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Law Establishing A Tax Deduction For Capital At Risk (1)

Original Language Title: Loi instaurant une déduction fiscale pour capital à risque (1)

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22 June 2005. - Act to introduce a tax deduction for risk capital (1)



ALBERT II, King of the Belgians,
To all, present and to come, Hi.
The Chambers adopted and We sanction the following:
PART Ier. - General provision
Article 1er. This Act regulates a matter referred to in Article 78 of the Constitution.
PART II. - Income Tax Code 1992
Art. 2. In article 43 of the Income Tax Code 1992, the words "decreased in the costs of realization" are inserted between the words "of good" and the words "and on the other hand".
Art. 3. Section 201 of the Code, replaced by the Act of 28 July 1992 and amended by the Act of 4 May 1999, by the Royal Decrees of 20 July 2000 and 13 July 2001 and by the Act of 27 December 2004, are amended as follows:
1st paragraph 1er, 1°, is replaced by the following provision:
"1° in respect of resident corporations whose shares or shares, representing the majority of the voting rights, are held to a maximum of half by one or more natural persons, the percentage of the deduction is equal to the increase expressed in per cent, the average of the consumer price indices of the Kingdom of the penultimate year before the year of which the vintage is the taxation year to which the tax period is attached to the taxable price »;
2° Paragraph 2 is replaced by the following provision:
"The King may, where the economic circumstances so warrant, increase, by order deliberately in the Council of Ministers, the percentages referred to in paragraph 1er, 1° and 2°, as they are brought back to 0. »;
3° paragraph 4 is repealed;
4° the article is supplemented by a new paragraph written as follows:
"In the case referred to in section 70, paragraph 1erthe deduction percentage is reduced to zero. »
Art. 4. In title III, chapter II, section IV, of the same Code, a sub-section IIIbis, comprising sections 205bis to 205novies, the title of which reads as follows:
"Subsection IIIbis. - Deduction for risk capital. »
Art. 5. In the same subsection, an article 205bis is inserted, as follows:
"Art. 205bis. For the determination of taxable income, the taxable basis is reduced from the amount determined in accordance with section 205quater. This reduction is called "deduction for risk capital". »
Art. 6. In the same subsection, an article 205ter is inserted, as follows:
"Art. 205ter. § 1er. To determine the risk capital deduction for a taxable period, the risk capital to be considered shall, subject to the provisions of §§ 2 to 7, correspond to the amount of the corporation's equity at the end of the previous tax period determined in accordance with the accounting and annual accounts legislation as set out in the balance sheet.
Risk capital determined in paragraph 1er is reduced by:
(a) the net tax value at the end of the previous tax period of equity and equity and financial capital assets consisting of equity and other shares and shares, and
(b) the net tax value at the end of the previous tax period of shares or shares issued by investment companies whose potential revenues are likely to be deducted from profits under sections 202 and 203.
§ 2. Where the corporation has one or more foreign institutions whose income is exempted under preventive conventions of double taxation, the capital at risk, determined in accordance with § 1er, is diminished by the positive difference between, on the one hand, the net book value of the assets of foreign institutions, with the exception of the shares or shares referred to in section 205ter, § 1er, paragraph 2, and on the other hand, the total liabilities that are not part of the corporation's equity and are attributable to those institutions.
§ 3. Where are among the elements of the assets of the corporation of immovables located abroad or rights relating to such immovables, not assigned to a foreign establishment, and that the revenues of such assets are exempted under preventive conventions of double taxation, capital at risk, determined in accordance with §§ 1er and 2, is diminished by the positive difference between the net book value of these assets and the total liabilities that are not part of the corporation's equity and are attributable to those buildings or rights.
§ 4. The capital at risk, determined in accordance with §§ 1er to 3, is reduced by the following values determined at the end of the previous tax period:
1° the net book value of tangible assets or part thereof, to the extent that the associated costs unreasonably exceed professional needs;
2° the book value of the elements held as an investment and which by their nature are not normally intended to produce a taxable periodic income;
3° the book value of real property or other real property rights on such property, including natural persons exercising a mandate or functions referred to in section 32, paragraph 1er, 1°, their spouse or children when such persons or their spouses have the legal enjoyment of their income, have the use.
§ 5. The capital at risk, determined in accordance with §§ 1er to 4, is further diminished of the surplus-values expressed but not realized under Article 44, § 1er, 1°, which does not concern elements of the assets referred to in §§ 2 to 4, and capital subsidies.
