As of 2024, Belgian parent entities will become liable to pay a top-up tax in respect of group entities in low-tax jurisdictions outside Belgium. In addition, Belgium will adopt a Qualified Domestic Minimum Top-up Tax (QDMTT) on low-tax profit generated in Belgium. Indeed, although Belgium has a corporate tax rate which amounts to 25% and is thus well above the minimum rate of 15%, certain companies pay less as a result of tax incentives, such as the Belgian innovation deduction. The QDMTT will allow Belgium to apply the top-up tax on such low-tax profit. Belgium will require groups to make tax prepayments. As of 2025, the Undertaxed Profits Rule (UTPR) will act as a backstop and will make Belgian group entities liable to pay top-up tax if profits of the group in low-tax jurisdictions outside Belgium would go untaxed.
Belgium will implement the temporary safe harbours agreed by the OECD allowing groups to avoid having to make complex minimum tax calculations for jurisdictions which do not entail a risk of low-tax profit.
The R&D tax credit will become refundable within four years (instead of five) to meet the definition of a Qualified Refundable Tax Credit. As a result, the R&D tax credit will be treated more favourably for the application of the minimum tax. Furthermore, the government will be looking into the interaction between the Belgian innovation deduction and the minimum tax rules.
For budgetary reasons, the limitation on the use of carried forward losses and other deductions was tightened to 40% of the tax base in excess of EUR 1 million. The tightening applied until the implementation of the minimum tax in Belgium. Assuming the draft law is approved before year-end, the limitation will be loosened to 70% as of next year.
In parallel, the OECD continues to work on the remaining building blocks of the minimum tax. The Multilateral Instrument for the implementation of the Subject To Tax Rule (STTR) is being finalized and should be ready for signature from 2 October 2023. The OECD is also preparing a comprehensive action plan to support the implementation of the minimum tax.
Feel free to reach out to Pieter Van Den Berghe, tax partner at Monard Law, for further details.