Reform of Belgian corporate income tax risks not being budget-neutral
Monday, 04 December 2017
The supreme administrative court questions the budget-neutrality of the reform of the corporate income tax, wrote Le Soir on Monday. In the reform, which was announced by the federal government last July, the government intends to limit the use of certain tax deductions, currently included in a “tax basket”, by introducing a minimum tax rate of 7.5% if the profits of a company exceed one million euros.
This is one of the key compensation measures found by the government to meet the budget neutrality of the corporate income tax reform.
According to the proposal the corporate income tax will be reduced in two steps from 33.99% to 25% by 2020. A special tax rate of 20% will apply to SMEs as of 2018 for the part of the corporate tax base below €100.000.
But the administrative court (Council of State) believes that the tax basket may be seriously emptied of its substance since the inclusion of one of its main components, the surplus income that is permanently taxed (RTD = revenus définitivement taxés), may contradict European law.
“If RTD surpluses can no longer be included in the tax basket because it contradicts European law, it is clear that this will have a budgetary impact on the tax reform, which can probably be quantified in tens or even hundreds of million euros “, according to Denis-Emmanuel Philippe, tax lawyer at Bloom Law and professor at the University of Liège.