Belgium Unites On 2012 Budget

by Ulrika Lomas, Tax-News.com, Brussels

30 November 2011

At the eleventh hour and following intensive talks, negotiators in Belgium, led by Elio Di Rupo, tasked by the King with forming a viable coalition government, have finally united on plans for the country’s 2012 budget, providing for savings of EUR11.3bn (USD15.1bn) and for a public deficit of 2.8% of gross domestic product (GDP).

Of the EUR11.3bn in savings, 42% will be derived from spending cuts, 34% from either new taxes or from tax increases, while the remaining 24% will be derived from "other measures".

Among key fiscal measures contained in the budget bill are plans to increase the withholding tax levied on interest with the exception of savings accounts. In accordance with the latest plans, the withholding tax on interest will rise from 15% currently to 21%, and the lower rate of withholding tax on dividends will also rise to 21% from 15%. The headline rate of withholding tax on dividends will be maintained at 25%.

The bill also provides that an exceptional 4% levy will be imposed on investment income in excess of EUR20,000 per year, in addition to the 21% withholding tax rate.

The future government plans to tax company vehicles according to their actual value and to the level of carbon dioxide emissions. The proposed measure is expected to yield around EUR200m.

Under the plans agreed by the negotiators, a 25% tax will be imposed on corporate capital gains, in cases where capital gains are realized less than a year following the purchase of the security. The tax on stock options will rise in accordance with the plans from 15% currently to 18%. A reduced rates also apply to stock options if certain conditions are met, and this are now due to rise from 7.5% to 9%.

Negotiators from the six leading parties also united on plans to increase the tax on stock market operations and to reduce the tax break pertaining to notional interest to 3% next year.

Other measures contained in the draft budget include plans to increase the tax levied on tobacco and alcohol and to implement structural changes to pensions. The government has, however, abandoned plans to introduce a plane ticket tax.

Finally, to encourage individuals back to work, the income tax allowance is to rise by EUR125 in 2013 and by EUR250 in 2014.

It is hoped that Elio Di Rupo will assume the head of a coalition government shortly.

Recommended