Corporate Tax 2010 - BMR Advisors

Eubelius
Belgium
4.4 If it otherwise differs from the profit shown in commercial
accounts, what are the main other differences
The profit or loss recorded in the commercial accounts is subject to
certain technical tax adjustments. Differences between the final
result for accounting and income tax purposes are mainly due to:
non-deductibility of certain expenses, such as corporate
income tax or withholding taxes, a certain percentage of carrelated
expenses, fines or capital losses and reductions in
value of shares;
certain restrictive conditions for the deductibility of
depreciations of receivables;
tax exemption of realised capital gains on shares (see infra);
tax deduction of 95% of qualifying dividend income (see
infra); and
deduction of a notional interest amount, calculated as a
percentage of the preceding year’s equity (after certain
adjustments). This percentage is based on the preceding
year’s average yield of a long-term (10-year) government
bond, amounting to 4.473% in the assessment year 2010.
4.5 Are there any tax grouping rules Do these allow for relief
in your jurisdiction for losses of overseas subsidiaries
No tax consolidation or other form of group relief is applied in
Belgium. Only profits of foreign permanent establishments of a
Belgian resident company (provided that the PE is not located in a
treaty country) or losses of such foreign establishments (whether or
not they are in a country that has concluded a tax treaty with
Belgium), are taken into consideration to determine the Belgian
corporate income tax base.
4.6 Is tax imposed at a different rate upon distributed, as
opposed to retained, profits
As a general rule, distributed profits are taxed at the same corporate
tax rate as retained earnings. However, in some cases, profits are
temporarily exempt from corporate income tax, provided that they
are recorded on an unavailable equity account on the balance sheet;
e.g. for revaluation gains on fixed assets.
In order to encourage a release of some specific tax-exempt reserves,
the Belgian Government has introduced a temporary measure which
allows companies to distribute these reserves at a reduced corporate
tax rate (e.g. 20.75% in tax assessment year 2009, and 25% in tax
assessment year 2010). The rates are further reduced provided that
these reserves are set free to be reinvested in fixed assets.
4.7 What other national taxes (excluding those dealt with in
“Transaction Taxes”, above) are there - e.g. property taxes,
etc.
A real estate tax is annually due on property located in Belgium. It
is calculated on a deemed rental income attributed to such property
when it is used for the first time (which is generally considerably
lower than its fair rental value). The tax is assessed separately, and
it cannot be offset against final corporate income tax. The real
estate tax rate amounts to 2.5% in the Flemish region and 1.25% in
the Walloon and Brussels regions, but due to provincial and
municipal surcharges, the effective rate is a multiple thereof.
4.8 Are there any local taxes not dealt with in answers to
other questions
The Belgian regions, provinces, municipalities and
ICLG TO: CORPORATE TAX 2010
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“agglomerations” have power to levy taxes on a wide range of
matters. The Flemish and the Walloon region have used this power
to introduce a tax on unoccupied business premises. Most
municipalities impose a variety of (non-substantial) business taxes,
but there is some federal pressure to reduce the number of such
local business taxes.
5 Capital Gains
5.1 Is there a special set of rules for taxing capital gains and
losses
Generally, capital gains are taxed at the same corporate income tax
rate as ordinary business income, whilst capital losses are also fully
deductible from ordinary business income. However, capital gains
realised on shares are tax exempt provided that certain “subject to
tax” requirements are fulfilled at the level of the subsidiary. No
minimum threshold or minimum holding period requirement
applies for this exemption. Capital losses on shares are not
deductible, unless they are realised upon the subsidiary’s
liquidation, limited to the actual capital amount represented by
these shares. There is no restriction to the deductibility of interest
expenses for borrowings related to such share investments.
Capital gains realised on certain intangible and tangible fixed assets
can benefit from a tax deferral provided that the sales proceeds are
fully reinvested in qualifying (depreciable) assets. Reinvestment
should in general take place within 3 years, unless the proceeds are
reinvested in a building, a ship or an airplane, in which case the
reinvestment period is 5 years. If all conditions are fulfilled, the
capital gains tax will become due in accordance with the tax
depreciations on the qualifying reinvestments.
5.2 If so, is the rate of tax imposed upon capital gains
different from the rate imposed upon business profits
No, the rate imposed for capital gains is the same as that imposed
for business profits.
5.3 Is there a participation exemption
As far as capital gains exemption in respect of share investments is
concerned, we refer to question 5.1.
Moreover, Belgian resident companies are entitled to deduct 95% of
the gross amount of dividends received from their corporate income
tax base. The remaining 5% is subject to tax, but ordinary
expenses, losses or interest payments can be deducted from this
taxable margin, even if such expenses, losses or interest payments
directly relate to the share investment from which the dividend
income has arisen. As a consequence, tax-efficient leveraged
acquisitions through a Belgian company are possible. So-called
“excess” dividend received deduction, i.e. the amount of the
deduction that cannot be effectively used to offset taxable income
(e.g. because of an operating loss), cannot be carried forward to the
following taxable periods, by virtue of Belgian tax law. However,
very recently the ECJ has decided that the Belgian legislation
violates the EU Parent-Subsidiary Directive, in this respect, so that
the excess dividend received deduction relating to dividend income
from EU subsidiaries can effectively be carried forward (Cobelfret
v. Belgium, C-138/07, d.d. 12 February 2009). The question
remains whether this jurisprudence also applies to dividend income
from non-EU subsidiaries based on the freedom of capital
movements, which, subject to certain restrictions, also applies in
relation to non-EU states. The ECJ refrained from taking a clear
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