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30 October 2017 / article

Tax reform: new way to achieve tax consolidation

As from tax year 2021 (taxable periods starting on or after 1/1/2020), Belgian tax law shall provide for a possibility to consolidate profits and losses within a group through a so-called “intragroup transfer” between a Belgian taxpayer and another qualifying taxpayer.

Tax reform: New way to achieve tax consolidation

Qualifying taxpayers

A qualifying taxpayer is a Belgian or a foreign company established in the EEA

  • that holds a participation of at least 90% in the capital of the Belgian taxpayer; or
  • whose capital is owned for at least 90% by the Belgian taxpayer; or
  • that is a sister company of the Belgian taxpayer, it being understood that their Belgian or foreign parent company must own at least 90% of their respective capital.

Moreover, the qualifying taxpayer must

  • qualify, without interruption, for the entire taxable period and the 4 preceding tax periods; and
  • have the same financial year starting date and, either, the same financial year end date than the Belgian taxpayer or an earlier end date due to liquidation.

Certain taxpayers are excluded from the benefit of this measure:

  • the Belgian taxpayers that benefit from a special tax regime (e.g. investment funds);
  • the companies that put real estate at disposal of their manager (or their spouse or children);
  • the foreign companies that benefit in their state of residence of a special tax regime.

Subject to the specific case of termination of activities, the intragroup transfer is also only allowed between Belgian taxpayers. In other words, when it is referred to a foreign company, the transfer occurs with its Belgian establishment.

Agreement for an intragroup transfer

Tax consolidation shall be achieved through the transfer of benefits between Belgian taxpayers of the same group in accordance with an agreement for an intragroup transfer. Key aspects of this agreement are as follows:

  • the parties to the agreement are the Belgian taxpayer and the qualifying taxpayer, i.e. either a Belgian company or the Belgian establishment of a foreign company;
  • the agreement only relates to one taxable period; it means, in practice, that the intragroup transfer is determined at the end of each taxable period and the agreement must provide for all relevant and precise amounts;
  • the amount of the intragroup transfer is mentioned in the agreement, and cannot be higher than the tax losses for the period concerned of the qualifying taxpayer;
  • the Belgian taxpayer must pay to the qualifying taxpayer a compensation corresponding to tax saving resulting from the intragroup transfer; this compensation is neither deductible in the hands of the Belgian taxpayer nor taxable in the hands of the qualifying taxpayer.

Let’s take an example:

Tax consolidation through intragroup transfer

Taxable profits of Belgian taxpayer for the taxable period concerned

1,000

 

Tax profits (i.e. losses) of the qualifying taxpayer for the taxable period concerned

<500>

 

Amount of the intragroup transfer

500

 

Taxable profits of the Belgian taxpayer for the taxable period concerned, after intragroup transfer

1,000-500

500

Taxable profits of the qualifying taxpayer for the taxable period concerned, after intragroup transfer

<500>+500

0

Tax saving for the Belgian taxpayer

500*25%

125

Compensation paid by the Belgian taxpayer to the qualifying taxpayer

 

125



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