2. Agenda
► Welcome
► Mr. Geert Gemis
► Corporate taxation
► Mr. Jos Reniers
► Personal income tax and
expatriate taxation
► Mr. Hendrik Serruys
► Chinese business services
► Ms. Ronghui Xu
Page 2 China Update Seminar
3. Agenda
► 14.30 – 14.45 Welcome by Mr. Geert Gemis, Partner, Chinese Business
Services – Tax
► 14.45 – 15.45 Update on corporate taxation by Mr. Jos Reniers, Director
Business Tax
► Update on recent changes of the Belgian tax law (Budget 2012)
► Important new reporting requirements
► 15:45 - 15:55 Summary of contents in Chinese by Mrs. Ronghui Xu (Summer)
(Chinese business Service Desk)
► 15:55 – 16:10 Coffee Break
Page 3 China Update Seminar
4. Agenda
► 16.10 – 17.00 Update personal income tax and expatriate taxation by
Mr. Hendrik Serruys, Senior Manager Human Capital Tax
► individual income tax and expatriate taxation aspects - new tax and case law
► Impact of new tax measures for expatriates in Belgium (company car, housing, tax
deductions, other)
► Update expatriate taxation issues & recent trends – feedback from our discussions
with the head of expatriate tax department
► Overview of recent Circular letters and tax rulings
► Update on R&D related benefits
► 17.00 – 17.10 Summary of contents in Chinese by Mrs. Ronghui
Xu(Summer) (Chinese business Service Desk)
► 17.10 Closing & Cocktails
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5. Jos Reniers
UPDATE NEW LEGISLATION DI RUPO
Page 5 China Update Seminar
6. Agenda
► Update new legislation Di Rupo
► Notional interest deduction
► Thin capitalization
► Benefit in kind – company cars
► Combat against tax fraud
► Secret commission tax ad 309%
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8. Notional interest deduction – old regulation
► Deemed deduction on qualifying Belgian GAAP equity
(reduced with items such as financial fixed assets and
equity related to foreign branches, ...)
► Deduction linked to 10 year OLO but capped to 3.8 % for
tax years 2011 and 2012
► Tax year 2012: 3.425% (3.925% for SMEs)
► Full carry-forward of excess NID but limited to seven
years
Page 8 China Update Seminar
9. Notional interest deduction – new regulation
► Law of 28 December 2011 (B.S. 30 December 2011)
► NID rate
► Still based on 10 year OLO but reduction of cap to 3%
(3.5% for SME)
► Average 10-year bond rate 2011: 4.191%
► Budget note: reduction of cap to 3% for period 2012-2014 - as
from 2015: NID rate will be determined by law
Page 9 China Update Seminar
10. Notional interest deduction – modifications
still in pipeline
► Abolishment of NID carry-forward for future excess NID
► NID may only be deducted from taxable base of the tax year
► Limitation of deduction of existing “stock” excess NID
► Last operation of the tax return/calculation (after deduction of tax
losses/investment deduction and before application of the tax rate)
► If taxable base =/< 1 mio EUR: no limitation
► If taxable base > 1 mio EUR: maximum deduction = 60% of that
part of the taxable base exceeding 1 mio EUR
► Carry-forward still limited to seven years (exception: unlimited
period of limitation when excess NID is unused due to 60%
limitation)
► Problem when large tax loss carry-forward?
► Effect on deferred tax assets?
