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Belgium Clarifies Increased Investment Deduction and Wage Tax Exemption for COVID-19 — Orbitax Tax News & Alerts

Belgium has published guidance to clarify the application of certain support measures introduced by the Law of 15 July on urgent tax measures due to the COVID-19 pandemic, which was published in the Official Gazette on 23 July 2020.

One of the main measures is a temporary increase in the standard investment deduction (déduction pour investissement - DPI) rate to 25%. A notice dated 7 August 2020 clarifies:

  • The DPI rate is increased to 25% for new fixed assets, directly linked to economic activity actually carried out, that are purchased or manufactured during the period 12 March 2020 to 31 December 2020; and
  • The carry-over of non-deducted DPI, which is normally limited to the taxable period following the period in which the fixed assets are purchased or manufactured, is extended to the two following taxable periods for fixed assets purchased or manufactured in 2019.

For this purpose, the required form for the DPI has been updated and taxpayers are allowed to amend returns already submitted to account for the impact of the DPI support measure.

Another important measure is a 50% exemption for the payment of wage tax withheld. A circular dated 6 August 2020 clarifies the application of the exemption, including the following key points:

  • Wage tax must still be withheld normally, while the payment is exempted for 50%;
  • The amount of the exemption is 50% of the difference between the total amount of wage tax withheld during the period of June, July and August 2020, and the amount of wage tax withheld in May 2020 (total exemption capped at EUR 20 million);
  • The 50% exemption applies on taxable remuneration of employees, but excludes holiday pay, end-of-year bonus, and salary arrears; and
  • Where other wage tax exemptions apply, such as for R&D personnel, the 50% exemption is calculated on the balance of withholding due after the application of such other exemption.

Further to the above, it is provided that certain companies are excluded from the exemption benefit, including those that distribute dividends or buy back own shares during the period 12 March to 31 December 2020 and those that hold a direct interest in a company established in a tax haven or make payments of at least EUR 100,000 to companies established in a tax haven without proof of real economic purpose.