- 19/03/2025

Government memorandum refines corporate taxes

5 min

The new federal government's coalition agreement includes several matters that concern entrepreneurs, generating considerable press coverage. However, it's always wise to wait for the actual legislation that emerges from such an agreement.

Nevertheless, it's worthwhile to consult a specialist in the field to examine some of the key topics that directly affect entrepreneurs in their financial dealings. Tom Van Coningsloo, Head of Tax Enterprises at BNP Paribas Fortis, is well-placed to provide insight. He offers a sober, professional analysis of issues such as the liquidation reserve, investment deductions, and the reduced rate of corporate income tax. Adjustments are planned in these three areas. What is the government's plan, and how will it impact your daily decisions?

Liquidation reserve

Paying less withholding tax on income from movable property than on an ordinary dividend, by posting part of the net profit to a liability account and distributing it as a dividend after a waiting period: the liquidation reserve offers an attractive way for SME shareholders to receive payments. Tom Van Coningsloo: "The government's coalition agreement aims to close the gap between the VVPRbis regime (a similar system of reduced withholding tax on income from movable property for company shareholders) and the liquidation reserve. The two systems currently run in parallel, each with its own advantages and disadvantages. According to the coalition agreement, the plan is to align the rates of both systems, which would result in a slight increase (from 13.64% to 15%) in the total tax burden on the liquidation reserve for those who respect the waiting period for payment. However, the government also plans to abolish part of this waiting period, shortening it from five to three years. This change will enable small companies to pay out dividends much faster at a favourable rate."

Investment deduction

According to Van Coningsloo, the change in the investment deduction is already more concrete: "A law was approved in May 2024, and by the end of last year, we had already received lists of qualified investments. One of the main objectives was to simplify the process. For example, the complicated link to the index has been replaced with fixed rates, although some adjustments are still in the pipeline. In general, entrepreneurs welcome the desire for simplification and legal certainty. The coalition agreement includes plans to remove the regional certification requirement for investment deductions in research and development, or the possibility of being recognised as a research centre. This would provide certainty about a stable, long-term fiscal and legal framework. These proposals are positive for entrepreneurs, who are naturally seeking to limit excessive administration and achieve maximum legal certainty. Furthermore, I see a clear preference for initiatives related to the Green Deal, such as the greening of society and the pursuit of sustainable development. Additionally, the investment deduction would become unlimited and transferable without time limitations."

Corporate income tax rate

Van Coningsloo notes that there are no major changes on the horizon for the reduced rate of corporate income tax. However, there are some significant adjustments: "The reduced rate remains at 20% instead of 25% on the first 100,000 euros of profit for small companies, subject to certain conditions. The new plan involves a change to the exclusion based on the minimum salary: to qualify for the reduced rate, at least one company manager must now receive a salary of at least 45,000 euros, which is taxable under personal income tax. This amount is indexable and would be around 50,000 euros, which may not have a significant impact. What I think will have a greater effect is the rule that a maximum of 20% of the remuneration can consist of benefits in kind. For example, if a company manager receives a company car and a decent flat from their company, they will be charged a significant benefit in kind. If this exceeds 20% of their salary, they will need to pay themselves a higher cash salary, which means less cash available in the company and more personal income tax and social contributions."

Balance

Van Coningsloo remains cautious when discussing the actual legislation: "These are political decisions that we have no control over. I've heard rumours that some topics may be fast-tracked to generate tax revenues. On the other hand, some of the new measures will likely be incorporated into a comprehensive bill later in the year. However, the exact timing of all this is still uncertain. As a bank, we are closely monitoring the situation and supporting our customers accordingly."

Furthermore, Van Coningsloo believes that companies and entrepreneurs will be presented with a balanced deal in the new coalition agreement. "There are no major giveaways on the horizon, but neither are there significant cuts to existing provisions or benefits, except possibly with regard to the erosion of the exemption from added value on shares. However, the actual impact will depend on the concrete effects and potential exemptions. As a bank, we will continue to closely monitor developments and are ready to provide our entrepreneurs with guidance and support in navigating future legislation. We aim to be a trusted partner and a positive force in the business community."