A novelty for Belgium - Tax consolidation

For the first time in Belgian tax history, Belgium introduces tax consolidation, as from assessment year 2020, i.e. financial years starting 1 January 2019 or later.

Group contribution

The Belgian system will not require establishing consolidated accounts as it uses a ‘group contribution’ system: Belgian profitable entities (companies or PE’s of EEA companies) will be able to transfer (part of their) taxable profits (i.e. to make a ‘group contribution’) to a Belgian loss making affiliated entity (company or PE of EEA companies). The loss making entity can set-off the group contribution received against its current year tax losses and the profitable entity gets a tax-deduction for the ‘group contribution’ made.

Requirements?

- Companies should be affiliated =

- parent and subsidiary companies with direct participation of at least 90%

- sister companies with the same parent (in Belgium or EEA) where the parent has a direct participation of at least 90% in the sisters

- for an uninterrupted period of 5 years, and

- they should per taxable period conclude a ‘group contribution’ agreement that must meet certain requirements;

- the (profitable) entity will have to financially compensate the (loss-making) entity for the tax benefit resulting from the tax-deductible ‘group contribution’ made;  this compensation is non-deductible for the paying company and exempt for the receiving company.

Take-away

Belgian group companies with a loss making entity should as soon as possible check whether they meet the requirements for tax consolidation!