The patent income deduction is ceasing to exist. Belgium has adopted a new tax incentive, called the ‘innovation income’ deduction: below is what you need to keep in mind for your company.
End of the patent income deduction
Since the 2008 tax year, 80% of companies' gross earnings generated by their patents could be exempted from tax. Since then, there has, in actual fact, been a 6.798% maximum effective tax rate. The intended aim was to stimulate innovation through research and development while promoting the protection of innovation through patents.
What was the problem? Only a limited number of Belgian companies were able to make use of this deduction. This is why - in addition to the new recommendations from the OECD (Base erosion and profit shifting) - Belgium has repealed the regime restricted just to patents so that its scope can be extended. In order to reassure companies which are already affected, there will be a transitional regime which, subject to conditions, will allow such companies to continue to benefit from the former regime for a further five fiscal years.
Law extended from patents to innovation
The Chamber adopted the new deduction for innovation income at the beginning of February 2017. It entered into force with retroactive effect on 1 July 2016.
What changes for you? In addition to patents, new intellectual property rights will, going forward, now be eligible and other adjustments are set out in the law.
- From now on, the deduction also applies to innovation revenue from plant variety rights, orphan drugs, data and market exclusivity and copyright-protected computer programs.
- Compensation for violation or alienation of intellectual property rights may be taken into account in respect of tax deduction.
- From now on, the deduction remains valid even if mergers or divisions occur within the company.
- Unused deduction can be carried forward to a subsequent taxable period.
The rate of the deduction is currently set at 85% but note, this is after deduction of costs directly linked to R&D activities. In the event of a negative net innovation income, the negative amount will be deducted from other intellectual property rights.
The deduction is applicable to worldwide revenue from the year in which the patent application is lodged (not the year in which it is granted). If rejected, the deduction is cancelled and default interest will apply.
"This tax deduction for innovation allows us to conform to the new OECD directives on tax evasion while preventing profits from being artificially shifted. We are reinforcing the competitiveness of our SMEs and Belgium's position in terms of innovation by taking a common sense approach and extending the scope of the deduction." Johan Van Overtveldt, Minister of Finance.
Capital Markets Union: It’s Not About Us, It’s About You
How to harmonize capital markets and regulation across Europe? Petra De Deyne, Regulatory Affairs Manager for Global Markets at BNP Paribas, presents the new initiative of the European Commission to build a single market for all 28 Member States of the Union.
After the crisis of 2007-2008, financial stability was the key priority for the European Commission. In order to restore that stability, the resilience of banks needed to be strengthened and systemic risk in the markets needed to be contained, which had Brussels produce that famous “tsunami” of regulation. Today, most of the work to make banks and markets stable again is done and the respective legislation has been or will soon be implemented.
Growth as a priority
The next item on the European Commission’s to-do list is now to create growth. Therefore, corporates need to grow their businesses, invest and expand. Historically, corporates have been very much dependent on bank lending if they want to expand. However, on the back of capital and liquidity requirements imposed by bank regulation, some banks have found it more difficult to fulfil their role of traditional lender. Seeing their bank funding channels drying up, larger corporates turned to capital markets, but did not always meet favourable borrowing conditions and interested investors. For some of the smaller corporates, getting funding had become as good as impossible. A survey done by the ECB and the European Commission in 2014 on the access to finance of enterprises (SAFE) showed that 35% of SMEs did not get the full financing they asked their banks for in 2013.
Looking at the US, we notice that corporates get about three quarters of their funding directly from the capital markets, and rely only to a small extent on bank lending. In Europe the situation is the other way round. So Europe wondered if they could create a funding landscape that would resemble more the US situation. That would mean that those in need of financing would meet directly with those that have money to invest. It would reduce the dependency of the real economy on banks, which would again contribute to financial stability. However, what is needed in that case is a harmonized, well integrated capital market in Europe. And this is where comes in the initiative of the European Commission: build a Capital Markets Union.
