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On 14 December 2023, the Belgian parliament approved the final law "introducing a minimum tax for multinational companies and large domestic groups". This is the Belgian transposition of European Directive 2022/2523 of 14 December 2022. The European Directive and Belgian legislation aim to ensure an overall minimum level of taxation for multinational corporate groups and large domestic groups.
The purpose is clear and in line with the OECD BEPS ("Base Erosion and Profit Shifting") project: reducing the risk of tax erosion and profit shifting by, among other things, ensuring that the largest multinational groups pay the agreed global minimum corporate tax rate of 15%. The OECD initiative is known as "Pillar II". Other European countries and the UK have also introduced legislation to this effect.
Which companies will be targeted?
Multinational corporate and domestic groups whose consolidated annual turnover is at least €750 million in at least 2 of the 4 previous reporting years will be taxed at a minimum tax rate of 15%. The target is for the group to pay at least 15% on its profits in each jurisdiction where it operates.
The legislation provides for exceptions which exclude certain companies from the scope of these new regulations (e.g. certain international or non-profit organisations, certain pension or investment funds, certain shipping companies, etc.). Although these companies are excluded, their income must still be taken into account to determine whether the EUR 750 million threshold has been exceeded.
Under the new rules, the effective tax rate on a group's combined results in each jurisdiction must be compared with the general minimum rate of 15%. Any shortfall will give rise to an additional tax to be paid by the ultimate parent company, an intermediate group company or the low-taxed entity. Several mechanisms are introduced for this purpose:
- qualified domestic top-up tax (QDTT or QDMTT)
- qualified income inclusion rule (IIR)
- qualified undertaxed profit rule (UTPR)
The existence of these different mechanisms is expected to ensure that the difference between the effective tax rate and the 15% minimum tax rate will always have to be paid somewhere.
Possible impact for belgian companies and groups
The Belgian corporate tax rate today is 25% for larger companies. However, lower effective rates are possible by applying various measures such as the deduction for innovation income, the investment deduction, other tax deductions, the exemption of certain subsidies, the use of exceptional tax systems such as e.g. diamond companies, etc.
Belgian companies will thus have to check whether they pay an effective tax rate of at least 15% under the new rules. Belgian groups with foreign subsidiaries will have to check whether the minimum rate of 15% is paid in all countries.
Complex calculation methods are introduced for this purpose. These methods do not start from the corporate tax return, but from the results included in the consolidated annual accounts. Their figures should then be adjusted as provided for in the legislation.
Take timely action - Legislation already in force
The new Belgian legislation will apply to financial years starting on or after 31 December 2023. Thus, for many companies, the new regulation will have to be applied from the financial year starting on 31 December 2024. The UTPR surcharge will not be due until later (financial years starting from 31 December 2024).
The first Belgian compliance obligation is the qualified domestic minimum top-up tax (QDMTT) declaration or the declaration for the so-called domestic top-up tax. This QDMTT declaration must be filed within 11 months of the end of the reporting year. For groups where the financial year ends on 31 December 2024, the first QDMTT declaration will have to be filed by 30 November 2025.
For the GloBE Information Return (which oversees IIR and UTPR withholding tax), there is a 15-month filing deadline, except for the first year where groups have an 18-month deadline. For groups with accounting periods that follow the calendar year, the first GloBE return must be filed by 30 June 2026 at the latest.
Regarding the GloBE Information Return, no return needs to be filed in Belgium if the ultimate parent entity or a designated group entity has already done this and it is established in a country with which Belgium has a double taxation treaty providing for the automatic exchange of information. In that case, however, the Belgian group entities will have to notify the Belgian tax authorities of this through a prescribed document.
If the calculation (and subsequent declarations) shows that additional taxes have to be paid in Belgium in the form of the QDMTT or the IIR, this will be subject to the rules on advance payments. If the additional tax is not paid during the financial year in question itself, an increase of 6.75% will apply (assessment year 2025). Companies wishing to avoid this increase should work on the necessary calculations (and payment, if applicable) in the following months. For the first year of application for fiscal years ended 31 December 2024, only advance payments can be made, which must be paid on the authorities’ account no later than 20 December 2024.
The QDMTT and IIR/UTPR returns of Belgian sub-entities are considered 'complex returns', resulting in an extended examination and assessment period of 10 years.
In addition, the law mentions that there will be no possibility to apply for advance rulings from the advance decisions department on subjects related to the law introducing a global minimum tax.
Failure to comply with the above formalities may result in administrative sanctions (i.e. tax increases or administrative fines ranging between € 2,500 and € 250,000) and/or criminal sanctions.
According to FPS Finance, this new legislation should result in additional revenue of € 634 million in 2024. Recent OECD data even speak of a potential Belgian revenue of more than € 1.1 billion.
If you have any questions regarding the above topics, do not hesitate to contact the RSM Belgium | Tax team. Upon simple request, we will be happy to provide you with a summary presentation with an overview of the main rules ([email protected]).
