Mazars Info May 2019

CORPORATE INCOME TAX

Distinct taxation on insufficient director’s remuneration retroactively abolished

In our previous newsletter, we already informed you on the potential abolishment of the distinct taxation on the insufficient director’s remuneration.

The Corporate Income Tax Reform Act of 2018 introduced a distinct (deductible) taxation of 5% on the difference between the minimum remuneration of 45.000 EUR and the actual director’s remuneration if lower than 45.000 EUR.

However, on April 4, 2019, the Federal Parliament confirmed by plenary session the elimination of the sanction for non-compliance with the minimum remuneration condition.

Consequently the article 219quinquis is removed from the Belgian Income Tax Code. The separate assessment will be considered never to have existed and will not apply to any company, regardless of the amount of the director’s remuneration since January 1, 2018.

An important remark is that the 45.000 EUR limit still remains a condition for the application of the reduced corporate income tax rate. Companies claiming the reduced rate of 20% on their first bracket of 100.000 EUR must therefore still pay a minimum of 45.000 EUR to one of their directors.

We recommend to consider this abolishment in the FY18 corporate income tax provision - and FY19 advance tax payment calculation and/or in your FY18 profit distribution decision - whether or not to distribute a profit participating director remuneration ("tantième").

An eventual excess advance tax payment made to cover the separate assessment on insufficient director’s remuneration can be reclaimed via the tax year 2019 corporate income tax return. This amount will be refunded by the end of the second month following the mailing date of the tax assessment note, sent by the Tax Authorities.

A(n excess) FY18 and/or 19 director remuneration specifically made to avoid the separate assessment could now be reconsidered and reversed. In this respect, we would be glad to assist you on an individual basis.

LEGAL

May 1, 2019: Entry into force of the new Companies’ Code

In earlier alerts and newsletters we already informed you about the huge and important reform of Belgian company law with the introduction of a new Companies’ Code.

The law introducing this new Companies’ Code enters into force on May 1, 2019. As of that date new companies can only be incorporated in accordance to the provisions of the new Companies’ Code.

The new Companies’ Code will be applicable to existing companies as of January 1, 2020 (or earlier if they voluntarily chose to opt-in). From then on, all mandatory provisions of the new Companies’ Code will automatically apply.

The supplementary provisions will apply insofar the articles of association of the company do not deviate. Moreover, if a company wants to amend its articles of association after that date, it will be obliged to bring its entire articles of association in line with the new Companies’ Code (no cherry picking allowed).

By January 1, 2024 at the latest, existing companies must ultimately fully comply with the new Companies’ Code.

The main changes include the limitation of the number of company forms, the abolishment of the capital requirement in the private limited liability company, the possibility to incorporate a company with one shareholder for private and public limited liability companies, the cap on the directors’ liability, the introduction of multiple-voting rights, the introduction of a new management model in the public limited liability company.

GLOBAL MOBILITY SERVICES

Belgium & Belgian regions are preparing for a no-deal Brexit

Deal? No deal? Nobody knows what progress has been made towards the Brexit. The United Kingdom (UK) and the European Union (EU) have been unable to reach a withdrawal agreement. Therefore, the Belgian federal government has published a ‘Brexit Law’, which introduces a transition period until December 31, 2020. This Brexit Law has to prepare Belgium for a no-deal Brexit and will only come into effect if no agreement is reached with the United Kingdom.

Next to the federal government, Flanders and the Brussels-Capital Region also want to be well prepared in case the United Kingdom leaves the European Union without agreement. The Flemish and Brussels government both have adopted a framework decree regulating a transitional period in case of a no-deal Brexit. However, the regulations of the federal government and the regions are not always the same.

Taxes: For all taxes included in the Flemish Tax Code Codex, the United Kingdom is to be considered as a member state of the European Union until and including assessment year 2020. At federal level, the tax equality of the UK with an EU member state applies until and including December 31, 2019. In principle, December 31, 2019 coincides with the end of assessment year 2020, however, this is not always the case (f.i. immovable withholding tax). Nothing has yet been agreed for the Brussels-Capital Region in this regard.

Professional card: The day after the exit of the UK from the EU, a professional card will be required to work as an employee or as a self-employed individual in the Flemish and/or Brussels Region. There is an exception to this rule in case the activities on Flemish and Brussels territory are limited to a maximum of 90 days per 180 days. Thus, the respective decrees contain no transitional regime. As this entails a competence allocated to the Regions, there is no federal regulation applicable.

Social security: For social security purposes, the UK is considered to be a member state of the EU until the end of 2020. This is the case for the federal competences such as sickness benefits, compensations for work-related accidents or occupational diseases, unemployment benefits, pensions, but also for the competences of the Regions, for example familial benefits. One should pay attention to the fact that:

1. nobody can force a Belgian institution to apply the social security rules if the institution does not receive the necessary information from its British counterpart;
2. the right to social security is based on the principle of reciprocity. The federal government has the power to amend the Brexit Law in case Belgian citizens in the UK would no longer be entitled to the same rights as British citizens in Belgium.

The transitional regime: The transitional regime comes into force on the day the UK leaves the EU without agreement and will, in principle, be applicable until December 31, 2020. Nevertheless, the Flemish and Brussels governments have the right to postpone or bring forward this end date. The federal government can only bring this end date forward. Furthermore, the tax provisions will no longer be applicable as of assessment year 2021 (as mentioned above) and any provisions affecting students will expire as of academic year 2021-2022.

KEEP IN MIND!

• VAT return April 2019: before May 20, 2019
• First monthly prepayment for social security contributions (Q2 2019): May 3, 2019
• Second monthly prepayment for social security contributions (Q2 2019): June 5, 2019
• Personal income tax return – Belgian residents:
  • o Paper: June 28, 2019
  • o Via Tax-on-web: July 11, 2019
  • o Via proxyholder: October 24, 2019