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Belgian Budget Deal Includes Corporate Tax Cut

by Ulrika Lomas,, Brussels

03 August 2017

Belgium's coalition government has agreed to a 2018 Budget package that includes substantial cuts in the rate of corporate tax.

Agreed by the Cabinet after a late-night session and following days of discussions, the Budget will reduce the main rate of corporate tax to 29 percent in 2018, and lower it further, to 25 percent, in 2020. The agreement also phases out the three percent crisis tax on corporate income.

Currently, Belgium's corporate tax, which with the solidarity contribution included sits at 33.99 percent, is one of the highest in Europe.

The 2018 Budget also cuts corporate tax for small businesses, which will pay 20 percent income tax on the first EUR100,000 (USD117,000) of income, instead of 25 percent tax under current rules. However, small companies would have to pay a director a certain level of remuneration in order to qualify for the reduced income tax.

The corporate tax rate reductions are to be offset by changes to the notional interest deduction (NID) rules, which help companies to substantially reduce their effective rate of corporate tax.

Under the NID regime, companies are permitted to deduct a fictional, or notional, rate of interest based on their adjusted equity, at a level equal to the average rate of 10-year government bonds. As a result of the changes included in the Budget, the NID will be available only in respect of increases in company equity.

In addition, limitations will be applied to the basket of deductions, including the NID, loss carry forwards, and the dividend received deduction, that companies can offset against income. As a result, these deductions will be restricted to 70 percent of the portion of income exceeding EUR1m.

TAGS: tax | small business | business | Belgium | interest | law | corporation tax | tax rates | Europe

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