So in short, this is what CMU is about: it is a plan to create a single market for all 28 Member States of the European Union, where, on the one hand, funding choices for corporates will be diversified beyond bank lending and where, on the other hand, investment opportunities and the investor base will be broadened.
So what’s the plan?
“The Plan”, which the European Commission published in October 2015, sets 4 clear objectives:
- Support job creation and growth
- Connect financing effectively to investment projects across the EU
- Make the financial system more stable
- Deepen financial integration and increase competition
“The Plan” also defines 5 priority areas for action, with over 30 different initiatives for reviews, assessments, reports, initiatives and legislative proposals, all to be taken between now and sometime in 2018.
The first priority is to provide more funding choices for Europe’s corporates and SMEs. Here we will see initiatives to support venture capital and innovative forms of financing, such as crowdfunding. The EU is also thinking about ways to provide necessary data on SMEs to investors, so that they can make well informed investment decisions.
Second, long term investment has to be promoted. An initiative here is to make sure that capital requirements for insurers are reviewed so that they see their investment needs more efficiently met. Measures will also be taken to promote investment in infrastructure projects.
Third, the range of investment choices both for retail and institutional investors has to broaden. In this area, we will see, amongst others, incentives to promote pensions savings and private placements.
The fourth priority is to enhance the capacity of the banks to step up lending. This may sound contradictory, as the idea of the CMU is to move away from traditional lending. However, for a lot of SMEs, banks will still remain the prime source of financing. So Europe wants to make sure that banks can offload more assets from their balance sheet so that they have extra space to lend.
And lastly, the EU wants to dismantle barriers that would hamper cross-border investment across the Member States. This is quite an ambitious area, where certain tax issues will be tackled, and where we will see a certain harmonization as far as national insolvency laws and securities laws are concerned.
Simultaneously with the publication of “The Plan”, the European Commission issued a couple of legislative proposals and 3 consultations, as a matter of launching the short term actions right away and getting the train out of the station.
The European Commission takes immediate action in the field of securitization. This may seem quite controversial as some will still consider this as the root of all evil. However, it is a critical tool to finance the economy and it sits high on the Commission’s agenda. In order to kick start the securitizations market, the EU has come up with a legislative proposal, the purpose of which is twofold:
- First, it aims at reinstalling confidence. Therefore, a quality label is introduced: “Simple, Transparent and Standardized” securitizations. That means that any “STS” securitisation will comply with over 20 different standards, thus helping investors to better understand these products and ensuring quality. Second, it incentivizes banks to restart the activity again by giving these STS securitizations a better capital treatment, compared to other forms of securitisation.
- Next to that, the EU has issued a proposal to adjust Solvency II rules for insurers, so that they would have to deploy less capital when investing in long term infrastructure projects or in European Long Term Investment Funds (ELTIFs).
Also note that the European Commission is looking into covered bonds. Currently there are 26 different covered bond frameworks in the EU, an area which could possibly benefit from a certain level of harmonization. While the idea is not to create a single framework for Europe, the Commission would look to promote best practices, step up transparency and remove barriers that would hamper cross-border investments. We also saw a consultation venture capital and a call for evidence on the cumulative impact of financial legislation.
In the medium term, a review of the Prospectus Directive is on the cards. This is a logical move, given that the EU would like to attract many more corporates directly onto the capital markets to issue debt. Making prospectuses cheaper and less burdensome for smaller issuers on the one hand and more user friendly for investors on the other hand, would be a welcome help in that respect.
Another initiative is a Green Paper (this is a first, general exchange of views between the EC and the industry to explore a certain topic) on Retail Financial Services. Here he European Commission is exploring ways to enhance competition and make sure that consumers have access to a broader range of services in order to get the best deal around, when it comes to mortgages, savings products, insurance, banks accounts etc.
In the long term, count 2017/2018, we can expect further steps to support SME growth markets and private placements, along with plans for a pan-European Pension Fund. As already mentioned earlier, matters regarding withholding tax and insolvency law will get attention as well.
