Earnings stripping rules

The recently introduced draft legislation to finalize the implementation of the earnings stripping rules in Belgium has been withdrawn. It is hence unlikely that the Federal Parliament will adopt legislative changes to the base law before year-end.

Consequently, the earnings stripping rules will basically apply as of FY 2019 without the add-ons provided for by the draft legislation.

As a reminder, the retracted draft law would have added the following specifications to the existing base law:  

• Clarification on when a taxpayer is considered to be part of a group (definition of taxable period during which taxpayer must remain part of the group); and
• Remodeled calculation of a taxpayer’s EBITDA (a.o. allocation of negative EBITDA and negative exceeding borrowing costs to other group entities); and
• Determination of how the threshold of 3 million EUR should be divided among Belgian group members.

To be implementable, the base law however requires at least some executive measures (in principle via a Royal Decree), more in particular:

• A description of the modalities to be fulfilled for a grandfathered loan to be excluded from the earnings stripping rules; and
• A specification of the costs and revenues which are to be considered as economically equivalent to interest cost and interest income; and
• A methodology for the breakdown of the 3 million EUR threshold within a group of companies.

As the base law gives the government the mandate to issue executive measures within those domains and as there is already an advice available of the Council of State regarding a previous version of those executive measures, it may still be possible to announce and publish a Royal Decree before the end of this year.