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taxation.be

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Jun 16th
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Retirement planning

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Written by Administrator Thursday, 27 October 2005

The period 1955-2015 will go down in the history books as the golden age of solidarity between humans. Unfortunately, it is a period in the world history that will never be repeated.

Solidarity between workers is the basis of our social security system. Solidarity between those who can work and those who are too ill or too old to work. What you (and your employers) pay into the social security system today goes to the sick and the elderly now.

Social security is the opposite of occupational pension schemes for the private sector. The contributions you pay to your scheme are invested and capitalised. What you save now builds up the capital that will see you through your old age.

The money that the social security fund distributes today is the money it collects today. And where to get the money it will spend tomorrow is a problem for those that will be running the system then. When the first old age pension systems were set up, that was not really a problem. The chances of living until 65 were slim. And the chances of enjoying retirement benefits for a long period of time were even slimmer.

Things have changed. Only 40 percent of the population is working. Some 14 percent of the population between 20 and 59 is inactive and do not contribute to the social security system. And by 2015 one in five Belgians will be over 65. The conclusion is simple : fewer workers are paying the social security provisions for ever more retirees.

The pension question is (more or less)on the top of the political agenda in all European countries. In Belgium it has been kept on the back burner for far too long. We will have to work longer and early retirement will be discouraged. At the same time the government cannot afford to make the cost of employment more expensive for fear of losing jobs. The burden of financing the social security system will shift from employment income to other fiscal sources.

At the same time there will be bonuses for employees and self-employed who keep working until 65. If they do, they will be entitled to take up their occupational pensions and pay only 10 percent tax. And to encourage contributions to pension saving plans, the tax deduction will be raised.

However,when it announced that a tax would be levied on SICAVS, the government forgot that these were the preferential investment vehicle of small investors.

The solutions are not as bold as they could be ; the main problems are not tackled yet. Whether it is a question of ‘too little too late’, only the future can show. In any event the trend is set.

from The Guide for Retirement Planning that came with your latest issue of the Bulletin. (Download …)

Tax Incentives for Researchers

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Written by Administrator Friday, 14 October 2005

Every economy needs knowledge and innovation to survive, and in that respect researchers are of the foremost importance. Belgium does not have a good record in keeping researchers and research. With effect of 1 October 2005, Belgium has extended a special tax regime for employers of researchers to include partnerships between private-sector enterprises and universities and scientific institutions.

This measure is an extension of a measure that was initially introduced in 2002 to encourage the employment of assistant researchers by Belgian colleges and universities as well as for postdoctoral researchers paid by the National Fund for Scientific Research or the Fund for Scientific Research - Flanders.

The employer withholds the full tax at source on the remuneration they pay to their researchers, but they only pay some 35 percent of that withholding tax on remuneration to the tax authorities. The law does not prescribe how the employer has to use the rest (e.g. for additional research equipment or to pay higher salaries). Some 6.864 researchers are concerned by the measure.

A year later, that tax regime was extended to include assistant and postdoctoral researchers paid by a limited list of scientific institutions in the public sector and by collective research centers and international research institutions (for prior coverage see doc. 2004-12042). That was the first attempt to include partnerships between private-sector enterprises and universities and scientific institutions in the special withholding tax exemption. This relates to some 2,071 researchers.

Although the benefit for this second category of employers is limited to 50 percent of the withholding tax, it still means a saving of about 10 percent or between € 8.000 and 10.000 per year, which makes the cost of research comparable with the neighboring countries.

On 1 October this measure has been extended to enterprises in the private sector that are in a partnership with a college or a university (within the European Economic Area) or a recognized scientific institution. The exemption of the obligation to pay the full withholding tax can also be granted for researchers engaged in a particular project. It is then limited to the duration of the project. The Belgian authorities estimate that this measure concerns some 3,500 researchers and it has budgeted some €30 million per year.

In his October 11 State of the Union address Prime Minister Guy Verhofstadt announced that some €10 million were reserved for a similar measure in favour of young innovative companies. (Read the Article)

Belgian Government announces new tax amnesty and tax for small investors.

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Written by Administrator Wednesday, 12 October 2005

In his October 11 State of the Union address in the Chamber of Deputies, the lower house of the Parliament, Prime Minister Guy Verhofstadt presented the policy statement of his federal government to Parliament. This policy document and the 2006 budget had been officially agreed by his Cabinet after the three regional governments agreed to contribute EUR 250 million to the federal treasury.

In his policy statement the Prime Minister stated that he goal of his government is to safeguard our prosperity for the future. The means to do this is a cautious, but resolute reform. He stressed that there were two challenges facing the country: globalisation and the aging population.

Verhofstadt said that the higher life expectancy means that by 2015, one in five Belgians will be older than 65 years of age. Fewer workers will be paying the social security provisions of a larger group of retired people. This requires a new approach to boost employment (30,000 new jobs by the end of 2006 and 115,000 jobs by 2007. The federal government has agreed on a solidarity agreement between the generations. This will include measures aimed at reforming social security, retirement and employment.

In particular, the age at which workers may take early retirement will be raised from 58 to 60, starting in 2008. In addition, early retirement will only be available after 30 years of employment, to be set at 35 years in 2012. And to export products rather than jobs, the Prime Minister announced that the tax on labour will be reduced by € 9 million.