Benefits for companies
All in all, CMU certainly has a fully packed and ambitious agenda. Now what’s in it for companies, really? Potentially a lot. However, we appreciate that the road to a real CMU may be a far longer one. 2019 seems awfully close for some of the changes to happen. Rebalancing financial intermediation for example will most probably be a gradual, organic process that will go hand in hand with political interests, FinTech developments etc., rather than a major shift on a particular point in time.
Also, it will need a change in mind-set and behaviour by all stakeholders involved. The effects of a CMU may be more pronounced for the corporate sectors of certain countries with relatively small capital markets. For these countries, some of the initiatives could be particularly beneficial. Their domestic capital markets may currently not be able to cater for their large corporates, pushing them away to international markets. CMU could bring them back home and expand their markets.
The benefits of CMU will be different for the different types of companies:
- Start-ups will get special attention, as their innovation and entrepreneurial spirit are key to Europe’s growth potential. At this moment start-ups can turn to crowdfunding, but this is only developing and there is already some investment by business angels. However, these funding channels remain small and local and will not always provide the necessary funding at critical moments in their expansion. The initiatives to step up venture capital for example may be particular beneficial in that respect.
- Small companies that are struggling to get bank funding, especially in those countries that have been hit the hardest by the crisis, may unlock more funding via securitization. SMEs in particular could be positively impacted, as the intended side effect would be that securitisation allows banks to step up the lending capacity, knowing that bank lending for this type of corporates may remain a very important source of funding. Next to that, the European Commission also wants to work closely together with the SME growth markets, a new market sub-category created under MiFID II to facilitate access to capital for SMEs, to ensure that the regulatory environment for these markets delivers the expected results.
- Medium and large-sized companies, which may already have access to capital markets, should also feel the effects as CMU will support investors who wish to place larger amounts of capital in the market. The initiative to promote private placements, building on successful experiences such as the one in Germany and through supporting market-led initiatives such as the one by ICMA on the use of standardized documentation could be quite helpful. Tackling tax issues could come in helpful as well.
What is important too is that the European Commission is also planning to review the functioning of the European corporate bond market and to see how market liquidity can be improved. A well-functioning secondary market will be crucial for the success of the primary debt markets.
So all in all, the Capital Markets Union is an ambitious, yet challenging plan of the European Commission. Ambitious because it intends to reengineer Europe’s traditional funding channels. Challenging because of the wide range of issues that need to be tackled to get there and the tight deadline. The outcome should be that corporates meet with investors in an efficient market place, thus broadening the scope of options for both parties to contribute to economic growth.
(Source: Focus Magazine CIB)
Kilometervergoeding voor elektrische fiets niet altijd fiscaal vrijgesteld
Werknemers die met de fiets naar het werk rijden, kunnen een fietsvergoeding krijgen tot 22 eurocent per kilometer. De regeling geldt in principe ook voor elektrische fietsen. Sommige modellen zoals de speed pedelec, vallen echter uit de boot.
De elektrische fiets wint terrein: ruim één op vier verkochte tweewielers is een elektrisch exemplaar. Steeds meer mensen gebruiken hun fiets ook om te pendelen. Werkgevers kunnen hun fietsende medewerkers een fietsvergoeding uitbetalen. Tot 0,22 EUR per kilometer is die vergoeding fiscaal onbelast. Het moet dan wel gaan om een “klassieke” elektrische fiets:
- met een maximumsnelheid van 25 km/u;
- met een motor van maximum 250 watt;
- met trapondersteuning, wat betekent dat de fietser ook moet trappen, er mag dus geen sprake zijn van een autonome motor.
Niet voor speed-pedelecs
Die voordelige regeling geldt dus niet voor speed pedelecs, zeg maar de Formule 1-versie van de elektrische fiets. Speed pedelecs kunnen snelheden tot 45 km/u halen. Sinds 1 oktober moeten bestuurders daarom een helm, rijbewijs en verzekering hebben.