Page 10 China Update Seminar
12. Thin capitalization - general
► In many countries to prevent tax avoidance by excessive
leveraging
► Reduction of interest deductibility for tax purposes,
possibility of debt reclassification or a combination thereof
► Thin Cap limitations depend on debt/equity, cash-flow, …
Page 12 China Update Seminar
13. Thin capitalization - current regime
► Two Thin Cap rules in Belgium: 7:1 and 1:1
► Current legislation: specific 7:1 Thin Cap (for tax heaven
countries) where the beneficial owner of the interest is a
person who is
► Not subject to tax, or
► Subject to a tax regime for that income that is significantly more
advantageous compared to the Belgian tax regime
Page 13 China Update Seminar
14. Thin capitalization - new regime
► Program Law of 29 March 2012 (B.S. 6 April 2012)
► Entry into force to be determined but at the latest on 1 July 2012
► No longer limited to interest paid to beneficial owner who is located
in a tax heaven country
► Also for intra-group loans (irrespective of tax treatment of interest
at the level of the beneficiary)
► Definition of „group companies‟ in accordance with Art. 11 Companies
Code (related companies, consortium)
► Excluded (under certain conditions): loans contracted by leasing
companies, factoring companies and companies primarily active in the
field of public-private cooperation
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15. Thin capitalization - new regime
► Change of Thin Cap ratio from 7:1 now to 5:1
► Debt
► All loans, with the exclusion of publicly issued bonds, other publicly
issued borrowing instruments and loans granted by certain financial
institutions (banks, insurance companies and other types of financial
institutions listed in Art. 56, §2, 2° ITC 92)
► Look at beneficial owner in case of indirect loans and guaranteed
loans when main objective is tax avoidance
► Equity = fiscal equity
► The sum of the taxed reserves at the beginning of the accounting
period and the paid-in capital at the end of the accounting period
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19. Secret commission tax ad 309%
► In the past administrative tolerance to apply article 219
ITC92
► Reporting obligation on specific forms
► Internal administrative instruction (27 July 2011): strict
application of 309% unless
► BIK is reported on the specific forms and in the beneficiary‟s filed
tax return
► BIK is included in the beneficiary‟s filed tax return even though it is
not reported on the specific form, or
► The beneficiary pays the invoiced amount of the benefit, or the
value of the benefit is added to the beneficiary‟s current account in
the year during which the benefit is granted
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20. Secret commission tax ad 309%
► Addendum to internal administrative instruction of 27 July
2011: transitory period until 30 June 2012
► Lump sum benefits in kind and benefits in kinds for the private use
of a mobile phone
► Tax authorities may decide not to apply the secret commission tax on
benefits which have been discovered during a tax audit prior to 1 July
2012 and which are not (or not sufficiently) reported, provided these
benefits can still be taxed in the hands of the beneficiary during the
legal assessment period
► Other benefits in kind (and abovementioned benefits which have
not been discovered prior to 1 July 2012)
► Application of secret commission tax unless these benefits are
spontaneously reported by the beneficiary prior to 1 July 2012
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21. Secret commission tax ad 309%
► Addendum to internal administrative instruction of 27 July 2011:
strict application of 309% as from 1 July 2012
► No application of secret commission tax on benefits which are
recorded on the current account of the beneficiary in the year during
which they have been granted
► No longer accepted: not submitting the appropriate forms and waiting
until the tax audit to record the amount of the current account
► Elements to take into account by the tax authorities when assessing
whether or not to apply the secret commission tax
► Good faith of the taxpayer who has simply forgotten or has mistakenly not
reported the benefit
► Exceptional nature of the failure to report and the materiality of the error
► New administrative tolerance: no 309% when no reporting due to
reasonable (but wrong) classification as social/cultural advantage by
grantor
Page 21 China Update Seminar
25. Hendrik Serruys
CHINA UPDATE SEMINAR
Page 25 China Update Seminar