§ 6. When changes in the elements referred to in § 1er and 3 to 5 in the course of a taxable period, the at-risk capital to be considered is increased or decreased, as the case may be, of the amount of these variations, calculated on a weighted average and considering that the changes occurred on the first day of the calendar month following that of their occurrence.
The changes in the elements referred to in § 2 that occur during a taxable period shall be taken into account in the conditions and in the manner determined by the King, by order deliberately in the Council of Ministers.
§ 7. For the application of § 1erin the head of the credit institutions referred to in Article 56, § 1erof the insurance companies referred to in Article 56, § 2, 2°, h, and of the stock exchange companies referred to in Article 47 of the Law of 6 April 1995 on secondary markets, the status of investment enterprises and their control, to the intermediaries and investment advisers, it shall be understood by financial capitals consisting of participations and other shares and shares, the shares or shares that have the nature of financial assets referred to in § 2,
§ 8. For taxpayers subject to corporate tax, to which the law of June 27, 1921 applies on non-profit associations, non-profit international associations and foundations, equity, referred to in § 1er means the social fund, as shown in the balance sheet prepared by these taxpayers. »
Art. 7. In the same subsection, an article 205quater is inserted, as follows:
"Art. 205quater. § 1er. The risk capital deduction is equal to the risk capital determined in accordance with section 205ter, multiplied by a rate set out in the following paragraphs.
§ 2. For the 2007 taxation year, the applicable rate is equal to the average of the benchmarks J (linear bonds 10 years) published monthly by the Pension Fund, as referred to in Article 9, § 1er, of the Law of 4 August 1992 on Mortgage Credit, for the year 2005.
§ 3. For the following taxation years, the applicable rate is set with respect to the average of the benchmarks J referred to in § 2 for the penultimate year preceding the year in which the vintage is the taxation year.
The applicable rate to determine the amount of the risk capital deduction referred to in section 205bis may not, for each taxation year referred to in the previous paragraph, deviate from more than one point of the rate applied in the previous taxation year.
§ 4. The King may, by royal decree deliberated in the Council of Ministers, decide not to apply the limit referred to in § 3, paragraph 2, and set, outside this limit, another rate to determine the amount of the deduction for at-risk capital, but limited by the rate corresponding to the J reference index referred to in § 2 for the penultimate year preceding that the vintage is the taxation year.
§ 5. The rate determined in accordance with §§ 2 to 4 may not exceed 6.5 p.c.
The King may, by royal decree deliberated in the Council of Ministers, derogate from the rate referred to in paragraph 1er.
§ 6. For companies that, in accordance with certain criteria established by Article 15, § 1er, of the Corporations Code, is considered to be small corporations for the taxation year related to the tax period in which they have benefited from the deduction for at-risk capital, the rate determined in accordance with §§ 2 to 5 is increased by half a point.
§ 7. The King shall determine, by royal decree deliberated in the Council of Ministers, the terms and conditions for calculating the deduction for risk capital for the first taxable period of a corporation and when the taxable period is longer than or less than twelve months. "
Art. 8. In the same subsection, an article 205quinquies is inserted, as follows:
"Art. 205quinquies. In the event of absence or insufficiency of profits from a taxable period for which the deduction for risk capital may be deducted, the exemption not granted for that taxable period shall be deferred successively on the profits of the following seven years. »
Art. 9. In the same subsection, an article 205sexies is inserted, as follows:
"Art. 205sexies. The deduction for at-risk capital shall only be granted provided that an amount equal to the deduction for at-risk capital granted for the taxable period is carried and maintained to an unavailable account distinct from the liability and that it is not used as a basis for calculating the annual allocation of the legal reserve or any remuneration or attributions, during the taxable period and the following three years.
