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The Corporation Tax Reform Act abolishes the reduced incremental corporation tax rate for SMEs. A new regulation will replace it. Furthermore, the reform introduces a new sanction for companies not granting a minimum remuneration to one of their company directors.
Under the old scheme, SMEs benefited, under certain conditions, from a reduced incremental corporation tax rate. Through this reduced incremental rate, the rate of corporation tax increased as taxable income increased. As soon as the taxable income reached a certain threshold, the standard rate applied to the total taxable income.
One of the conditions for applying the reduced incremental rate was that the companies granted a minimum remuneration of EUR 36,000 to at least one of its company directors.
The Corporation Tax Reform Act of 25 December 2017 abolishes the reduced incremental corporation tax rate for SMEs.
The new corporation tax rate is 29% and is subject to future change.
Companies complying with the definition of small company on the basis of Article 15, ยงยง 1 to 6 of the Companies Code, benefit from a reduced rate of 20% on the first taxable income tranche of EUR 100,000.
The reduction of the rate is subject to additional conditions, including the granting of a minimum remuneration. For example, the companies must grant a minimum remuneration of EUR 45,000 to at least one of its company directors.
If the result of the taxable period is less than 45,000 EUR, the remuneration of one of the company directors must be at least equal to this result.
In addition, the Act of 25 December 2017 introduces a new sanction in the form of a separate assessment. This assessment applies to all companies (large and small) if they do not grant a minimum remuneration of EUR 45,000 to any of their company directors.
If the result of the taxable period is less than 45,000 EUR, the separate assessment applies if the remuneration is not at least equal to the result of the taxable period.
Initially, the separate assessment amounts to 5% of the difference between the minimum remuneration required and the highest remuneration granted by the company.
This new scheme enters into force as from assessment year 2019 associated with a taxable period that commences not earlier than on 1 January 2018.
Source: Corporation Tax Reform Act of 25 December 2017, Belgian Official Gazette, 29 December 2017.
Author: Peggy Criel
03/04/2018
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