On 29 December 2017, The Belgian corporate tax reform law was published in the official gazette contains measures that will be effective as from tax periods beginning from 1 January 2020.

Corporate income tax rate reduction

The corporate income tax rate will be reduced to 25% from 29.58%. For small enterprises, the first €100,000 of profits will be taxed at a rate of 20% instead of 20.4%.

Tax free reserves

Certain pre-2017 tax free reserves can be converted to taxable reserves at a special rate of 10% or 15%, if reinvested.

Depreciation

The double declining method of depreciation will be repealed. The first depreciation will also for small and medium enterprises be applied on a pro-rata temporary basis.

R&D partial exemption

As from 1 January 2020 the exemption from withholding tax for wages paid to scientific research employees with scientific bachelor degrees will be increased to 80% from 40%.

Company cars

Company car costs deduction will be a function of the CO² emission calculated by a formula and deduction may range between 50% and 100%. The excess deduction for electric cars will be limited to 100% instead of 120%.

Permanent establishments (PE)

The definition of permanent establishment in Belgium will be extended to commissionaires based on the OECD’s base erosion and profit shifting (BEPS) Action plan 1 and 7.

Interest deduction

The ending part of the EU anti-tax avoidance directives will be implemented soon. A limitation of deductible interest will apply for more than 30% of earnings before interest, tax, depreciation and amortization (EBITDA) or €3 million. This limitation will only apply to interest on loans concluded as of 17 June 2016. The current thin capitalization ratio is 5:1 and will continue for interest on old intra-group loans and for interest paid into tax havens jurisdictions.