Long awaited tax reforms announced by the Government

Posted on 1st January, 2012

Estimated reading time 3 minutes

Following an agreement between Belgian political parties to form a government a Tax Bill has been passed.  A summary of the main tax measures announced in these budgets, and which may be of relevance to CELIA Enews readers, are set out below.

Capital gains on shares

For individuals the situation remains unchanged.  That is, gains on shares sold by an individual in the normal management of their personal assets are tax exempt.  Other capital gains remain subject to taxation at 16.5% or 33%.

Taxation of stock options

The rate of tax of stock options was increased from 1 January 2012.  The rate to determine the benefit in kind has been increased from 15% to 18% (or from 7.5% to 9%).

Benefits in kind

From 1 January 2012 the taxation of company cars, as a benefit in kind for employees, is based upon CO² emissions and the vehicle’s catalogue price.  Employers are subject to an additional non-deductible expense of 17% of the value of the benefit in kind for use of a company car.

The taxation of free housing, heating and electricity, as a benefit in kind for directors, will increase.  For free housing this increase will be achieved by applying a higher coefficient to the indexed cadastral revenue (that is, a notional annual rental income value of the property, as set by the governmental property register) to determine the taxable benefit in kind.  This change has not yet been enacted.

Withholding taxes on dividends and interest

From 1 January 2012:

  • The standard rate of tax for dividends remains at 25%.
  • The 15% rate applicable to interest and dividends not taxed at a different rate will increase to 21%.  However liquidation surpluses will remain subject to tax at the 10% rate.
  • The 15% rate will apply to interest from saving deposit accounts in excess of the annual tax limit and to government bonds issued and subscribed between 24 November 2011 and 2 December 2011.
  • An additional withholding tax of 4% will apply to dividends and interest subject to the 21% withholding tax.  This additional tax applies to resident individuals and applies where an individual’s income is in excess of EUR 20,000.  (Liquidation surpluses, the interest on government bonds issued and subscribed between 24 November 2011 and 2 December 2011 and tax exempt interest on saving deposits are disregarded in determining whether this threshold has been reached).  This additional tax will either be applied at source (i.e. a withholding tax at 25%) or declared in the annual income tax return.

Occupational pension plans

Both the 80% rule which determines the tax deductibility of employer contributions and the tax reduction for employee contributions areto be reviewed.

The internal provision of pensions will have to be externalised and this will result in the application of insurance tax.  This change has not yet been enacted.

Other tax changes

  • From 1 January 2012 the taxation of stock exchange transactions was increased.  Both the rate and the cap increased by 30%.
  • The conditions applicable to the general anti-abuse measure will be relaxed thereby giving the tax authorities greater powers.
  • From 1 January 2012 a tax is imposed on the conversion of bearer securities.  Conversions implemented in 2012 will be taxed at 1% and conversions implemented in 2013 will be taxed at 2%.

For further information or to discuss any of the issues raised, please contact Jean-Louis Davain or Soubiha Ouamari on +32 2 743 4345.