Belgian government announces corporate tax reform

The Belgian Government reached an agreement on a corporate tax reform. The reform will be implemented in two stages in 2018 and 2020. Panis highlights the key points of this plan that affect the diamond sector. Most important key point is a gradual drop of the company tax rate. For large companies, the general tax rate of 33,99% becomes 29,58% for income year 2018 (tax assessment year 2019), and 25% for income year 2020 (tax assessment year 2021). For SME’s, the profit up to 100.000 EUR will be taxed at 20,40% for income year 2018 (tax assessment year 2019) and 20% for income year 2020 (tax assessment year 2021), if a minimum salary of at least 45.000 EUR is paid to a director (individual) of the company. In case the company pays a salary which is lower than 45.000 EUR, an additional levy of 10% will be calculated on the difference between 45.000 EUR and the actual salary, if the salary is lower than the taxable profit declared. The income tax rate reduction will be accompanied by other compensation measures, amongst others: - If a company decides to decrease its statutory capital, the reduction will be considered as a pro rata reduction of capital and a pro rata distribution of retained earnings. On the distribution of retained earnings a dividend withholding tax of 30% in general will be due. - Also notional interest deduction is reformed and will be calculated on the additional equity of the year, and no longer on the total equity. Moreover the increase of equity will be spread over a period of five years to calculate the deductible allowance. - In case a company does not file its corporate tax declaration, it will be taxed on a minimum profit of 40.000 EUR.