Voor alle duidelijkheid: pendelaars die gebruik maken van een speed pedelec kunnen wel degelijk een kilometervergoeding krijgen van hun baas. Maar die uitkering wordt dan wel beschouwd als een belastbaar inkomen. De werknemer zal dus zowel RSZ als bedrijfsvoorheffing moeten betalen. Op die regel bestaat één uitzondering: medewerkers die kiezen voor een forfaitaire aftrek van hun beroepskosten. Zij hebben recht op een fiscale vrijstelling van maximum 380 EUR.
Wat met bedrijfsfietsen?
Werkgevers kunnen hun medewerkers een fiets ook ter beschikking stellen. Alle kosten die daaruit voortvloeien, onder andere het onderhoud, zijn vrijgesteld van belastingen. Voorwaarde is dat de medewerker de fiets daadwerkelijk gebruikt voor zijn woon-werkverkeer, al zijn zuivere privé-verplaatsingen ook toegestaan. Deze regeling geldt alleen voor de klassieke elektrische fietsen. Speed pedelecs vallen (opnieuw) niet onder deze fiscale vrijstelling.
Why is the European Justice sounding the death knell on "fairness tax"?
The Advocate General of the Court of Justice rules that the "Fairness Tax" contradicts European tax rules. What is the impact on Belgian companies and the State budget?
Since the 2014 tax year, national companies and Belgian subsidiaries of foreign companies have been subject to fairness tax (or "fairness tax"). Introduced by the Di Rupo government, this separate contribution of 5.15% is applied to the distribution of dividends which are not subject to the normal rate of corporation tax. At issue here is the application of the deduction of deferred tax losses or deductions for venture capital.
What is at stake?
When it was introduced, the government wanted to subject companies who paid little or no tax to a minimum tax, by using tax deduction mechanisms. Issue: when this tax was introduced, questions were raised about the compatibility of the legislation with tax law in the European Union.
In February 2014, the Belgian subsidiary of Fortum Project Finance (Finnish company) brought an appeal against this tax before the Constitutional Court. The Constitutional Court asked the European Court of Justice three questions:
- Does the fairness tax constitute a withholding tax prohibited by the parent-subsidiary European directive?
- Do dividends collected by Belgian companies not exempted in Belgium contravene the directive?
- Does the different treatment of Belgian companies and Belgian subsidiaries of foreign companies contravene the freedom of establishment in the European Union?
A compatible... but problematic tax
The European Court of Justice finally gave its verdict, but the opinion still needs to be qualified in certain respects. The Advocate General of the European Court of Justice in effect deemed the fairness tax "contrary to European regulations", but he considered the measure to be compatible with the principle of free establishment laid down in the texts and treaties. The problem resides precisely around the directive governing parent companies and their subsidiaries in Belgium, the objective of which is an exemption from withholding tax (under certain conditions) for dividends paid by subsidiaries to parent companies, which the fairness tax calls into question.
A highly political issue too
"A skeleton comes out of the closet", commented the Minister of Finance Van Overtveldt after the opinion of the Advocate General. For him, the consequences could be enormous, particularly from a budgetary point of view, without so far giving the slightest indication of these. He added that he has "always had many doubts" about this tax, "a doubt confirmed by the Court." The government has stated that it is currently leaning towards a reform of corporation tax, in a tense atmosphere between the partners of the current majority, particularly to make "this tax fairer for SMEs."
The Socialist Party, for its part, continues to defend this minimal tax through thick and thin. The leader of the Socialist Group in the Chamber of Representatives, Laurette Onkelinkx, in L'Avenir, suspects that the Minister is benefitting from a "technical remark from the Advocate General to give a tax break to the multinationals" and that "this minimum tax should be maintained, (...) a matter of fiscal justice and decency with regard to the efforts required by the population."
Les conséquences de la taxe douanière américaine
Analyse de Koen De Leus, Chief Economist chez BNP Paribas Fortis.
