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taxation.be

Friday
Mar 22nd
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taxbites

European Commission asks Belgium to stop discriminating against overseas bank.

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Written by Marc Quaghebeur Friday, 26 June 2009

The European Commission has sent Belgium a formal request it to amend its legislation. According to the Belgian legislation, interest paid by Belgian banks to individuals is exempted from tax up to the amount of € 1660.  That exemption is only applicable to interest paid by banks established in Belgium. Interest paid by foreign banks cannot benefit from the same exemption. Belgian residents are, as a consequence, dissuaded from opening or maintaining savings accounts with banks that are not established in Belgium.

The Commission's request takes the form of a 'reasoned opinion'. That is the second step of the infringement procedure of Article 226 of the EC Treaty. If Belgium does not reply satisfactorily to the reasoned opinion within two months the Commission may refer the matter to the European Court of Justice.

Shall we all become copy(w)ri(gh)ters?

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Written by Marc Quaghebeur Friday, 19 June 2009

An interesting thought on FinanceWorld. Shall we all become authors and get paid royalties.

If you write regularly and receive royalties, these are not taxed as earnings anymore. Since 2008, they have a favourable tax regime of 15 %, at least for the first €51,915 (that is the figure for 2009). 

And that €51,915 is calculated after deduction of a lump sum of €10,383, so that you can earn up to €62,298 and only pay 15% tax. In fact, on the first €13,844 you pay only 7.5 % and on the bracket between €13,844 and €27,688 only 11.25%

This tax regime applies to authors  of books, comic strips, contributions to news papers and magazines, paintings, sculptures, theater plays, movies, scenarios, data bases, music, illustrations, photos, user guides, brochures, …

When a record label, a publishing company or a newspaper pays royalties to an author, it will deduct 15 % and the author must not declare those royalties in his tax return anymore.

In any event, the rules are not very clear. If a journalist works for two papers, each will calculate the 15 % on the first €62,298 because they do not know of each other.

The tax regime is not limited to independent authors or journalists. If the employment contract of a journalist who is on the staff of a newspaper, mentions that all copyright belongs to the paper, it is only normal that part of his earnings are royalties that are taxed at 15 % … but the taxman does not share that view.

Top managers of Belgian head offices do not need a work permit anymore

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Written by Marc Quaghebeur Friday, 12 June 2009

Before an employer can hire an employee from outside the EEA (the European Economic Area includes the 27 Member States of the European Union as well as Norway, Iceland and Liechtenstein, he must apply for an authorisation and a work permit for the employee. 

In 2007, the rules had been simplified for all management levels under the top two levels (project managers, leaders of R&D teams, planning engineers, assistant heads of the accounting department, etc).

With effect from 29 May 2009, managers of headquarters do not need a work permit anymore if they meet the following conditions.

  • They are managers with an employment contract for a salary company in excess of €59.460 EUR (the figure for 2009) per year.  
    To be considered a “manager”, the employee must exercise a high ranking position in the company that is generally reserved for people who have successfully graduated from university or another institution of higher education or to people who acquired the necessary experience for a senior position by gradually climbing up the corporate ladder.
  • The employer  is a Belgian head office, i.e. a company or branch of a multinational group that provides certain services of an auxiliary or preparatory nature to all or some of the companies of the group. These include existing coordination centers, shared services centers, call centers, marketing departments, etc.
    The exact nature of the head office’s activities must be proven by an official attestation issued by an external auditor.

The head office must inform the regional authorities of the manager’s arrival in Belgium.

Taxman stops six yearly routine checks

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Written by Marc Quaghebeur Thursday, 04 June 2009

In 1997, the tax authorities realized that auditing every taxpayer every two years did not work. They took another approach: taxpayers could expect a major audit every six years, and that audit would cover the last two years. However, even that appeared to be too ambitious.

The tax authorities are changing their strategy again. Instead of carrying out a routine check every six, years, each tax office will analyse the tax files of companies and individuals and determine their fraud-risk. Taxpayers with a high fraud-risk will be examined every year.  The tax authorities manage to explain this as progress: in the past a tax defrauder risked an audit once every six years, as of now he may well get an investigation every year.

Since about five years, tax returns are processed electronically, leaving more time for audits. The tax returns that are not filed electronically via Tax-on-Web are scanned and controlled automatically. The data on the tax return are compared with information that the tax authorities have received from other sources: salary statements, pension statements, bank certificates about pension saving, etc.

