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A FEW OTHER ASPECTS
About corporate income :
Although the calculations are based on the accounting registers, the net taxable profit differs a lot from the accounting profit. The adjustments and deductions allowing the calculation of the net taxable profit on the basis of the financial profit, take place in the following order:
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addition of the three elements making up the taxable profit: reserves, disallowed expenses and distributed profits;
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breakdown of profits according to their origin (Belgian or foreign);
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deduction of non-taxable items;
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deduction for “Participation Exemption” (PE) and for exempted movable income;
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deduction for patents income;
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allowance for corporate equity (notional interest deduction);
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deduction of previous losses;
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investment deduction;
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deduction of the stock of carried-over allowances for corporate equity.
The net taxable profit thus calculated is taxed globally.
TAX SHELTER FOR AUDIOVISUAL WORK
Since 2003 sums paid up for the financing of the production of audiovisual work have been entitled to exemption from CIT in the framework of the ‘tax shelter' agreement.
The latter is a framework agreement entered into with a view to the financing of audiovisual productions and concluded between the company producing the audiovisual work and the company or companies financing it.
The profits are exempted up to 150% of the sums paid, provided some conditions have been met.
From 1 July 2013, an additional requirement applies, i.e. at least 70% of the global budget must be used for costs directly related to the production of the work; the remaining 30% can be used for indirectly related costs. Non-exhaustive lists of costs considered as direct and indirect costs will be introduced for income tax purposes; costs that are not included in these lists will have to be analysed on a case-by-case basis.
INVESTMENT RESERVE
The reform of CIT entered into force in 2003 creates the possibility to constitute an exempt investment reserve. This possibility is open to SMEs as defined in the Corporation Code.
The exempt amount of the investment reserve is calculated in function of the variation of the reserved taxable results. These contain not only the (accounting) non-distributed profits but also the undisclosed reserves.
The result obtained is limited to 37,500 euro and can be exempted up to 50%.
The reserve actually constituted must appear in a separate account of the liabilities and satisfy the intangibility condition.
SMEs benefiting the investment reserve have to choose between this reserve and the allowance for corporate equity.
EXEMPT REGIONAL AID
By way of derogation from the general regime which includes regional aid in the tax base, some aid measures granted by the Regions to companies are exempted. Are concerned:
These subsidies are granted by the Regions in the context of their laws of economic expansion for the acquisition or constitution of tangible or intangible fixed assets. Are also concerned, subsidies granted by the competent regional institutions in the context of R&D aid.
MISCELLANEOUS EXEMPTIONS
The following are deducted:
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15,220 EUR exemption awarded for each additional staff member appointed in Belgium to a managing function in the "Export" department or in the “Total quality management” department. The additional personnel is determined according to the average number of workers employed by the company for the same purpose in the course of the previous tax period. The exemption awarded is withdrawn in the event of a personnel reduction.
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exemption of 20% for the remunerations paid or allocated to workers in respect of whom the employer benefits a trainer's bonus.
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5,660 EUR exemption for each additional staff member in SME's. The increase in personnel is computed by comparing the average workforce in the current year with the workforce in the preceding year. If however, in the course of the year following the exemption, the workforce diminishes in comparison with the year of exemption, the total amount of formerly exempted profits or proceeds is diminished by 5,660 EUR per released member of the personnel.
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Gifts. The deduction of gifts can exceed neither 5% of the taxable profit (reserves, disallowed expenses and distributed profits) nor 500,000 EUR.
PARTICIPATION EXEMPTION AND EXEMPT INCOME FROM MOVABLE PROPERTY
Participation exemption can be granted for:
Participation exemption is granted upon the condition of upstream taxation: dividends must be originated from companies which are liable to corporate income tax or to a similar foreign tax.
Participation threshold: Another requirement is that, at the time of the attribution or payment of the dividends, the shareholding company holds a participation in the capital of the issuing company amounting either to not less than 10% of the latter's capital or to not less than € 2,500,000.
Permanency condition : Deduction for participation exemption is only granted in respect of shares in participations which have been held by the company for an uninterrupted period of one year at least.
Exempt income from movable property :
Income from preference shares in the Belgian National Railway Company (SNCB/NMBS) and income from tax exempted bonds (issued prior to 1962) are deductible.
PATENT INCOME DEDUCTION
Are taken into consideration: the patents or supplementary protection certificates registered by the company itself and that have been developed, wholly or partially, in the R&D centres of the company, as well as the patents, supplementary protection certificates or licences acquired by the company provided they had been improved in the R&D centres of the company. Own research centre requirements for patent income deduction no longer apply to SMEs.
“Patents income” means as well the income stricto sensu notably derived from the granting of licences, as the income which would have been received from a third party by the company having exploited patents on its own behalf.