The government wants to modify the system of financing the social security security system that weighs less on the employment cost. Instead, 15 percent of the proceeds of the withholding tax on investment income and 30 percent of the taxes on products that harm health (such as tobacco) will be directed to the social security system.

The Prime Minister continues to reduce the national debt and targeted tax reductions will remain a government priority. He said Belgium was performing better than the eurozone average and forecast Belgian economic growth of 2.3 percent this year.

The most important new fiscal measures are described in this article (Read the article …)

European Stamp Taxes Conference

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Written by Administrator Thursday, 06 October 2005
Do you advise on cross-border European real estate transactions? Do you act for pan-European investors? An important new conference has been announced covering stamp and real estate transfer taxes in the main European Union member states. The conference is in London on 10 and 11 November 2005 and will be chaired by Patrick Cannon with leading stamp tax legal experts from various member states. The English version of the conference brochure can be viewed here.

In your interest

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Written by Administrator Saturday, 01 October 2005
Belgian savings accounts have always been very popular. Saving accounts may not be very lucrative, they are risk-free and you can always take out your money. Another attraction they have is that they benefit from a tax exemption. And that is an advantage they have over other fixed interest investments. (More …)

Belgium Asks France to Revise Tax Treaty

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Written by Administrator Tuesday, 20 September 2005
During a meeting of the EU finance ministers the weekend of 10 September in Manchester, England, Belgian Finance Minister Didier Reynders and his French counterpart, Thierry Breton, agreed to examine whether to revise the current income tax treaty between the two countries. Read more .

Reynders Proposes Change to New Risk Capital Deduction

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Written by Administrator Monday, 19 September 2005
Belgian Finance Minister Didier Reynders has announced his intention to abandon a three-year holding condition for the new tax deduction for risk capital that is scheduled to take effect on 1 January 2006. (Read the article …)

Angelina and Brad

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Written by Administrator Thursday, 25 August 2005
Have you ever wondered how you could get a chance of socializing with Brad Pitt and Angelina Jolie. Now here's your chance and the Belgian tax authorities will help you pay you for it. Does that sound too good to be true? (More …)

Belgian Risk Capital Deduction to Enter Into Force on 1 January

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Written by Administrator Friday, 05 August 2005

A law introducing a risk capital deduction for Belgian companies has been signed into law, fulfilling a promise made earlier this year by Finance Minister Didier Reynders. The deduction amounts to between 3 percent and 4 percent of a company’s equity (share capital plus retained earnings). The law also provides for the abolition of the 0.5 percent capital duty on contributions to a company’s share capital.

The House of Representatives adopted the bill on 2 June and the Belgian Senate did not opt to review it, clearing the way for King Albert II to sign it into law. The law was published in the Official State Gazette on 30 June 2005, and will enter into force on 1 January 2006.

This new tax regime will replace Belgium’s existing coordination center tax regime, which is set to expire in the next couple of years. However, any Belgian company or permanent establishment can begin operating as a coordination center for a group of companies without being subject to the approval period that used to be in force for coordination centers. If a new coordination center has sufficient capital, it can provide all sorts of preparatory and auxiliary services to a group’s companies. These include insurance and reinsurance, the centralization of financial operations, the hedging of foreign exchange risks and centralization of accounting, administration and data processing, sales promotion and advertising, the collection and distribution of information, scientific research, and relations with national and international governmental institutions.

The cost of those activities can be charged back to the group companies that use the services, and the new coordination center will not be taxed on the proceeds, within the limits of the risk capital deduction. For the most part, the new coordination center regime will be used to finance the companies of a group. In particular, if a parent company finances the equity with borrowed funds, the risk capital deduction can neutralize the interest income, and both the parent company and the subsidiaries of the group can set off the interest paid against their profits.

As under the old coordination center regime, the new coordination centers cannot hold participations in other companies. When a holding company is converted into a financing company, it must transfer its shareholdings to a new holding company. Moreover, before doing that, it would be advisable to reduce the share capital of the subsidiaries to the statutory minimum capital, and to convert the excess share capital into receivables.

Reynders Initiates Consultation on Investment Fund Legislation

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Written by Administrator Monday, 01 August 2005

In 2003, Belgium introduced a new tax-beneficial investment vehicle, the private PRICAF. Two years later, the private PRICAF has not been as successful as expected, with only two such investment funds having been approved. Consequently, Finance Minister Didier Reynders has now started a round of consultation to revise the private PRICAF legislation.

In a consultation note, Reynders explained that the revisions are needed because of changes in other Belgian legislation, the pending implementation of the new EU Prospectus Directive, and experience that has been gathered in the two years since the private PRICAF legislation entered into force. (More …)

Court Seeks ECJ Ruling on Scope of Money-Laundering Directive

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Written by Administrator Monday, 25 July 2005

In a July 13 decision Belgium’s Court of Arbitration has asked the European Court of Justice for a preliminary ruling concerning the compatibility of the extension of the EU money-laundering directive to lawyers with the fundamental right to a fair trial.

The Law of January 12, 2004 implemented Directive 2001/97/EC amending Council Directive 91/308/EEC on preventing the use of the financial system to launder money. In practice it extended the provisions of the Law of January 11, 1993, to lawyers when they assist their clients in the planning or execution of transactions that involve large amounts of cash. (More …)

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