Belgian Revenue Service Clarifies Partial Wage Withholding Tax Exemption and Increased Investment Deduction

August 27, 2020 | Blog

            A. Partial Wage Withholding Tax Exemption

As mentioned in our latest newsletter, employers who benefited from the Belgian temporary unemployment regime for an uninterrupted period of at least one month between March 12 and May 31, 2020, are eligible for a partial Wage Withholding Tax (“WWT”) exemption for June, July and August 2020.

The exemption (i) amounts to 50 per cent of the difference between the total WWT due for the relevant month (June, July or August 2020) and the total WWT due for May 2020, and (ii) cannot exceed EUR 20 million for the three relevant months in the aggregate.

If between March 12 and December 31, 2020, corporate taxpayers distribute dividends, buy back shares or reduce share capital, they forfeit their right to claim the exemption. Likewise, corporate taxpayers with a direct participation in tax haven companies or making payments exceeding EUR 100,000 (on an annual basis) to such companies are out of scope, unless they establish they made such payments for legitimate economic or financial purposes.

On August 6, 2020, the Belgian Revenue Service published Circular Letter 2020/C/103 (available here in Dutch and here in French):

  1. The exemption only applies to the WWT due on the taxable remuneration of employees, excluding vacation pay (“pécule de vacances/vakantiegeld”), end-of-year bonus (“prime de fin d’année/eindejaarspremie”) and arrears (“arriérés de rémunérations/achterstallige bezoldigingen”);
  2. Companies already benefiting from another partial WWT exemption (g., the 80 per cent WWT exemption for qualifying R&D workers) are still eligible for the “Corona WWT exemption”. Here is a practical example inspired by the Circular Letter:
  • Company “A” qualifies both for (a) the 80 per cent WWT exemption for qualifying R&D employees, and (b) the 50 per cent “Corona WWT exemption”.

  • For May 2020 (= reference month)
    • Company “A” has 10 qualifying R&D workers.
    • Company “A” puts 5 of the employees under the temporary unemployment regime.
    • The taxable income of the remaining 5 employees equals EUR 20,000 and the WWT due by Company “A” amounts to EUR 7,500.
    • Application of the partial R&D exemption: (80 % x EUR 7.500) = EUR – 6,000.
  • For June 2020 (= relevant month)
    • Company “A” has 10 qualifying R&D workers.
    • Company “A” puts none of the workers (0) under the temporary unemployment regime. All 10 continue to work and are fully eligible for the partial R&D exemption.
    • The taxable income of the workers equals EUR 40,000 and the WWT due by Company “A” amounts to EUR 15,000.
    • Application of the R&D exemption = (80 % x 15,000) = EUR – 12,000
    • Application of the COVID-19 exemption = 50 per cent of the difference between the total WWT due for the relevant month (June 2020) and the total WWT due for the reference month (May 2020) = 50 % x ((15,000 – 12,000 euros) – (7,500 – 6,000)) = EUR – 750.


      B. Clarifications on the Increased Investment Deduction

The Belgian investment deduction regime allows companies to deduct a percentage of the acquisition or investment value of newly acquired or developed tangible or intangible fixed assets, used for professional activities in Belgium. This investment deduction comes in addition to the normal tax depreciation, leading to an overall deduction of more than 100% of the assets’ value.

In order to mitigate the economic and financial impact of the COVID-19 pandemic, the Belgian Federal Government temporarily increased the one-off investment deduction rate for Small and Medium-sized Enterprises (“SMEs”) to 25 per cent (up from 8%) for fixed assets purchased or manufactured between March 12, 2020 and December 31, 2020.

SMEs are companies that, in their two latest financial accounts, do not exceed more than one out of  three thresholds: (a) an average of 50 full-time workers per year, (b) an annual turnover of EUR 9 million, and (c) a balance-sheet total of EUR 4.5 million. For companies that are part of a group, these thresholds are assessed on a consolidated basis.

On August 7, 2020, the Belgian Ministry of Finance published a newsflash (available here in Dutch and here in French) providing the following two clarifications regarding the resident or non-resident corporate income tax filing:

  1. Qualifying corporate taxpayers can carry forward any unused portion of investment deduction during two subsequent taxable periods (instead of one) for fixed assets purchased or manufactured in 2019;
  2. Qualifying corporate taxpayers that have already filed their tax return can submit a correction; if such correction is no longer possible through the electronic platform “BizTax”, the taxpayer should write to the competent Tax Inspector to claim the increased deduction.

If you have any questions about these topics, feel free to contact Werner Heyvaert or Vicky Sheikh Mohammad.

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