The Corporate Income Tax Reform Act of 25 December 2017 introduced various procedural measures that should encourage taxpayers to comply with their tax obligations.
Please find below an overview of the main procedural changes.
In order to stimulate taxpayers to fulfil their duties in the field of corporate income tax compliance, no deduction of current year losses and deferred tax assets (e.g. carried forward tax losses) is allowed against a taxable basis determined as a result of a tax audit. An exception is made for the participation exemption for dividends received during the same taxable period. The new rule does not apply for infractions committed negligently and for which no tax increases are applied.
Not only in an M&A environment does an increased need for a thorough due diligence therefore arise. Also from a transfer pricing perspective it becomes even more essential that Belgian taxpayers have proper transfer pricing policies, transfer pricing studies and intercompany agreements readily available and that the taxpayer’s activities is aligned with such documentation. A quick scan performed by a third party could be helpful in this respect.
The rule applies as of tax assessment year 2019 (relating to the taxable period starting the earliest at 1 January 2018).
Late payment interest (i.e. interest to the benefit of the tax administration) is decreased from the current 7% to a percentage that is based on the OLO amount on 10 years from the months of July, August and September. This percentage cannot be lower than 4% and not be higher than 10%.
Late payment interest will also become due in case the taxpayer converts the tax free reserve for spread taxation into a taxed reserve prior to the expiration of the reinvestment term. Also, if the reinvestment conditions for the exemption of capital gains realized on sea vessels is not met, late payment interest becomes due. This rule applies as of tax assessment year 2019 relating to the taxable period starting the earliest at 1 January 2018.
Moratorium interest (i.e. interest to the benefit of the taxpayer) is decreased from the current 7% to a percentage that is 2% lower than the late payment interest. It cannot be lower than 2% and cannot be higher than 8%. This interest would start to accrue as of the first day of the month following the month during which a notice of default (e.g. a tax complaint or a request for ex officio relief) is sent to the tax authorities. The month of repayment is not included. No moratorium interest becomes due if the tax authorities do not have the necessary details for making the repayment.
Please note though that an action for annulment of these new rules has recently been brought before the Constitutional Court.