26. Update personal income tax and expatriate
taxation
► Introduction – new government, new tax budget
► Taxation of company cars
► Stock option income
► Personal income tax measures
► Bik housing/utility
► Pension taxation
► Combat of tax fraud
► R&D incentives
► Expatriate tax regime – feedback meeting
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27. Introduction
► Tax measures: impact in 2012 (EUR 3,449 mio)
EUR (in mio) Percentage
Notional interest deduction 1,620 + 45.6%
Taxation of capital gains on shares 150 + 4.2%
Company car taxation 200 + 5.7%
Externalization pension provisions 30 + 0.8%
Stock options 20 + 0.5%
Benefit in kind housing, etc. 170 + 4.8%
WHT increase and solidarity levy 917 + 26.0%
Stock exchange tax 50 + 1.4%
VAT pay-TV 84 + 2.4%
VAT notaries and bailiffs 100 + 2.8%
Excises 158 + 4.5%
► Related measures (combat fraud, …): EUR 3,220 mio (2012-2014)
Page 27 China Update Seminar
28. Company cars
► Adopted (applicable as from 1 January 2012)
► Change to the calculation formula for benefits in kind (BIK) for
company cars
► Limitation to deduction of lump sum commuting cost
► Additional disallowed item related to company car costs
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29. Company cars
► Change to the calculation formula for BIK company cars
BIK = car‟s list price x CO2 coefficient x 6/7
► Car list price: amount invoiced, including VAT and options, but
excluding rebates and discounts
► Amount invoiced: also for second hand cars and leased cars
► Leased cars: amount invoiced, including price of the option to buy
► Private kilometers are not relevant anymore
► Regular changes and adjustments to tax law
Page 29 China Update Seminar
30. Company cars
► Change to the calculation formula for BIK company cars
(cont‟d)
► CO2 coefficient
► Basic coefficient
► 5.5% for emission
► 95 g/km (diesel engine)
► 115 g/km (fuel engine)
► Higher CO2 emission levels
► Increase with 0.1% per gram (maximum coefficient: 18%)
► Lower CO2 emission levels
► Decrease with 0.1% per gram (minimum coefficient: 4%)
► Minimum amount BIK
► EUR 1,200 (2012 – tax year 2013)
► Formula will be reviewed annually to take into account the
evolution of the CO2 emission levels
Page 30 China Update Seminar
31. Company cars - impact
► Commuting >25
# Type Company cost Individual cost Total / car
100 Mini One 88,46 -299 -210,54
80 BMW X1 138,76 188 326,76
50 Citroen C5 137,95 -107 30,95
60 BMW 520d 105,84 545 650,84
10 Audi Q7 -186,2 2645 2458,8
300
► Commuting < 25
# Type Company cost Individual cost Total / car
100 Mini One 68,43 14 82,43
80 BMW X1 48,14 663 711,14
50 Citroen C5 73 302 375
60 BMW 520d 40,39 957 997,39
10 Audi Q7 -343,29 3263 2919,71
300
► Weighted average > 25 km = EUR 234,24 tax gain
► Weighted average < 25 km = EUR 662.73 tax gain
► Commuting more or less than 25 km resp. 30% and 70% : new average = EUR 534
Page 31 China Update Seminar
32. Company cars
► May 1, 2012 – Change is clear
► Certain percentage of list price to reflect age of car.
Age of the car Percentage of list price
0 – 12 months 100%
13 – 24 months 94%
25 – 36 months 88%
37 – 48 months 82%
49 – 60 months 76%
61 – … months 70%
New formula
BIK = car‟s list value x CO2 coefficient x 6/7 x age-correction
. 32
Page China Update Seminar
33. Company cars
► Pro-rata rule changed
► Monthly calculated depends on the # of days
► For example: if the taxable benefit in kind is EUR 3,000 per annum, the
monthly taxable benefit included in the payslip shall be EUR 254.10 for
the month of May (3,000 x 31/366) and EUR 245.90 for June
(3,000 x 30/366)
► Deduction professional costs for commuting distance
► EUR 0.15 x commuting distance x working days limited to BIK
company car
► Professional lump sum expenses lost
► Disallowed item company car costs (corporate tax)
► 17% of benefit in kind (car‟s list price x CO2 coefficient x 6/7)
► Disallowed item is minimum taxable base
► No tax deductions : DRD, NID, tax losses, investment deduction, …
Page 33 China Update Seminar
34. Company cars
► Action points / points of attention
► Review your car fleet and car policy – consider alternatives
► Reconsider the remuneration package of employees/directors
involved
► Consider having the lease taken on by the employee, reimbursing
the employee for the lease and reimburse the professional mileage
of the employee (if the amount is considerable) instead of
providing free use of a company car
► Compare effect on BIK with calculation tool on our website
(http://www.ey.com/BE/en/Services/Tax/Calculate_new)
► General remark !