Can a company promise to pay a pension to its director?

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Written by Marc Quaghebeur Monday, 01 June 2009

That can become difficult, because the possibilities to grant a pension directly (without passing via a group insurance or a retirement institution (pension fund)) have been limited by law. The purpose of the law is to secure the pension of the employees in case the employer would not be able to comply with his obligation to pay the pension. The Loi Vandenbroucke (28 April 2003) has rendered the conditions for such undertakings very cumbersome and ordinary companies that are not specialized pension institutions are forbidden to promise to pay for such pensions.

However, the company can still promise to pay a pension directly to one of its directors if they are self employed for social security purposes. However, for directors who pay social security contributions as employees the company will have to pass via a group insurance or a retirement institution.

How does it work? The company will draft a contract with the director mentioning the amount promised, the mode of payment (capital or annuity), whether it is index linked, what happens when the director dies before his retirement, etc… And the company will have to make sure it meets the conditions for the tax deduction (promise the pension before retirement, make sure that the director is paid regularly and at least once a month, and calculate whether the pension is under the 80 % limit). And in small companies, the contract should not be signed by the beneficiary on behalf of the company.

This contract can be signed shortly before retirement, but it can also do so long before the date of retirement. And in that case the company must record a provision on its balance sheet for the cost of paying a pension capital upon retirement or an annuity.  The amount depends on the type of pension promised, i.e. the net present value is not the same for an annuity and for a pension capital.

Belgian Participation Exemption Adapted in Accordance With Cobelfret

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Written by Marc Quaghebeur Monday, 18 May 2009

The Belgian government on May 8 decided to adapt Belgium’s rules on the participation exemption to fall in line with the decision of the European Court of Justice in Cobelfret v. Belgium (C-138/07). As a result, Belgian companies will be able to carry forward the dividends received deduction that they were unable to carry forward in the past with effect from 1992.

In Cobelfret the ECJ ruled that the Belgian participation exemption (the equivalent of the dividends received deduction) is incompatible with article 4(1) of the parent-subsidiary directive because it does not effectively refrain from taxing dividends in some situations. (click here to read the article)

Belgium to Fight for Notional Interest Deduction

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Written by Marc Quaghebeur Monday, 11 May 2009

Belgian Finance Minister Didier Reynders, in a recent response to the European Commission, maintained that Belgium’s notional interest deduction is not discriminatory and complies with EU law.

In February the European Commission addressed a letter to the Belgian government as a preliminary step toward an investigation into the compatibility of the notional interest deduction with the EC Treaty and European Economic Area Agreement. Reynders’s April response to the commission marks an apparent reversal of his position. When Reynders first reacted to the commission’s letter in Parliament on February 19, he said that extending the notional interest deduction to overseas branches and overseas real property, as prescribed by the commission, was a possibility. (article)

Tax Measures Would Aid Economic Recovery

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Written by Marc Quaghebeur Sunday, 03 May 2009

The Belgian State Gazette on April 7 published the Law for the Recovery of the Economy of March 27, 2009, which introduces a series of tax measures relating to social affairs (social security benefits), work matters (measures for employees of companies in reorganization), and financial matters. (article)

Limitations Period Extended for Assessment of Income Tax, VAT

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Written by Marc Quaghebeur Monday, 30 March 2009
The Belgian Parliament on December 22, 2008, adopted a program law that gives the tax authorities an additional two years to assess income tax and VAT. The program law was published in the Belgian State Gazette of December 19, 2008, and includes several new tax rules for 2009 (article).

European Commission Questions Belgian Notional Interest Deduction

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Written by Marc Quaghebeur Monday, 23 March 2009
Four years after the introduction of a notional interest deduction to replace Belgium’s coordination center tax regime, which was repealed at the behest of the European Commission, the commission is questioning some limitations to the deduction.
Belgium’s favorable tax regime for coordination centers, which were used primarily to finance group companies, had a major role in the country’s popularity for international tax planning purposes. When the European Commission ordered Belgium to repeal the advantageous tax regime, Belgium responded by introducing a deduction for risk capital (the notional interest deduction), saying it was needed to create a level playing field for debt and equity financing. (article)

Belgium: The Year in Review

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Written by Marc Quaghebeur Monday, 22 December 2008
It has been a quiet year for taxes in Belgium. For most of the year, the legislative agenda was monopolized by discussions about broad political reform and keeping major banks afloat. (article )

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