In view of the current Covid crisis, many companies have closed their 2020 financial year with an operating loss. In order to help these companies, the Belgian legislator had already proposed several tax measures to support the liquidity and solvency of companies (bill of 5 June 2020 – parliamentary document K551309). This bill aimed in particular to introduce a carry-back of losses (measure in order to support the liquidity of companies by setting off estimated losses for 2020 against profits made in 2019), and the creation of a recovery reserve (a measure to support the solvency of companies). However, the recovery reserve as proposed in this bill was rejected following a negative opinion of the Council of State, as well as an unfavorable vote by parliamentarians in the Finance and Budget Committee
As a consequence, a new and separate bill to introduce a recovery reserve was submitted and approved by the Chamber (Act of 19 November 2020 on the introduction of a recovery reserve for companies published on 1 December 2020).
I. Principle :
Companies may temporarily exempt a part of their profits made in the tax years 2022, 2023 and 2024 (accounting period closed as from December 31, 2021) up to the amount of the losses incurred in 2020 (and with an absolute maximum of 20 million euros) via the constitution of a so-called “Recovery reserve”. This reserve must be maintained in a separate account of the liabilities (i.e. intangibility condition).
II. Excluded companies :
The law provides that the following companies are explicitly excluded from the regime:
- Investment companies;
- Companies which have repurchased their own shares, allocated or distributed dividends or reduced their capital between 12 March 2020 and the date of filing of the tax return relating to the constitution of the above mentioned reserve;
- Companies holding shares or make payments to companies located in a tax haven.
III. Operations involving taxation of the recovery reserve :
In addition to the exclusions mentioned above, the law also provides that certain operations may imply that all or part of the taxable profit of the taxable period must be taken into account. In order to avoid taxation of this reserve, the company has to preserve “employment”. To do so, the company has to maintain its staff costs at 85 p.c. at least of the staff costs paid in 2019. In case of a decrease below this limit, a part of the exempted reserve will become taxable (in proportion to the excess of this limit). Furthermore, any capital reduction, shares or own shares repurchase or dividend distribution will result in the reserve being partially or totally considered as profit for the taxable period.
Tax Consult follows the new measures taken and applied by the Authorities on a daily basis and is regularly in contact with the (tax) Administration. In case of question, do not hesitate to contact our team at email@example.com or directly your file manager in order to receive a tailor-made advice adapted to your situation.
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