I. Newly adopted Belgian tax measures
On 30 November 2022, a new law on various fiscal and financial provisions (Law) was published in the Belgian State Gazette. The Law is part of the Belgian Minister of Finance’s action plan against tax and social fraud and modifies inter alia the investigation, assessment and retention periods in Belgian income tax and VAT law.
I.1. Investigation and assessment periods
For income tax purposes, the following investigation and assessment periods will as a general rule apply:
in case of late or non-filed tax returns, the investigation period and assessment period are extended from three to four years;
a new investigation period and assessment period of six years applies in case of tax returns of companies with certain specific cross-border operations, such as, for example, companies that (i) are subject to reporting obligations (transfer pricing or country-by- country reporting), (ii) have made payments to non-cooperative jurisdictions, or (iii) have applied a withholding tax exemption or reduction based on a tax treaty or EU directive;
in case of fraud, the investigation and assessment periods are extended from seven to ten years. The tax administration is no longer required to notify, prior to the tax audit, indications of fraud. Indeed, as per the Law the tax administration only needs to notify the presumption of fraud and the application of the extended ten-year periods; and
an investigation period and assessment period of ten years will apply in case of so-called “complex” tax returns, even in the absence of fraud. Tax returns will be deemed “complex” if they concern (i) a hybrid mismatch arrangement, (ii) profits in scope of controlled foreign company (CFC) rules, or (iii) the presence of a foreign legal arrangement (juridische constructie/construction juridique).
For VAT purposes, the following statute of limitations will in principle apply:
the ordinary three-year period during which the VAT authorities may adjust the taxpayer’s VAT position is maintained;
for late or non-filed VAT returns, the ordinary period is extended to four years; and
in case of fraud, the period during which the VAT authorities may adjust the taxpayer’s VAT situation is extended from seven to ten years.
I.2. Retention periods
Taxpayers must currently keep all relevant books and accounts for seven years. The Law extends this retention period to ten years.
I.3. Entry into Force
These measures will apply (i) as from assessment year 2023 with respect to income taxes and (ii) as from 1 January 2023 with respect to VAT that becomes due as of that date. The Law will only have effect for the future. This means, for example, that the investigation and assessment period relating to assessment year 2022 (taxable period 2021) in principle expires at the end of 2024 (2028 in case of fraud).
The Law further also contains the following measures (non-exhaustive list):
an extension of the period for submitting the administrative appeal against a tax assessment (bezwaar/réclamation) from six months to one year applicable as of 1 January 2023;
the possibility for the tax authorities to request a judge to impose penalty payments (dwangsom/astreinte) in case of obstruction of a tax investigation; and a modification of the method for calculating interest rates. For 2023, the following interest rates apply:
income tax: (i) 4% in case of late payment by the taxpayer, and (ii) 2% in case of reimbursements by the Treasury; and
VAT: (i) 8% in case of late payment by the taxpayer, and (ii) 6% in case of reimbursements by the Treasury.
II. Upcoming Belgian tax measures
On 24 November 2022, the Belgian government has submitted to the Federal Parliament a draft program law containing several important tax measures (Draft Law). The Draft Law is expected to be adopted before the end of the year.
II.1. New tax regime for copyright income
The Draft Law modifies the scope of the income tax regime of copyright income.
Belgian individual taxpayers receiving income from the transfer or licensing of copyright and related rights benefit from a special income tax regime. The first tranche of such income up to EUR 64.070 (assessment year 2023) unequivocally qualifies as movable income taxable at 15% and the taxpayer can deduct lump sum expenses to determine the taxable basis (50% on the first EUR 17.090, and 25% on the tranche from 17.090,01 to 34.170 EUR) (assessment year 2023). Income from the transfer or licensing of copyright income or related rights exceeding the above threshold only qualifies as professional income provided said rights are used in the framework of the recipient’s professional activity.
As per the Draft Law, the following limitations apply for income from copyright and related rights to unequivocally qualify as movable income:
it entails income received from the transfer or licensing of copyright and related rights by the original rightsholder (or his heirs or legatees) (cf. Articles XI.170-171 Economic Law Code (ELC));
with respect to literary or artistic works (cf. Article XI.165 ELC) or acts of performing artists (cf. Article XI.205 ELC);
for purposes of exploitation or the actual use of these rights by the recipient, the license holder or a third-party (except in case of, e.g., force majeure); and
the original rightsholder holds a specific art certificate or, alternatively, the rightsholder transfers or licenses the relevant rights to a third-party in view of (i) communication to the public, (ii) public execution or performance, or (iii) reproduction.
In addition, the unequivocal qualification as movable income only applies insofar:
the income from the transfer or licensing of copyright or related rights does not exceed EUR 37.500 (to be indexed);
the income from the transfer or licensing of copyright or related rights does not exceed 30% of the ratio between (i) the income from the transfer or licensing of copyright or related rights and (ii) the total remuneration (including for services) (as of assessment year 2026; 50% and 40% for assessment years 2024 and 2025, respectively). This threshold does not apply absent any performance; and
the average income from copyright and related rights received in the four previous taxable periods does not exceed EUR 37.500 (to be indexed).
Notwithstanding the above, income from the transfer or licensing of copyright income or related rights exceeding the above threshold will - also under the new rules - only qualify as professional income provided said rights are used in the framework of the recipient’s professional activity.
Taxpayers taxed in accordance with the current tax regime in assessment year 2023, but not falling within the scope of the new rules, can still be taxed in accordance with the current tax regime in assessment year 2024 considering that the relevant thresholds are reduced by half.
II.2. Minimum corporate income tax base
For corporate income tax purposes, carried-forward tax losses and certain other tax deductions can only be used to offset taxable profits up to 70% of the profits exceeding EUR 1 million (the so-called “basket limitation” rule). The Draft Law lowers the above-mentioned 70% threshold to “40%” and hence increases the amount of the minimum taxable basis. This new measure applies as from assessment year 2024 (taxable period 2023) and is intended to be temporary provided the law implementing the EU Council’s draft directive on ensuring a global minimum level of taxation for multinational groups in the Union has entered into force.
II.3. Abolition of the notional interest deduction
The Draft Law abolishes the notional interest deduction (NID) regime as from taxable periods ending as of 31 December 2023. The NID has in practice become less relevant in the last couple of years following recent legislation and reduced interest rates. Hence, the abolition of the NID does not come as a surprise. Please note that the European Commission has recently presented a proposal for a debt-equity bias reduction allowance (DEBRA) to place debt and equity financing on a more equal footing across the EU.
II.4. Partial non-deductibility of certain taxes relevant for the financial sector
As a general rule, the annual taxes on credit institutions, collective investment undertakings and insurance undertakings are currently deductible for corporate income tax purposes. As per the Draft Law, the deductibility of said taxes will be limited to 20% as from 1 January 2023. Hence, 80% of said taxes will be considered as disallowed expenses in the hands of the relevant taxpayers. This is particularly relevant for taxpayers subject to the limited corporate tax base which includes disallowed expenses.