On 18 August 2015, the Omnibus Act of 10 August 2015 (the "Act") was published in the Belgian State Gazette, introducing three new measures to support SMEs and young entrepreneurs: (i) a tax shelter for investments in start-ups, (ii) favourable tax treatment for loans made through crowdfunding platforms, and (iii) a partial exemption from the obligation to remit income tax on salary. The purpose of these new measures is twofold: firstly, to help start-ups raise sufficient funds to develop their activities and, secondly, to provide a solution to the high labour cost in Belgium.
1) Tax shelter for investments in start-ups
The tax shelter for investments in start-ups consists of a reduction in the investor's individual income tax through the grant of a tax credit. The investor is entitled to a tax credit of 45% of the invested amount, for an investment in a qualifying micro-company, or 30% for a qualifying SME, provided the investment is made during the first four years of the company's existence. The investment may be made directly in an SME or micro-company or indirectly through a qualifying starter fund.
Qualifying SMEs and micro-companies
A qualifying SME is a company with an average annual headcount of no more than 100 employees which meets at least two of following three criteria (on a consolidated basis):
- a balance sheet total of no more than EUR 3,650,000;
- turnover, excluding VAT, of no more than EUR 7,300,000;
- average annual employee headcount of no more than 50.
A micro-company is a company that meets at least two of the following three criteria:
- balance sheet total of no more than EUR 350,000;
- turnover, excluding VAT, of no more than EUR 700,000;
- average annual employee headcount of no more than 10.
Moreover, it must be an unlisted Belgian company or a company with is registered office, principal place of business or headquarters in the European Economic Area and an establishment in Belgium. In addition, only investments in companies established from 1 January 2013 can qualify for the tax shelter.
For the sake of completeness, it should be noted that certain types of companies are excluded from the tax shelter regime. These include: companies created further to a merger or division, companies involved in financing or cash pooling activities, management companies, and companies facing insolvency proceedings. The collected amounts may not be used to pay dividends, acquire shares or grant loans.
Maximum amount collected through the tax shelter
A start-up can collect a maximum of EUR 250,000 through the tax shelter. In addition, only investments in newly issued shares are eligible, and contributions in kind are not allowed.
To qualify for the full tax credit, the shares must have been held by an individual for at least four years. In addition, the investment is limited to EUR 100,000 per year.
The investor's family members and the start-up's employees can also benefit from the tax shelter, but not shareholders.
Investments in so-called start-up funds are also eligible for the tax credit. To date, however, there are no such funds meeting the criteria set out in Article 48 of the Act.
On his or her income tax return, the investor must prove that s/he meets the criteria set out above. A royal decree will clarify how this should be done. Investments made from 1 July 2015 onwards are eligible for the tax shelter.
2) Favourable tax treatment for loans through crowdfunding platforms
For interest on a loan of up to EUR 15,000 (for interest received in 2015) granted through a qualifying crowdfunding platform recognised by the FSMA, an individual investor can benefit from favourable tax treatment (i.e., a tax exemption for the interest on the loan), provided:
- the loan has a minimum term of four years and interest is paid annually;
- the loan was granted to an SME (see above);
- the SME is still in the start-up phase (i.e. it has been registered with the Crossroads Enterprise Database or a similar register in the European Economic Area for no more than 48 months).
The investor is entitled to the favourable tax treatment for loans granted up to an amount of EUR 15,000 per year, regardless of whether it is invested in the same project. It is important to note that company directors and key personnel who are shareholders in the company can also benefit from the exemption for loans granted to their company.
This measure entered into force on 1 August 2015.
3) Partial exemption from the obligation to remit income tax on salary
During their first years of operation, start-ups are partially exempt from the obligation to remit taxes withheld from salary. During the first four years of their existence, micro-companies qualify for a 20% exemption, while SMEs qualify for a 10% tax exemption.
The employer withholds 100% of the taxes due from the employee's salary, but only has to transfer 90% (or 80% in the case of a micro-company) to the treasury. Similar favourable tax measures already exist for qualifying researchers (an incentive which substantially reduces the salary cost of researchers working on qualifying R&D projects).
Employers registered with the Crossroads Enterprise Database for up to 48 months can benefit from this measure. In addition, the company cannot be in liquidation, bankruptcy or judicial reorganisation, an indication of (financial) difficulties.