The tax authorities have released a circular letter on the grandfathering rule in the new earnings stripping regime. The other aspects of the regime will be discussed in another forthcoming circular letter.

As a reminder, according to the grandfathering rule, interest on loans concluded before 17 June 2016 can be excluded from the calculation of the exceeding borrowing costs if those loans have not been subject to a fundamental change as from that date.

The circular letter recalls that a fundamental change concerns e.g. a change in parties, interest rate or duration or borrowed amount. The refinancing of an old loan is considered as a fundamental change. There is a fundamental change when there is a debt renewal in the meaning of article 1271 of the Civil Code (or its foreign equivalent).


Partner, Head of Corporate Tax | Tax, Legal & Accountancy

KPMG in Belgium


Whether there is a fundamental change must be determined on a case by case basis. The circular letter contains a non-limitative list of changes that are NOT considered to be fundamental, e.g.:

  • a change in duration, which was foreseen by contract before 17 June 2016 and which flows from an automatic extension;

  • a change in interest rate or interest calculation, which was foreseen by contract before 17 June 2016;

  • a change in the modalities for paying the interest (e.g. quarterly instead of monthly payment);

  • a change in original guarantee (when the identity of the guarantor changes, the circumstances in which the change happens must be considered in order to determine whether that change is fundamental or not).

The circular letter also enumerates a number of changes which are considered as fundamental, regardless of whether there is an (explicit) consent or agreement from (one of) the involved parties:

  • a change in duration, interest rate or interest calculation which was not foreseen by contract before 17 June 2016;

  • a change or replacement of one or more of the original involved parties, except for a change or replacement of an original lender which was foreseen by contract before 17 June 2016;

  • a change in borrowed amount

  • any change imposed by a legislator or supervisory authority.

As a result, all interest on a loan which relates to the period as from the fundamental change, must be taken into account for the interest deduction limitation.

As a final reminder, the new earnings stripping rules entered into force on 1 January 2019 and apply as from AY 2020 linked to a taxable period starting at the earliest on that date. Any change to the closing date of the financial year as from 26 July 2017 remains without effect for the application of the interest deduction limitation.