► Budget 200 mio
Page 34 China Update Seminar
35. Stock options
► Adopted (applicable as from 1 January 2012)
► Increase of benefit in kind from 15% to 18% of the value of the
underlying shares
► Increase of reduced benefit in kind from 7.5% to 9% of the value of
the underlying shares
► Applicable to stock options offered as from 1 January 2012
► Reference point is date of offer (text of the law: “offertes /
aangeboden”), not date of grant (text of justification to the amendment:
“toegekend / attribuées”)
Page 35 China Update Seminar
36. BIK housing/utilities
► Increase of BIK for free housing and utilities
► Increase of the BIK for heating from EUR 1,480 to EUR 1,820
► Increase of the BIK for electricity from EUR 740 to EUR 910
► Increase of the BIK for free housing for house with a notional
income (cadastral income) exceeding EUR 745
► Currently: 100/60 x notional income x 2
► 2012 : 100/60 x notional income x 3.8
► Amounts to be subject to indexation annually
► Difference rental contract signed by employer or
employee?
► Calculation
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37. BIK housing
Gross based BIK Housing Tax paid on BIK housing
KI=850 (old) 4,632.22 2,478.24
KI=850 (new) 8,801.21 4,708.65
Rent = EUR 850/month 10,200.00 5,457.00
Net based BIK Housing Tax paid on BIK housing
KI=850 (old) 4,632.22 5,329.54
KI=850 (new) 8,801.21 10,126.12
Rent = EUR 850/month 10,200.00 11,735.48
Page 37 China Update Seminar
38. Tax deductions
► Adopted (applicable as from TY 2013)
► Abolishment of tax reductions for ecological investments (solar
panels, …), except for investments in isolation of roofs
► Further modification
► Conversion of deductions into tax reduction at 45%
► Deduction for only own dwelling, deduction for child care expenses
and gifts
► Exception: alimony payments remain tax deduction
► Other tax reductions (life insurance, own dwelling taxation (old
regime), etc.): tax reduction at 30% instead of tax reduction at
adjusted average tax rate (between 30% and 40%)
Page 38 China Update Seminar
39. Group insurance / Pensions
► Modification of treatment of payments and contributions
► Pension payments (second pillar): increase of tax rate on
payments (part relating to employer contributions)
► Old situation
► Payment at ages 60 to 64: 16.5%
► Payment at age 65: 10%
► New situation
► Payment at age 60: 20%
► Payment at age 61: 18%
► Payment at age 62 to 64: 16.5%
► Payment at age 65: 10%
Page 39 China Update Seminar
40. Pensions
► Modification still in the pipeline: adaptation of 80%-rule
► Limitation of deductibility of complementary pension contributions
based on amount of pension payment upon retirement
► Currently: cap of 80% of last annual gross salary
► Introduction of an additional cap: pension of the highest public official
(gross EUR 72,480.72 per year or EUR 6,040.06 per month)
Page 40 China Update Seminar
41. Combat against tax fraud
f.e. Abuse of management companies
► Tougher approach towards abuse of management
companies
► Not aimed at management companies in se
► Aimed at abuse of management companies
► Combat of turbo-usufruct transactions
► Combat against avoidance of social security regime for employees
and abuse of benefits
► Private expenses
► Company cars, BIK for heating and electricity
► Tougher application of secret commission tax
Page 41 China Update Seminar
42. R&D incentives have not been modified
► R&D incentives: confirmation of continuation (and, insofar
possible, extension) even increase of tax measures
► Withholding tax exemption
► Investment deduction for R&D
► Patent income deduction
► Exemption of regional grants
► Belgium remains attractive R&D/IP location
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43. Expatriates in Belgium – Meeting notes
► Key notes and matters of attention
1. Review application file after 10 years
► Verification if basic conditions are still met
