Executive summary

An agreement reached, on 31 January 2025, between the five political parties expected to constitute a new Belgian federal government includes a series of measures relating specifically to corporate income tax.

The overall objective of the reform is to strengthen the purchasing power of working people, increase economic competitiveness and stimulate entrepreneurship. Specific incentives and measures aim to improve the investment climate with a focus on environmental transition and the sustainability of the economy.

To this end, the parties agreed that the tax system should be simplified, made more transparent and user-friendly in addition to relying on a fair contribution of taxes paid by relevant taxpayers (corporations, individuals, etc.). Reliance on a fair contribution, in particular, would be achieved through an increase of the tax-free allowance for individual tax purposes and by introducing a 10% capital gains levy for individuals on shares and certain other financial assets (see EY Global Tax Alert, Belgium | New federal government agreement on capital gains tax and tax reforms for investors, dated 7 February 2025).

Furthermore, a series of measures aim to create a better relationship between the taxpayer and tax administration through enhanced legal certainty and cooperation.

Corporate income tax measures

Key measures relating to corporate income tax are outlined below. The measures that will come into effect during this legislative term will all be implemented in 2026 (general principle). The government also intends to refrain from introducing retroactive tax regulation.

DRD regime transformed into a real exemption but with increased thresholds

The current Belgian dividends-received deduction (DRD) on qualifying dividends is actually a deduction of a company's taxable income basis, which does not lead to the same outcome as a full exemption of income.

Under the new agreement, the deduction will be replaced by an exemption but the thresholds for the exemption will increase for non-small-and-medium-sized companies (SMEs) as defined by the Belgian tax code. For non-SMEs, investments of at least 10% will continue to qualify but investments below 10% will only qualify if they are accounted for as financial fixed assets (new condition) with an acquisition value of at least €4m (as opposed to €2.5m). Note that the financial fixed asset condition may still be under discussion.

As a result of this change, the group contribution regime will also be more effective for companies and groups with important dividend income.

Affected entities nonetheless will need to monitor whether, and to what extent, this change could also affect the capital gain exemption on shares.

DBI-BEVEK/SICAV RDT

Capital gains on DBI-BEVEK/SICAV RDT (i.e., an investment vehicle that meets certain requirements) will be taxed at 5% and creditable withholding tax can only be credited if the company meets the (increased) minimum remuneration condition for company directors.

Group contribution regime to be broadened

The Belgian group contribution regime includes some strict rules to allow companies within a group to share profits and loss through a group contribution. Today, companies can only perform such group contributions when they are "directly related" for at least 90%. The agreement states that this will be extended to "indirectly" related companies.

The current regime also requires a qualifying relationship for at least five years in order to be able to benefit from a group contribution. There is no specific mention of shortening this period, but it is mentioned that new companies will no longer be excluded. This likely implies that for newly established (and acquired?) companies such a group contribution may become available as from the first financial year.

Changes to the DRD (see above) and the contribution regime are also expected to resolve inefficiencies relating to dividend income.

Exit tax on migration

The emigration of a company will be treated as a deemed liquidation for tax purposes. It is expected that this measure refers to the levy of a withholding tax on the deemed dividend distribution as corporate income exit tax provisions are already in place.

No automatic tax penalty of 10%

The tax authorities systematically apply a 10% tax penalty to tax audit adjustments. The application of this penalty leads to a separate taxable basis for these adjustments without the possibility to set-off this tax basis against current year operational losses or carried forward tax attributes. This approach has recently been challenged in court (For background, see EY Belgium Alert, No 10% tax increase in case of a first mistake - Practical consequences | EY - Belgium, dated 4 December 2024).

The agreement announces that this automatic and systematic tax penalty should be reformed and not be applied for the first infraction in good faith.

It further states that the denial to offset current year losses should only apply in the case of repeated infractions with penalties of 10% or higher. It seems to indicate that the compensation with carried-forward losses would not be allowed.

A spontaneous change by a taxpayer of his filing position should also be possible without incurring penalties.

Disallowed expenses reformed

There are several announcements related to the simplification of the disallowed expenses.

The agreement indicates that research will be done to introduce an optional but simplified approach to determine disallowed expenses.

The complex method for determining disallowed car expenses will be reviewed and simplified and the current transition rules applicable to hybrid cars will be revisited. Specifically:

• The maximum deduction percentage for hybrid cars remains at 75% until the end of 2027. After that, the percentage would decrease to 65% in 2028 and to 57.5% in 2029.
• An exception will be provided on limited deductibility for hybrid cars with emissions of a maximum of 50 grams/km. If the percentage according to the deduction formula is higher than 75%, the higher percentage may be applied until the end of 2027.
• Fuel costs of hybrid cars remain 50% deductible until the end of 2027.
• Electric consumption costs of hybrid cars receive the same deductibility as that for electric models.

Investment deduction regime to be simplified and improved

A series of measures relating to the investment deduction regime was announced — specifically:

• The ability to carry forward investment deductions will be unlimited.
• The percentages for the increased investment deduction for energy, mobility and the environment will be harmonized to 40%.
• The green investment deduction would be simplified, especially for investments in energy transition.
• The restriction on financial support from the European government for carbon capture and utilization (CCS-CCU) investments will be removed.
• The regional certificate requirement will be abolished for research and development (R&D) investments with regard to the R&D Investment deduction.
• With regard to R&D, the competent federal administration and the tax administration agree on the need for clear criteria to help them cooperate to ensure they obtain loyalty of the administrations and maximum assurance of legal certainty for the taxpayer.
• Companies will have the possibility to be recognized as research centers, which provides respective companies with certainty as to the applicable tax legal framework.

Accelerated depreciation

For certain investments in R&D, defense and energy transition, accelerated depreciation may be available. For non-SME companies, this would be a temporary regime allowing a 40% depreciation in the first year of acquisition, while for SMEs the possibility will be (re-)introduced to apply a double-declining depreciation method.

Minimum remuneration for company directors (for application of the reduced CIT rate)

SMEs can only benefit from the lower corporate income tax (CIT) rates if they comply with a minimum management remuneration, among other requirements. This remuneration will be increased from €45,000 to €50,000 (amount will be indexed) and may only consist of up to 20% of the in benefits in kind.

Other selected tax measures

The agreement includes a series of other measures relating specifically to corporate income tax:

• The legally permitted maximum contribution for meal vouchers will be increased (from €8 to €12). The deductibility of the employer's cost will be correspondingly increased. Other existing vouchers (eco vouchers, culture vouchers, etc.) will be phased out.
• A framework for costs proper to the employer will be established as soon as possible.
• The social liability exemption will be eliminated.
• Form No. 270 MLH (rental annex) will be eliminated as soon as possible and replaced by a less administratively burdensome alternative, taking into account the information already available to the administration.
• The rules regarding transfer pricing documentation, particularly for SMEs, will simplify focus on the essentials.
• The maritime industry exemption from withholding tax, in line with European State Aid rules, for payments in the context of a bareboat chartering (conditions linked to greening of the Belgian fleet vessels)
• Belgium aims to implement international agreements on a digital tax, which will make large digital multinationals taxable even without a physical presence in Belgium. If no agreement can be reached at European or international level, Belgium will unilaterally develop a digital tax by 2027 at the latest.
• To increase tax certainty, an annual list of tax havens will be published, along with a clarification that the legislation is based on the existing list as of January 1 of each year (so that the countries do not vary throughout the year).

Implications

Multinational enterprises should closely monitor news of further developments, as the agreement has yet to be translated into formal laws.