Au lieu de taxer les entreprises sur la différence entre les revenus et les coûts globaux, les Etats-Unis souhaitent opter pour une taxe portant uniquement sur la différence entre les revenus et les coûts domestiques. Vu que tous les biens consommés aux Etats-Unis n’y sont pas produits, et que tous les biens qui y sont produits n’y sont pas nécessairement consommés, les chiffres nécessitent une correction. Il s’agit de la taxe douanière. Les importateurs paient une taxe de 20% sur les revenus réalisés aux Etats-Unis. Les exportateurs reçoivent un subside de 20% sur les produits exportés. Ce subside est nécessaire pour éviter de pénaliser les exportateurs. Vraiment ?
A première vue, on pourrait qualifier ce système de double protectionnisme : vous augmentez le coût des importations et vous baissez celui des exportations. Mais ce système ne tient pas compte de la probable évolution des taux de change, estime l’agence de recherche BCA. Imaginez que seule une taxe à l’importation soit appliquée : cela réduirait les importations, ainsi que la demande en devises étrangères. Le cours de change de ces devises baisserait et compenserait la taxe. La hausse du dollar aurait ainsi un impact négatif sur les exportations, avec comme conséquence une hausse du déficit de la balance commerciale. Pour éviter ce problème, on introduit parallèlement un subside à l’exportation. Le dollar augmente à un niveau qui ne touche ni les exportations ni les importations. Du moins en théorie.
Dans ce cas, quel est l’avantage d’une telle taxe douanière ? Elle augmenterait sensiblement l’impôt sur le revenu aux Etats-Unis. Aujourd’hui, de nombreuses sociétés internationales évitent de payer des impôts aux Etats-Unis. Les importateurs surestiment la valeur de leurs importations, et les exportateurs sous-estiment celle des exportations. Les importateurs comme Wal-Mart pourront encore surévaluer le prix de leurs importations, mais devront payer une taxe à l’importation. Idem pour les exportateurs comme General Electric. Et vu que le déficit de la balance commerciale américaine se monte à 500 milliards de dollars, la taxe douanière rapporterait 100 milliards de dollars. C’est un montant important comparé aux 350 milliards de dollars d’impôt des sociétés aujourd’hui perçu par le Trésor public, et qui permet de réduire considérablement cette taxe sans perte de revenus.
La question est bien entendu de savoir dans quelle mesure une telle taxe entraînerait une hausse du dollar. Si cette hausse est lente, les importateurs souffriront beaucoup, et les exportateurs seront les grands gagnants. Si le dollar augmente trop rapidement, cela comblera peut-être l’impact de la taxe douanière. La plupart des économistes penchent plutôt pour le premier scénario. Dans ce cas, la facture sera payée par les Américains les moins nantis et les importateurs. Il s’agit surtout de ceux qui consacrent proportionnellement une plus grande partie de leurs revenus à l’achat de biens importés par les grandes chaînes de magasins.
Les principales conclusions de Koen De Leus sont les suivantes :
- En cas de taxe douanière, le dollar va continuer à remonter.
- Bien qu’une telle taxe puisse se justifier sur base de considérations macro-économiques, elle sera considérée comme du protectionnisme d’un point de vue politique, et pourrait de ce fait créer un dangereux précédent.
- Comme les grands exportateurs sont aussi importateurs, cette taxe pèsera sur les grandes chaînes de distribution. Pour Peter Navarro, le patron du nouveau « White House National Trade Council », c’est aussi effectivement l’objectif de l’administration Trump.
Si les Etats-Unis réduisent l’impôt des sociétés, la Belgique se retrouvera en première position d’un nouveau classement : celui du pays occidental dont l’impôt des sociétés est le plus élevé.
(Source : Economic Express Koen De Leus)
- How the tax deduction for innovation affects you
- Capital Markets Union: It’s Not About Us, It’s About You
- Kilometervergoeding voor elektrische fiets niet altijd fiscaal vrijgesteld
- Why is the European Justice sounding the death knell on "fairness tax"?
- Les conséquences de la taxe douanière américaine