayer does not file a timely VAT return or pay its VAT liability in a timely manner, the Belgian administration will initiate a procedure whereby a special account is opened on behalf of the taxpayer. The Belgian administration intends to accelerate this procedure with a view to proceeding faster with collection measures.