It is important that you comprehend all facets of the reconstruction reserve. Only then can you correctly assess its interaction with other tax regimes. The taxable part of the reconstruction reserve – for example, when the company has made a dividend distribution after the establishment of the exempted reserve – can be compensated with (possibly transferred) deductions, such as the dividend received deduction, the innovation income deduction, the investment deduction, the group contribution, the notional interest deduction, etc.
Carry-back. You can combine the reconstruction reserve with another measure taken by the government in the context of combating the economic consequences of the COVID-19 pandemic: namely, the one-off carry-back scheme (also called the backward loss offset or early loss deduction). On the basis of the carry-back, it is possible that the losses were already applied in assessment year 2020. But that does not prevent you from using those same losses again as a basis for the reconstruction reserve.
Fiscal basket. The application of losses carried forward can lead to a minimum taxable base through the application of the basket of €1 million. After all, if a company has a profit of more than €1 million after applying the group contribution, 30% of the amount in excess of this limit will always be taxed. However, by establishing an exempted reserve (read: reconstruction reserve) a company can avoid this minimum taxable base, because in that case the taxable reserved profit is reduced (or even decreased to zero). This allows you to bring the threshold of the basket below €1 million, thereby neutralising the restrictions of the basket and allowing you to still apply other deductions in full.
Liquidation reserve. If your company establishes the exempted reconstruction reserve, the profit used for this purpose will not be available for the establishment of a liquidation reserve. Thus, you have to weigh up both regimes. On the other hand, you will be able to establish a liquidation reserve when the reconstruction reserve becomes taxable and you transfer that reserve to a revenue account.
EBITDA. By establishing an exempted reserve, the taxable reserved profit decreases. This can have adverse consequences – for the interest deduction limitation, for example. After all, a decrease in the taxable EBITDA reduces the deduction capacity in the taxable period in which you establish the exempted reserve.
Tax shelter. The establishment of a reconstruction reserve can negatively influence the tax shelter for audio-visual works or performing arts. The exemption, after all, is limited to 50% of the taxable reserved profit before the establishment of the exempted reserves.
Because of all these possible interactions, it is important to weigh up, on a case-by-case basis, the different tax regimes and their fiscal impact on the tax ultimately due or to be recovered. Thus, you must properly assess whether or not the establishment of a (possibly temporary) exempted reserve will be to your company’s advantage.