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The corporate income tax at the third stage of its reform

The law of December 25th, 2017 enacting the corporate income tax reform provides an entry into force of its measures into three phases.

  • Phase n°1 : Measures entering into force as of the tax year 2019 (taxable period starting at the earliest on January 1st, 2018)
  • Phase n°2 : Measures entering into force as of the tax year 2020 (taxable period starting at the earliest on January 1st, 2019)
  • Phase n°3 : Measures entering into force as of the tax year 2021 (taxable period starting at the earliest on January 1st, 2020)

The tax year 2021 (2020 revenues) marks the launch of the third phase of this corporate income tax reform.

All of the phase 3 measures are applicable as of the tax year 2021 for taxable periods starting at the earliest on January 1st, 2020.

  • Corporate income tax rate

The corporate income tax rate continues to decrease from 29% to 25%.

The complementary crisis contribution disappear while going from 2% to 0%.

The SME tax rate remains at 20%.

  • Company cars

The calculation for the tax deductibility of the company cars costs has been modified as follows :

120% – (50% * coefficient * CO2 rate)

The coefficient varies depending on the type of the fuel of the vehicle (1 for diesel, 0,95 for benzine and 0,9 for the CNG).

The minimal deductibility rate is 50%. However, the vehicles with a higher CO2 emission than 200gr/km will only be deductible at 40%.

Another new measure is for the fuel expenses which were previously deductible at 75% no matter which rate of CO2 emission of the car. These expenses will be deductible following the same percentage as determined for the other car expenses.

As the greener vehicles market has been growing fast in the last few years, a distinction must be made among hybrids vehicles :

  • Non-rechargeable hybrids non-rechargeable (which should be considered as « classic » car)
  • Rechargeable hybrids that meet the conditions
  • Rechargeable hybrids that does not meet the conditions and are commonly called « fake hybrids » (which should also be considered as « classic » car)

Regarding the latter category, the Tax Authorities are developing a list of fake hybrids with the corresponding non-hybrids (latest update of February 1st, 2021).

Is considered as « fake hybrids » » :

  • A plug-in hybrid vehicle (rechargeable);
  • With a heat engine and a rechargeable electric battery through an external energy source;
  • Purchased, leased or rented as from January 1st, 2018;
  • Having :
    • Either an electrical battery with an energy capacity of less than 0,5 kWh/100kg of the total weight of the car;
    • Either a CO2 emission of more than 50gr/km;
  • Falling under the flat-rate estimation of the benefit in kind for the personal use of a company car.

However, some of the models as listed in the FPS Finances are vehicle to be considered as hybrids from a tax point of view as they simultaneously meet the following two criteria :

  • An electric battery with an energy capacity of at least 0,5kWh by 100 kg of the total weight of the car, and
  • A CO2 emission of maximum 50gr/km

If the two abovementioned conditions are not met, the CO2 rate of the classic version (equivalent heat engine) must be applied. In case no equivalence exists, a coefficient of 2,5 must be applied to the CO2 rate of the vehicle.

  • Depreciation

The declining depreciation method is abolished.

For SMEs, when acquiring a fixed asset, depreciation must be done on a pro rata basis for the first depreciation period.

These changes are applicable for fixed assets acquired or constituted as from January 1st, 2020.

  • Secret commission

The deduction of the secret commission is abolished as of January 1st, 2021.

  • Administrative fines

All administrative fines must be considered as non-deductible.

  • Interests requalification into dividends

A shareholder or a company director can grant a loan to his company on which interests are claimed.

In order to avoid the requalification of the advance interests as dividends, the conditions and limits as imposed by the legislator must be respected.

Exceeding these limits entails, to the extent of the exceeding, a reclassification of the advance interests as dividends with all the tax consequences that it implies.

These limits concern in one hand the rate applied for the calculation of the interests (article 55 ITC92). The rate varies depending on the type of loan. The distinction is made between interests on non-mortgage loan without definite period (rates applied by the Monetary Financial Institution (MFI)) and all other loans (market rate).

The limit is also applied when, on the other hand, the total amount of interest-bearing advances granted to a company exceeds the taxed reserves of the company at the beginning of the taxable period and the paid-up capital at the end of the taxable period.

  • Release of tax-exempt reserves (temporary measure)

This measure is temporarily applicable during tax years 2021 and 2022.

Subject to a preferential payment of 15%, certain tax-exempted reserves can be converted into taxable reserves.

This rate can be reduced to 10% to the extent that the amount is reinvested during the taxable period in depreciable (in)tangible fixed assets (only if the assets are not intended to serve as reinvestment (deferred capital gains taxation regime).

This system does not apply to all tax-exempted reserves and is only available for reserves existing at the end of the last taxable period closing prior January 1st, 2017.

This taxation will result in a minimum taxable basis on which no tax deduction nor tax attributes could be offset.

  • Loss deduction from a foreign permanent establishment

The amount of losses incurred abroad by a foreign permanent establishment or abroad assets will not be deductible anymore, and even though these losses are not deducted abroad.

In the case the losses are definitive and incurred within the EEA, it will be deductible in Belgium.

A specific anti-abuse rule targets situation in which, within the three years following the deduction of the foreign losses, the Company decides to relaunch its activities abroad, the definitive losses previously deducted in Belgium must be recaptured and included in the taxable basis in Belgium.

Tax Consult follows the news of 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 info@taxconsult.be or directly your file manager in order to receive a tailor-made advice adapted to your situation.

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