► Temporary stay in Belgium
► Economic interest abroad
► Prepare file and documentation
► Review also possible on special occasions
► Purchase of real estate in Belgium
► Marriage with Belgian national
2. In case of re-qualification into resident tax payer: applicable as
from next income year
3. Belgian nationality: immediate change to resident tax status
► Practically as from next month
Page 43 China Update Seminar
44. Expatriates in Belgium – Meeting notes
4. Specialists
► Minimum salary threshold
► Labor law
► Immigration (gross before application of expat circular)
5. Researchers
► Withholding tax exemption
► Apply expat status correctly in Belgian payroll
► Intention: review expat status for researchers (higher limit of EUR 29,750)
includes review of withholding tax exemption for researcher
6. C-levels
► Expat status still possible
► However, day to day management activities should be in Belgium
Page 44 China Update Seminar
45. Expatriates in Belgium – Meeting notes
7. Coordinating and controlling activities
► Should be separate division
► No operational activities
► Coordinating and controlling activities required
► Proposal to present an approved „list‟
► Spread of costs within the group?
8. Moving
► 62.5% of first month salary
► Past: accepted without proof
► New: (minimum) proof of documents, costs made
► Upfront and to be approved
9. Cola/Coha
► Residence in Belgium required. „Commuter‟ not!
Page 45 China Update Seminar
46. Expatriates in Belgium – Meeting notes
10. Temporary housing
► Cost proper to the employer
► Until sign of lease contract or family arrives in Belgium
► If longer, part of technical note
11. Technical note – Hypothetical housing
► I.p.12.5% of ABS
► In case expat has double housing (Belgium and home country), no hypo
housing to be deducted in technical note (NTA)
12. Two employers in different countries
► Different activities!
► Expat status on Belgian part possible, with exclusion of foreign part
► Only travel on Belgian part to be included
► Director activities abroad
Page 46 China Update Seminar
47. Expatriates in Belgium – Meeting notes
13. Travel
► Documents
► Evolution: f.e. Boarding pass -> Smartphones
► Proof still required by any means
► Work at home (in home country)
► = not qualified as foreign day
► However, double tax treaty rules could become applicable!
14. Personal tax credits – broken year
► Full calendar year with abode or 75%-rule : IY 2010
► Retro-active implementation
► Abode on 1/1
Page 47 China Update Seminar
48. Expatriates in Belgium – Meeting notes
15. Temporary project outside Belgium
► Relocation -> ip expat status lost
► If „short‟ stay outside Belgium: expat regime can be continued
► Short = max six months
► Family remains in Belgium
Page 48 China Update Seminar
53. Ernst & Young Geert Gemis
Tel.: +32 3 270 14 57
Assurance | Tax | Transactions | Advisory Email: geert.gemis@be.ey.com
2012 Ernst & Young Transaction Advisory Services
All rights reserved.
About Ernst & Young Jos Reniers
Ernst & Young is a global leader in assurance, tax, Tel.: +32 3 270 12 38
transaction and advisory services. Worldwide, our Email: jos.reniers@be.ey.com
152,000 people are united by our shared values
and an unwavering commitment to quality. We
make a difference by helping our people, our
clients and our wider communities achieve their
potential.
Hendrik Serruys
Ernst & Young refers to the global organization of
member firms of Ernst & Young Global Limited, Tel.: +32 3 270 14 68
each of which is a separate legal entity.
Email: hendrik.serruys@be.ey.com
Ernst & Young Global Limited, a UK company
limited by guarantee, does not provide services to
clients.
For more information about our organization,
please visit www.ey.com/be. Ronghui Xu
Follow us: twitter.com/EY_Belgium
Tel.: +32 3 270 12 58
Email: ronghui.xu@be.ey.com
Page 53 China Update Seminar