The Belgian Minister of Finance has presented his outline for tax reform, which should extend over the next ten years.
The announced objective of the reform is to reduce the pressure on the taxation of labour by shifting it to the taxation of wealth (i.e. a tax shift).
Here are the main points of this outline.
A. Personal income tax
- Increase in the tax-free allowance from EUR 9,270 to EUR 13,390. This tax-free allowance would be increased by the same amount for each dependent child, whereas at present this increase is differentiated between dependent children. Additional exemption amounts would remain for disabled children and dependent children of single parents.
- Introduction of new personal income tax scales:
- Abolition of the special social security contribution and the additional social security contribution for self-employed persons.
- Abolition of the tax regime linked to maintenance allowances. As a reminder, the current regime allows for the deductibility of alimony payments by the payer and taxation by the beneficiary. With the reform, these pensions would no longer be deductible or taxed.
- Increase in the deductibility of childcare expenses.
- Income from supplementary work (e.g. collaborative economy, associative work, occasional work, flexi-job) exempted up to EUR 6,000 per year. Beyond that: taxation in the same way as other professional income.
- Abolition of a whole series of tax benefits linked to alternative forms of remuneration:
- Eco-cheques, sports and culture vouchers would be treated as remuneration but no
- change for meal vouchers.
- Taxation of benefits at their real value by removing the possibilities of optimisation through cafeteria plans or stock option plans.
- Reimbursement of the employer's own expenses on the basis of real costs and an end to "disguised" remuneration.
- Reassessment of tax benefits related to copyright. It is not clear whether an outright abolition of the scheme is envisaged or a tightening of the conditions of access.
- Measures to combat the use of companies for optimisation purposes by indexing the minimum remuneration of managers for the application of the reduced rate of corporate income tax and eliminating the possibility of paying this remuneration in alternative forms of remuneration (e.g. benefits in kind, etc.).
- Abolition of the marital quotient.
- Income from patrimonial assets:
- Tax-free quota of EUR 6,000 per year on income from savings, investments and stocks.
- Tax rate on all income from assets (movable and immovable) fixed at 25%.
- For income from real estate, this taxation would not apply to one's own home. For other property: taxation of actual rental income at a rate of 25%, with a flat-rate expense deduction of 30% and an allowance of EUR 6,000. It is not clear whether this is a specific deduction for property income or whether it is the exempted portion of EUR 6,000 applicable to all cumulative income from assets.
- Taxation of capital gains on securities (e.g. shares, bonds and other financial products) at 15% with deduction of capital losses. Exception for entrepreneurs: in case of transfer of a company with continuation of its activity, a limited exemption of the capital gain would be possible.
- Taxation of capital gains on real estate at a rate of 15%, except for capital gains on one's own home. Capital losses would be deductible.
- Abolition of the federal tax reduction for second homes.
- Abolition of the annual tax on securities accounts and the tax on stock exchange transactions.
- Pensions: general access to the second pillar with a capped tax benefit. Abolition of preferential treatment of a capital payment over an interest payment.
- Renovation of dwellings: owners would be entitled to a flat-rate deduction of costs up to 30% of actual rental income (or expected return if the property is not rented) with the possibility of deducting actual costs if these are higher.
- Reform of the tax regime for company cars, maintaining the advantage for zero-emission vehicles. The principle of the company car will therefore continue to exist.
However, the benefits of petrol cards will be taxed for private travel.
In this respect, the greening of the car fleet has already been agreed and will come into effect as of 2026 (with a transitional period for vehicles acquired from 1 July 2023).
B. Corporate tax
Reduction of the corporate tax rate for SMEs from 20% to 15% on the first EUR 200,000 (vs. EUR 100,000 for the current reduced rate).
Introduction of a minimum tax for multinationals.
C. VAT and excise duties
- Reduction of VAT on electricity. However, the new rate envisaged has not yet been revealed.
- Excise duties on energy would be linked to the amount of energy consumed.
- Retention of the reduced VAT rate for the demolition and reconstruction of the sole own dwelling.
- Abolition of the current reduced rates of 6% and 12%, to be replaced by a rate of 9% and continuation of the standard rate of VAT at 21%.
- Abolition of VAT on fruit, vegetables, essential hygiene products (e.g. nappies, products for intimate hygiene protection), medicines and public transport.
The proposals are, at this stage, rather vague and still need to be debated within the government and parliament if a bill is to be introduced.
Therefore, not all the points discussed will be approved and there will be many changes before this reform comes to fruition, assuming that it can be achieved before the elections scheduled for 2024.
For more information on tax issues in Belgium, contact your CMS client partner or local CMS experts:
Olivier Querinjean - Partner
Lida Achtari - Senior Associate, Brussels