Will your management company stay interesting after 1 January 2018?
Some legal evolutions in the field of tax and company law give reason to reflect on the future prospects of your management company, or the establishment thereof.
Tax changes
As of 1 January 2018, a number of new rules will come into force which will significantly change the management company’s taxes.
First of all, there is the decrease in the corporation tax rate. As of 2018, management companies that qualify as SMEs will be able to benefit from a reduced tax rate of 20% on the first tranche of taxable profit of 100,000 EUR. The part of the taxable profit above 100,000 EUR is taxed at the regular rate that is reduced to 29% (25% as of 2020).
However, some compensatory measures are provided in order to prevent ‘overSMEing’:
- The minimum remuneration condition to enjoy the SME rate of 20% is increased from 36,000 EUR to 45,000 EUR;
- A minimum standard for the company manager remuneration is introduced. From now on, all companies will be obliged to pay at least 45,000 EUR per year to a company manager, unless the taxable profit is lower. If the company does not do so, a special charge of 10% will be due on the difference between 45,000 EUR and the manager’s remuneration.
If the minimum remuneration rule is not observed, this leads to both a special charge and to the loss of the 20% reduced tax rate and application of the normal rate (29% or 25%).
This measure aims to discourage dividend payments, which are taxed at 30%.
In addition, the basic interest rate for determining the percentage of the tax increase due to lack of advance payments is increased from 1% to 3% Failure to pay advances in time by companies will therefore become a lot more expensive.
Finally, the creative use of costs and exemptions is also discouraged. If rectifications take place in response to an inspection, no deduction may be applied. In other words, there is an effective tax cost.
Company law initiatives
Moreover, it is worthwhile, when (re)evaluating whether to set up a management company, to consider the imminent (drastic) changes in the Company Code. The changes will come under the impetus of Minister Koen Geens and are expected to be finally approved by the Chamber by the end of this year. The main lines of this change include: only four company types, whereby the BV (former BVBA) would be the most important form; no minimum capital in BVs; introduction of multiple voting rights and the limitation of the liability of directors. Existing companies would have five years to adjust their articles of association.
These are some important reforms in the Belgian legal landscape you should keep close tabs on…
Sara Burm – Kim Bronselaer
Published in Business Vlaanderen, number 04 2017, September – October 2017. Click here for the online version on the “Business Vlaanderen” website.