The income enjoys a 80% exemption.
Should a company be unable to deduct the allowable amount in a tax year, any excess deduction cannot be carried forward.
ALLOWANCE FOR CORPORATE EQUITY (also called notional interest deduction)
The allowance for corporate equity (ACE) or tax regime applying to notional interests allows companies to deduct from their taxable profits a notional interest calculated on the basis of their corporate equity.
Calculation basis:
The allowance for corporate equity is based on the amount of the adjusted net assets the company was holding at the end of the preceding taxable period.
The allowance for corporate equity is applied after the deduction for patents income but before the deduction for previous losses and the investment allowance.
Rates:
The reference rate for the notional interest deduction is determined each tax year on the basis of the average of the monthly (July, Augustus en September) reference indices of the interest rate on Belgian 10-year linear government bonds (“OLO”) during the year preceding the year in which the financial year starts, i.e. the year 2013 for tax year 2015.
The rate for 2014 is set at 2.630% and at 3.130% for SMEs. For companies recognised as SMEs according to Article 15 of the Corporation Code, in respect of the tax year covering the taxable period during which they have benefited from the allowance for corporate equity, the rate is indeed increased by 0.50 point.
Carry-over :
As from tax year 2013, the allowance for corporate equity can only be set off against profits of the taxable period linked to the deduction and can therefore no longer be carried over.
However, with respect to companies still having remaining allowances for corporate equity which can be carried over on 31 December 2011 (or at the end of the taxable period linked to tax year 2012), the carry-over within the deadlines previously provided for (*) remains possible; however, above one million euro, the carry-over is limited to 60% of the remaining profits.
An extension of the carry-over period is planned for the amounts which could not be deducted because of this 60% limit.
The deduction of the stock of carry-overs is an integral part of the calculation of the corporate income tax and occurs after the deduction of previous losses and the investment deduction.
(*) Where profits were lacking or insufficient, the deduction not used could be successively carried over to the profits of the subsequent seven taxable periods.
Recent changes :
From tax year 2014, the notional interest deduction no longer applies to shares which qualify for the participation exemption, but which are held as a mere investment (treasury investments).
DEDUCTION OF PREVIOUS LOSSES
Losses from previous tax periods are deductible without any time limit.
INVESTMENT DEDUCTION
The tax advantage can either be given in one go or spread over several years (“staggered or spread deduction form”).
Rates of investment deduction - Tax year 2015
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Nature of the investment
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Deduction rate
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Companies
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SMEs article 15 Corporation Code
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Allowance in one go
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Basic rate applicable to ordinary investment
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0%
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4% (*)
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Increased rates
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Patents (**)
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13.5%
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13.5%
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“Green” R&D investments (**)
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13.5%
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13.5%
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Energy-saving investments
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13.5%
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13.5%
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Smoke extraction or air treatment systems in horeca-outlets
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13.5%
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13.5%
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Security investments
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n.a.
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20.5% (***)
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Investments made in order to promote reutilization of refillable beverage packages and reusable industrial products
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3%
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3%
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Spread deduction
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“Green” R&D investments (**)
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20.5%
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20.5%
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Other investments
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0%
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0%
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(*) Applicable to investments made in 2014 and 2015, provided that the assets directly relate to the economic activity actually carried out by the company. Only applicable if the company irrevocably waived the allowance for corporate equity.
(**) Unless the company has chosen to benefit the tax credit for R&D. The taxpayer's choice is irrevocable.
(***) Are only entitled to the 20.5% deduction rate: SMEs of which the voting rights are held for more than 50% by natural persons or SMEs to which the definition of “small companies” in the Corporation Code applies.
DEDUCTION OF THE STOCK OF CARRIED-OVER ALLOWANCES FOR CORPORATE EQUITY
The amount considered as allowance for corporate equity cannot exceed 60% of the result remaining before this operation. This limit does not apply to the first million euro of this result. The carry-over period of the amount which could not be deducted because of this limit, has been extended.
TAX CREDIT FOR RESEARCH AND DEVELOPMENT
Companies can benefit from a R&D tax credit which has been introduced for investments in patents and “green” R&D investments.
The R&D tax credit is granted for investments in tangible fixed assets newly acquired or constituted and in new intangible fixed assets, which are allocated in Belgium to the exercise of a professional activity.
Assets invested in R&D shall be used to this end for the whole period of depreciation. Otherwise, a part of the granted tax credit will have to be refunded.
Companies have to choose between the R&D tax credit and the deduction for investment for patents or for “green” R&D investments. This choice is irrevocable.
The tax credit fully applies to corporation tax. As appropriate, it can be carried over successively to the subsequent four tax years.
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