New tax measures from 1/01/2012 onwards

Various new tax measures will be introduced from 1st of January 2012 onwards.

Although they still have to be adopted by legislation and the application modalities and the final amounts still need to be fixed, Panis herewith wants to outline the proposed measures.

Withholding tax

Interest and dividend income, that is currently subject to a 15% withholding tax rate (e.g. interests on the current account of the company director or the reduced withholding tax rate for certain dividend payments), will be subject to a higher tax rate of 21%.

An additional solidarity surcharge of 4% will be levied for tax payers with (high) movable income for the part that exceeds the threshold of 20.000 euro. The liquidation boni and the tax exempt bracket of the interest income from regulated savings deposits should not be taken into account for the calculation of the threshold.

The tax rate of 15% and the current exemption on the first bracket for interest income from regulated savings deposits would be maintained. It is also the intention that the recently issued State bonds would still benefit from the 15% withholding tax.

The lower withholding tax rate of 10% for liquidation proceeds remains applicable. However, a share buyback would no longer benefit from this favorable tax rate.

Individual income tax

Various taxable benefits in kind that are currently calculated on the basis of attractive lump sum valuation rules, would suffer a significant increase.
- The most commented adjustment concerns the lump sum valuation of the benefit in kind for the private use of a company car. The benefit will now be calculated based on the car’s catalogue price and the CO2-emission level. The employer would bear half of this “tax increase” (cf. infra for the VAT consequences on benefits in kind).
- The benefit in kind resulting from the free disposal of housing (and free heating, electricity and other utilities) by a (management or real estate) company to company executives will be calculated based on a higher lump sum amount.
- The lump sum valuation for ‘regulated’ stock options at the moment of grant will be increased from 15 to 18%.
- Legal initiatives to determine an increased lump sum value of the related benefit in kind for “usufruct structures” can at this moment not be excluded.

Certain deductible expenditures such as donations, child care expenses or mortgage loan expenses for the own family dwelling that currently result in a tax benefit at the marginal tax rate will be transformed to a tax reduction against fixed rates (45% for the aforementioned expenditures and 30% for other qualifying expenditures).

The tax reductions for solar panels, super-isolated glazing, heat pumps and other energy saving measures will be abolished.

Corporate income tax

The changes to the Notional Interest Deduction (‘NID’) regime should substantially beef the expected revenue. Although the application of the NID regime would not be made subject to substantial changes and moreover no additional conditions would be imposed, the NID benefit will be capped:
- The maxim NID rate will be capped at 3 % until 2014 at least (the 0.5% increase for SME’s remains applicable).
- The current possibility to carry forward the excess NID for 7 years will be abolished for the future.
- The “stock” of the carry-forward NID can still be carried forward for 7 years, but can only be deducted gradually in function of the annual taxable base.

Capital gains on shares remain fully tax-exempted provided that a 1-year holding period requirement is satisfied. In case of a sale within 1 year, a capital gain tax at a specific rate of 25% would apply.

The tax benefits for extra-legal pension schemes will be capped via two new measures:
- A “wage cap” would be introduced for the calculation of the 80% rule for the deduction of the extralegal pension contributions made by the employer to the group insurance companies.
- The individual pension accruals for self-employed directors can no longer be set up via an internal pension provision. The existing pension accrual should be outsourced within a period of 3 years, resulting in an additional insurance premium tax.
The existing ‘thin capitalization’ regime will be tightened. Your company will no longer be able to deduct interests on intra-group loans to the extent that a certain debt-to-equity ratio would be exceeded (probably 5 to 1).

Changes to the gift and inheritance tax regime for the transfer of family-owned companies in the Flemish Region

A draft decree of the Flemish Government contains certain changes regarding the transfer of family-owned companies.
Currently, family-owned companies can be transferred via a gift inters vivo at a 2% gift tax rate and can be inherited at the moment of death at a 0% inheritance tax rate.

The gift tax rate for the transfer of family-owned companies will be decreased to 0% (instead of the current rate of 2%). Equally, the inheritance of family-owned companies at the moment of death will no longer be exempt from inheritance tax, but become subject to reduced inheritance tax rates (3% or 7%).

The application conditions for the tax regime for gifts and inheritance will be aligned.

The entrepreneur whose company does not meet the foreseen conditions cannot benefit from these advantageous measures and remains subject to the general gift tax rates (3% or 7%) or inheritance tax rates (3% to 27% for straight family line heirs).

For implementation and tailor-made advice, we recommend waiting until the law will be published.

Abolition of bearer securities

The abolition of bearer securities was preconceived by the law of 14 December 2005, where the legislator has intended to restrict the abuse that would be caused by the anonymity of such securities. These instruments would encourage financial crime as well as the financing of terrorism. Additionally, they would give cause to fraud or could damage the heritage rights of certain inheritors if for instance certain children in a family would be granted shares whereas others would not.

The law on the abolition of bearer securities has a large field of application and hits all bearer securities issued by Belgian entities, including shares, profit shares, bonds, warrants and other certificates. In addition, all securities governed by Belgian law and issued by an individual, need to be converted. Medium-term notes, treasury certificates, deposit notes as well as real estate certificates are hereby mainly affected.

The process of abolition of bearer securities was planned between 1 January 2008 and 31 December 2013. Such “gradual” conversion was intended to enable the affected companies and their investors to adapt themselves to the new legislation and to evaluate the consequences of the various alternatives. The introduction of the new taxation on the conversion of bearer securities, however, puts an abrupt end to these intentions and requires a prompt and accurate action if one wishes to avoid this new tax, definitely if the securities represent a substantial value.

(Source: Masars)