26 November 2018 Belgium: Year-end review for MNEs The approval of the Belgian corporate tax reform in late 2017 brought significant changes to the Belgian tax landscape.1 The first wave of measures came into effect in 2018, including a decrease in the corporate tax rate to 29.58%, a 100% dividend received deduction as well as certain compensating measures (e.g., minimum tax base due to the limitation on certain tax deductions). As the end of the calendar year marks the end of the financial year for many companies, the entry into force of the second wave of measures is imminent. The second wave includes measures which will have a significant impact on multinational enterprises (MNEs) holding investments in Belgium, with the implementation of a new interest limitation rule, hybrid mismatch rules and controlled foreign company (CFC) legislation in line with the European Union (EU) Anti-Tax Avoidance Directive (ATAD). This Alert provides an overview of the key changes relevant for MNEs. It also serves as a reminder of the rapidly approaching year-end transfer pricing reporting requirements as well as the recent developments in the context tax transparency and Belgium's international tax strategy. The following key measures and action items will apply for financial years starting on or after of 1 January 2019:
Although the transposition of the interest limitation rule was initially scheduled for 2020, the Belgian Federal Government reached a political agreement to advance the implementation of the interest limitation rule to 2019 in order to fully comply with the ATAD. This agreement is still to be transposed into national law.2 Below is a list of a number of recent developments regarding Belgium's international tax strategy and tax transparency relevant for MNEs:
One key item of note at this stage is the withdrawal of Belgium's reservation on Article 12 of the MLI, which tackles artificial avoidance of PE status through commissionaire arrangements (i.e., Belgium opted in for Article 12 to apply to its Covered Tax Agreements). Belgium's revised position on commissionaire arrangements will result in significant amendments to the interpretation of the tax treaties to which Belgium is a party.3 Determining whether a cross-border arrangement is reportable raises complex technical and procedural issues for MNEs and their advisors. A transition period applies to reportable arrangements of which the first step of implementation is taken between the 25 June 2018 (entry into force of the Directive) and 1 July 2020 (application of the Directive). These arrangements will have to be reported by 31 August 2020 and are to be exchanged between EU Member States by 31 October 2020. After the transition period, a reportable arrangement needs to be reported within 30 days beginning: (i) on the day after the arrangement was made available for implementation, or (ii) on the day after the arrangement was made ready for implementation, or (iii) when the first step in the implementation was undertaken, whichever occurs first. EU Member States are required to transpose the Directive into national law by 31 December 2019. Draft legislation is expected shortly. As a general reminder, for Belgian entities and PEs of MNEs with a financial year ending on 31 December 2018, three different transfer pricing reporting requirements may be due by year end. Provided that the applicable thresholds are met, the deadline for filing the 2017 Master File (Form 275.MF) and/or the 2017 Country-by-Country (CbC) report (Form 275.CBC) is set at 31 December 2018. In addition, for Belgian entities and PEs forming part of a MNE group with consolidated annual gross revenue equal to or exceeding €750 million, the annual filing of the CbC reporting notification (Form 275.CBC NOT) is also due by 31 December 2018 (if consistent with the year end of the ultimate parent entity). 1 See EY Global Tax Alert, Belgian Parliament adopts corporate tax reform, dated 2 January 2018. 2 See EY Global Tax Alert, Belgium reaches agreement on 2018/19 budget including on the timing of interest limitation rule under EU ATAD, dated 30 July 2018. 3 See EY Global Tax Alert, Belgium acts to ratify MLI and revises position on commissionaire arrangements, dated 7 November 2018. 4 See EY Global Tax Alert, EU publishes Directive on new mandatory transparency rules for intermediaries and taxpayers, dated 5 June 2018.
Document ID: 2018-2342 |
