Stricter limitation of corporate tax deductions in assessment year 2024

Following the corporate tax reform of 2017, the application of certain corporate tax deductions is limited to 1.000.000 EUR, increased with 70% of the remaining taxable result exceeding 1.000.000 EUR (system of the “korf/corbeille”). The tax deductions concerned are the notional interest deduction of the year, the dividends-received deduction carry-forward, the innovation income deduction carry-forward, the deduction of the loss carry-forward and the notional interest deduction carry-forward, in that order.

The new program law, which is expected to be published in the Belgian Official Gazette before the end of the year, reduces the percentage from 70% to 40% as from assessment year 2024 (linked to taxable periods starting on 1 January 2023, at the earliest). However, it will revert back to 70% as from assessment year 2025 (linked to taxable periods starting on 1 January 2024, at the earliest) provided Belgium has adopted a law implementing an EU Directive guaranteeing a global minimum taxation of multinational groups in the EU (“pillar 2”). EU Member States have meanwhile formally adopted the Directive, following the agreement reached on 12 December 2022. Any change to the closing date of the financial year as from 11 October 2022 which is not justified by other motives than the avoidance of income taxes is without effect for the application of both changes of the percentage.

Please note that according to the new program law the notional interest deduction of the year will be abolished as from taxable periods closed as from 31 December 2023 (assessment year 2024). Any change to the closing date of the financial year as from 11 October 2022 which is not justified by other motives than the avoidance of income taxes will also be without effect in this case. However, the notional interest deduction carry-forward remains applicable.

Companies should consider whether it is possible to bring forward any tax deductions to assessment year 2023 which would otherwise be jeopardized by the new stricter limitation of the tax deductions.