REFERENCE TEXTS Program Law of 1 July 2016 («Loi-programme du 1 er juillet 2016») ;

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1 Belgium: New tax measures Geneva REFERENCES 1.1 DECISION The Belgian Parliament has recently adopted different new tax measures. This flash will present the most relevant decisions amongst them. 1.2 KEY WORDS New Belgian tax measures 1.3 REFERENCE TEXTS Program Law of 1 July 2016 («Loi-programme du 1 er juillet 2016») ; Program Law II of 3 August 2016 establishing urgent tax provisions («Loi-programme (II) du 3 août 2016»); Law of 3 August 2016 establishing a new annual bank tax in replacement of existing annual taxes, limitation measures of deductions for Belgian corporate tax purposes and contributions to financial stability («Loi du 3 août 2016 instaurant une nouvelle taxe annuelle sur les établissements de crédit en remplacement des taxes annuelles existantes, des mesures de limitation de déductions à l impôt des sociétés et de la contribution à la stabilité financière») ; «Déclaration de politique générale» of the Minister of Finance. 1.4 IMPACT ON TAX COUNTRY MANUALS TCM Belgium 2 NEW TAX MEASURES 2.1 PAYMENTS MADE TO TAX HAVENS Belgian companies and Belgian establishments of foreign companies are obliged to annually report every payment made directly or indirectly to persons established in a tax haven when the total amount paid reaches at least EUR. The following jurisdictions are considered as tax havens, implying thus the abovementioned reporting obligation: (i) non-compliant jurisdictions (i.e. jurisdictions considered by the Global Forum on Transparency and Exchange of Information for Tax Purposes as jurisdictions which did not substantially or effectively implement the standard model regarding exchange of information); (ii) jurisdictions considered as zero-tax or low-tax jurisdictions. A list of zero-tax and low-tax jurisdictions is provided by Royal Decree. BRP TAX 1

2 The Program Law of 1 July 2016 has extended this reporting requirement. The modifications entered into force on 14 July Its personal scope of application has been enlarged. 1) Scope of the reporting obligation regarding non-compliant jurisdictions: the former reporting obligation was only applicable if the concerned jurisdiction was considered during the whole tax year as non-compliant. This obligation is now also applicable to jurisdictions considered as non-compliant at any moment during a tax year. The EUR threshold is also based on the whole tax year, and not limited to the period when the country was considered non-compliant. 2) Definition untaxed or low-taxed jurisdictions: the former definition only included jurisdictions whose nominal corporate tax rate is less than 10 %. The new definition covers non-eea jurisdictions (i) whose companies are not subject to corporate tax on Belgian or foreign income; or (ii) whose nominal corporate tax rate is less than 10 %; or (iii) whose effective corporate tax rate on foreign income is less than 15%. The scope of application related to the beneficiaries of the payments has also been enlarged. The former legislation only targeted payments made to private or legal persons established in tax havens. The scope is now extended to payments made to: 1) permanent establishments located in a tax haven (as defined above); 2) bank accounts managed or held by a private or legal person or a permanent establishment located in a tax haven; 3) bank accounts managed or held through credit institutions (or their permanent establishment) located in a tax haven. Breaches of the reporting obligations continue to be sanctioned by nontax deductible expenses. Regarding other requirements related to tax havens, the Program Law of 1 July 2016 provides that the financial institutions will have to automatically report their operations with tax havens to the Belgian Financial Intelligence Processing Unit (CTIF-CFI). 2.2 INVESTIGATION, CONTROL AND SANCTIONING MEASURES The Program Law of 1 July 2016 provides new investigation, control and sanctioning measures for the tax authorities. In terms of investigation, there has been an extension of the assessment period when the tax administration obtains information from abroad on Belgian taxpayers showing that taxable income was not declared in Belgium. In terms of sanctions, there is a new EUR penalty when Belgian taxpayers fail to correctly report legal constructions in their personal income tax return. BRP TAX 2

3 2.3 NEW BELGIAN REAL ESTATE FUND ( FIIS ) The Program Act of 3 August 2016 contains several tax rules applicable to the existing Belgian Regulated Real Estate Company ( RREC ) and the new Belgian Real Estate Investment Fund ( FIIS ). The FIIS is a Belgian special real estate fund structure dedicated to institutional investors. The fund is not listed on a stock exchange and proves to be attractive from a tax perspective, in particular for non-belgian investors and/or for investing in non-belgian real estate. From a regulatory perspective, this system is highly flexible as it benefits from a light registration procedure and few restrictions. For an overview of the amendments of the AIFM law, read our newsflash of 25 July A FIIS is subject to Belgian corporate income tax but with a minimal taxable basis, excluding rental income, capital gains, dividends or interest received by the FIIS in relation to Belgian and non-belgian real estate (similar as is the case for existing RRECs). An exit tax is triggered on Belgian real estate assets entering the FIIS system via conversion of an existing company, (de)merger or contribution. The tax is due on unrealised capital gains at a favourable tax rate of % and can be offset against available tax attributes. The Program Act II also brings some major changes to the current tax system applicable to the RREC (these proposed changes will be equally applicable to the FIIS): The favourable exit tax rate also becomes applicable if a company contributes Belgian real estate assets to the RREC (previously they were taxable at the default tax rate); The dividend withholding tax exemption on the part of income stemming from foreign real estate applies; Effective taxation is limited to 1.7% on dividends distributed by the RREC to Belgian corporate investors to the extent that they relate to the part of income stemming from foreign real estate or from dividends for which the tax liability condition is fulfilled. The tax provisions are applicable as of assessment year 2016 on transactions and income attributed as of 1 July ANNOUNCED TAX MEASURES FOR THE END OF 2016 ENTERING INTO FORCE 1/1/2017 The Belgian Prime Minister gave his usual General Political Declaration ( Déclaration de Politique Générale) on 17 October. At this occasion, the Prime Minister announced several tax measures for the end of Some of these measures will have an important impact on the Belgian tax strategy: Belgian withholding tax rate, currently established at 27%, will increase to 30%; The Belgian speculation tax (capital gains tax), introduced one year ago, will be abolished, with a retroactive effect in order to include gains materialized in 2016, i.e. as if the measure had never existed; The current tax on stock exchange transactions (Taxe sur les opérations de bourse -TOB) will increase and be applicable to foreign intermediaries; BRP TAX 3

4 Increasing the tools for the fight against tax fraud. At the same time, several discussions are currently open at the level of the federal government: Reform of corporate taxation; New taxation of capital gains; New favourable tax regime or new tax incentives regarding the use of savings to stimulate the economy. 3 FOLLOW-UP OF ALERTS PUBLISHED IN 2016 Alert Ref. Title 1/2016 Agreement on automatic information exchange between CH and the EU 2/2016 Extended due diligence requirements in tax matters 3/2016 Proposed Tax Changes in the UK 4/2016 Luxembourg: Tax Reform Bill /2016 Turkey: Tax Amnesty Law 6/2016 Tax Regularization in Belgium (DLU IV) We are at your disposal for any questions you may have. Best Regards, BRP TAX SA Disclaimer This text may not be reproduced, partially or entirely, without stating the source: BRP TAX SA, Alert 7/2016, BRP TAX 4

5 CONTACT US For further information, do not hesitate to contact us at or by calling us directly at Your BRP Tax team Sergio Uldry & Nina Mueller BRP TAX SA GENÈVE Rue Ernest-Bloch 54 CP Genève 6 T info@brptax.com BRP TAX 5