You ask, we answer
Based on five specific questions, we are bringing the same number of different themes to your attention. Not randomly, but based on the questions that we have recently received from our clients.
What is the impact of the upcoming tax reform on my property?
Many Belgians have a second residence or property that they rent out as an investment.
At present, the tax treatment of this property is quite advantageous. But we expect the imminent tax reform to change that.
The blueprint that was put on the table last summer contains several proposals. Consider the tax on actual rental income, the tax on capital gains from the sale of property and the abolition of the tax reduction for non-owner-occupied homes.
The programme law: first step in the reform
The programme law was (temporarily) limited to the abolition of the tax reduction for non-owner-occupied homes. The following are targeted:
- The tax deduction for capital repayments;
- The tax reduction for premiums for individual life insurance policies that guarantee or reconstitute a loan to acquire or retain property.
Good to know!
The interest associated with the loan remains deductible from the net taxable income of the property which you own. With the exception of your own home because it is exempt in the personal income tax.
The abolition of the tax reduction does not apply to current financing. It only applies to loans taken out from 1 January 2024 to acquire or retain the property. For loans taken out by the latest on 31 December 2023, the existing benefit is retained.
We deduce from the explanatory memorandum to the programme law that a refinancing loan is not considered a ‘new’ loan insofar as it is refinancing an existing loan, from before 1 January 2024, that was entitled to the tax reduction.
Want to know more? Go to our pages at www.bdo.be, where you will find all up-to-date information about the programme law and the upcoming tax reform. Or contact the experts in our Tax team: firstname.lastname@example.org
I am 55 years old and my broker is asking to reduce my IPC premium. How should I best respond to this?
The deductibility of premiums paid in the context of an individual pension commitment (IPC) has changed, more specifically the calculation of the 80% limit. How? This is explained by the tax authorities in three circulars, which were issued recently.
As a reminder: premiums paid into an IPC are tax-deductible in corporate income tax, subject to a number of conditions, including the 80% rule. This rule requires that the sum of the statutory pension (1st pillar) and the supplementary pension (2nd pillar) does not exceed 80% of the last normal gross annual remuneration of the manager.
What do the circulars say?
In order to calculate the deductible contributions ‘more easily’, three circulars record ‘estimates’ of the statutory pension that you can use in the formula of the 80% rule:
For the years before 2021, you can estimate the statutory pension of the self-employed manager at 25% of the gross income for 2020.
For the other years (i.e. those in which the activity was performed under the status of employee and those in which the activity was performed under the status of self-employed as from 2021), you can estimate the statutory pension at 50% of the gross income that must be taken into account for the taxable period (if necessary limited to the income ceiling or the maximum pension).
Circular 2022/C/79 adds that, regardless of the method of calculating the statutory pension, you must in principle not include the part of the premiums that is not deductible solely as a result of the increase in the estimated statutory pension as rejected expenses for the tax years 2022 and 2023.
This administrative tolerance is allowed insofar as the company books those excess premiums into an account #49 (charges to be transferred) in the taxable period associated with tax year 2023. These surpluses are considered as advances on the premiums to be paid in the next taxable period.
These circulars still raise some questions, such as: how must you book a charge to be carried forward on 31/12/2022 in respect of an amount charged on 31/12/2021? However, our experts recommend that you ask your broker to recalculate (if the maximum premiums were paid in 2021 and/or 2022). This way you can be sure whether the premiums for those years are deductible or not.
Want to know more? Go to the comprehensive article at www.bdo.be. Or contact the experts in our Tax team: email@example.com.
‘Restructuring and insolvency’ directive: what are the consequences for companies in difficulty?
In the midst of the high-risk macro-economic context resulting from the COVID-19 pandemic, inflation fever, geopolitical tensions and climate change, the Council of Ministers approved the draft law transposing the European Directive ‘Restructuring and Insolvency’ into Belgian legislation. The Directive provides for preventive actions that must be carried out before the insolvency of a company becomes irreversible.
The main difference with the existing judicial reorganisation procedure (JRP) is that the economic value of the company as a ‘company in continuity’ is central. The intention is therefore no longer just to safeguard the activity at all costs – as was previously the aim of the legislator to maintain employment – but also to protect the interests of creditors.
Today that vision has thus changed. In plain language: if the survival of the company generates more value than the proceeds of a liquidation, a restructuring plan must be approved. If this is not the case, liquidation is justified.
The directive itself does not provide a method for determining value in continuity and liquidation. The company must call in an expert for this. However, the valuation of a company in difficulty is complex and particularly sensitive when discussions between creditors take place.
Nevertheless, the reform must lead to a faster and more efficient restructuring of companies in difficulty, to greater homogeneity within the European Union and hopefully to a positive impact on the European Union’s economy.
Want to know more? Then contact the experts in our Financial Advisory team: Alexandre Streel (firstname.lastname@example.org) and Maxime Ledent (email@example.com).
Expat executives and researchers are (at the latest as from 1 January 2024) no longer regarded for tax purposes as non-residents but as residents of Belgium. What are the consequences?
The former special tax regime equated qualifying executives and researchers to non-residents through fiction. The new tax regime for incoming taxpayers eliminates that fiction. Now the normal rules apply to determine the tax residency of an expat. This means that the expat domiciled in Belgium or who has their registered office of wealth/assets in Belgium and who cannot present proof of residence issued by another country will be regarded as a Belgian tax resident. The same applies to foreign executives who will lose the benefit of the old special tax system by 1/1/2024 at the latest.
The main tax consequences of the new status are:
- The obligation to submit an annual personal income tax return;
- Extensive tax compliance obligations. The expat and, where appropriate, his or her spouse, must state the following information in the declaration:
- Global income (income of Belgian and foreign origin)
- Bank accounts, life insurance contracts or legal arrangements held, underwritten or established outside Belgium;
- The obligation to provide information on real estate abroad via the electronic portal MyMinfin. This must allow the Belgian tax authorities to allocate a theoretical rental value/cadastral income;
- The obligation to provide certain information about foreign bank accounts to the Central Point of Contact of the National Bank of Belgium;
- a potential increase in municipal tax.
Want to know more? Go to the comprehensive article at www.bdo.be. Or contact the experts in our Tax team: firstname.lastname@example.org
Who has to organise social elections in 2024?
The next social elections will probably take place from 13 up to and including 26 May 2024.
As from an average employment of fifty employees, a company must organise social elections. As from that limit, a company must set up a Committee for Prevention and Protection at Work. If the average employment is one hundred employees, then a works council must also be set up.
Average employment is ‘calculated’ over the reference period running from 1 October 2022 up to and including 30 September 2023. Only if, on average, fifty or one hundred employees are in service during that reference period must the company organise social elections the following year. When calculating average employment, all persons associated with the company through an employment or apprenticeship contract are taken into account, even if those persons are absent due to illness or accident. A special arrangement applies to temporary workers.
What is meant by a ‘company’ when organising social elections? The level of the technical business unit (TBU) applies here. This is determined by the social and economic independence of the company. The TBU does not, therefore, necessary correspond to the legal entity.
Want to know more? Go to our comprehensive article at www.bdo.be, where you will find all up-to-date information about organising social elections. Or contact the experts in our Legal team: email@example.com