Belgium approves minimum taxation of 15% for large groups (Pillar 2)

On December 14, 2023, the parliament approved the introduction of the so-called minimum taxation. This is the Belgian implementation of the EU Pillar Two Directive (and aligns to a large extent with the OECD pillar 2 plans). The objective of this minimum taxation is to subject entities that are part of large corporate groups to an effective tax rate of at least 15%. The minimum tax will apply to taxable periods commencing as of December 31, 2023.

A crucial limitation on the scope of minimum taxation is that it applies exclusively to entities within a group with consolidated revenue, attributable to the ultimate parent entity, of 750 million EUR or more for at least two of the four preceding reporting years.

It is therefore essential to accurately determine the group to which an entity belongs and the (consolidated) revenue of that group. In certain cases, such as during acquisitions, joint ventures, or mergers, this can pose a challenge.

In summary, the goal is to ensure the payment of an effective tax of 15%. It is important to note that this refers to an effective tax and not merely the nominal rate.

If the 15% minimum tax is not met, a top-up tax may be imposed. There are various types of top-up taxes, namely the Domestic Minimum Top-up Tax or ('QDMTT'), the Income Inclusion Rule top-up tax ('IIR'), and the Undertaxed Profit Rule top-up tax ('UTPR'). The type of top-up tax is particularly relevant in determining the jurisdiction and entity responsible for paying it. In practice, the domestic top-up tax will be most common, determined at the jurisdictional level (i.e., per country) and can be collected from one group member in that country with joint liability among various group entities.

Although Belgium has a standard corporate tax rate higher than 15% (specifically 25%), the effective tax burden in Belgium can still be significantly lower, for example, due to the application of innovation deductions or investment deductions. Additionally, Belgium may impose IIR or UTPR top-up tax even if Belgian entities are subject to an effective tax rate of more than 15% in certain cases.

It is worth noting that certain mitigations are provided, including a 'de minimis' threshold and some included 'safe havens'.

The minimum tax introduces an additional filing obligation. This filing is separate from the regular corporate tax return (or existing transfer pricing documentation). Violations of this formality may result in penalties of up to 250,000 EUR. The initial filings are due on November 30, 2025.

A prepayment system for the minimum tax will be implemented, with a surcharge for insufficient prepayments, similar to the corporate tax. Due to the non-operational status of the prepayment platform, the late introduction of the legislation, and its complexity, an initial-year extension is provided. All prepayments in 2024 would be exceptionally deemed to have been made in the first quarter.

As imposed by the European directive, the minimum tax will be applicable in Belgium to taxable periods commencing from December 31, 2023.

Initially, it is imperative to determine whether the minimum tax is applicable. This can be achieved by accurately analyzing the group to which the entity belongs.

If it is established that the group falls within the scope of the minimum tax, an examination of whether the effective tax rate is below 15%, and the impact of the minimum tax, should be conducted. Necessary data for filing obligations will also have to be gathered.
 

More information?

As a client of Baker Tilly, you can contact Milan Swijngedouw, Corporate Tax Manager or your file manager.
No client yet? Contact us for a no-obligation appointment.