When no longer satisfied with the obligation referred to in paragraph 1er for the deduction for at-risk capital of a specified taxable period, the already actually granted party shall be taxed as a benefit of the taxable period in which the non-compliance with that obligation occurred and the unin fact granted balance shall lose its right to be deferred referred to in section 205quinquies. »
Art. 10. In the same subsection, an article 205sesis is inserted, as follows:
"Art. 205s. In order to justify the benefit of the risk capital deduction, the corporation must attach to its corporate tax return a statement whose model is determined by the Minister of Finance or his or her delegate, for the taxation year for which it is entitled to the deduction. "
Art. 11. In the same subsection, an article 205octies is inserted, as follows:
"Art. 205octies. Sections 205bis to 205septies are not applicable to the following companies:
1° the approved coordination centres that continue to benefit from the provisions of Royal Decree No. 187 of 30 December 1982 concerning the establishment of coordination centres;
2° corporations incorporated in a reconversion area, pursuant to the law of recovery of 31 July 1984, as long as, for the relevant tax period, they still benefit from the provisions of section 59 of the aforementioned Act;
3° Variable Capital Investment Corporations (SICAV), Fixed Capital Corporations (SICAF) or receivables (SIC) defined respectively in Articles 14, 19 and 24 of the Act of 20 July 2004 on certain forms of collective investment portfolio management;
4° Participating cooperative societies, pursuant to the Act of 22 May 2001 on the schemes for the participation of workers in the capital and profits of corporations;
5° Maritime shipping companies that are subject to tax in accordance with sections 115 to 121 or section 124 of the Program Act of 2 August 2002. »
Art. 12. In the same subsection, an article 205novies is inserted, as follows:
"Art. 205novies. If the corporation constitutes an immunized investment reserve referred to in section 194quater for a taxable period, sections 205bis to 205quinquies are not applicable for that taxable period and for the following two taxable periods. In this case, the seven-year period referred to in section 205quinquies is extended by the number of complete years in which sections 205bis to 205quinquies do not apply. »
Art. 13. In Article 207, paragraph 3, of the same Code, inserted by the Royal Decree of 20 December 1996, it is inserted between the first and the second drawer a new dash written as follows:
" - by derogation from section 205quinquies, the deduction for at-risk capital not granted in the event of absence or insufficiency of profits from the taxable periods preceding the period referred to in the first place; "
Art. 14. Section 236 of the Code, repealed by the Act of 30 January 1996, is reinstated in the following wording:
"Art. 236. Sections 205bis to 205novies are applicable to the taxpayers referred to in section 227, 2°, for the at-risk capital assigned to their Belgian establishments as well as to their real property located in Belgium and rights relating to such property, under the conditions and terms determined by the King, by order deliberately in Council of Ministers. »
Art. 15. Article 289bis, § 2, of the same Code, replaced by the Act of 4 May 1999 and amended by the Royal Decrees of 20 July 2000 and 13 July 2001, is repealed.
Art. 16. Section 292bis of the same Code, inserted by the Act of 20 December 1995 and amended by the Acts of 4 May 1999 and 16 July 2001, is repealed.
Art. 17. Section 523 of the same Code, inserted by the Act of 20 December 1995 and amended by the Act of 4 May 1999, is replaced by the following provision:
"Section 52, 11°, as it existed before being amended by section 3 of the Act of 20 December 1995, remains applicable to the extent that it concerns capital increases aimed at ensuring compliance with the requirement of section 8 of the Act of 13 April 1995 amending the co-ordinated laws on commercial companies, by the anonymous companies existing at the time of the coming into force of this Act. »
Art. 18. It is inserted in the same Code an article 528, which reads as follows:
"Art. 528. The provision of section 201, paragraph 5, as inserted by the Act of 22 June 2005 establishing a tax deduction for risk capital, does not apply with respect to the investment deductions referred to in section 70, paragraph 1er, granted from a taxation year prior to the 2007 taxation year. »
Art. 19. It is inserted in the same Code an article 529, which reads as follows:
"Art. 529. The provisions of section 292 bis, as they existed before being repealed by the Act of 22 June 2005 establishing a tax deduction for at-risk capital, remain applicable with respect to the tax credit referred to in section 289bis, § 2, as it existed before being repealed by the above-mentioned Act and which was not charged before the 2007 taxation year. »
PART III. - Code of Registration, Mortgage and Registry Rights
Art. 20. Sections 115, 115 bis and 116 of the Code of Registration, Mortgage and Registry Rights, as amended by the Acts of 3 July 1972, of 1er March 1977, August 12, 1985 and March 30, 1994, the words "0.5 p.c." were replaced by the words "0 p.c."
PART IV. - Entry into force
Art. 21. Sections 2 to 19 come into force from the 2007 taxation year.
Any change made from April 29, 2005 to the closing date of the annual accounts shall not affect the application of the provisions referred to in paragraph 1er.
Section 20 comes into force on 1er January 2006.
Promulgate this law, order that it be clothed with the seal of the State and published by the Belgian Monitor.
Given in Brussels on 22 June 2005.
ALBERT
By the King:
Deputy Prime Minister and Minister of Finance,
D. REYNDERS
Minister of Economy, Energy, Foreign Trade and Science Policy,
Mr. VERWILGHEN
Seal of the state seal:
The Minister of Justice,
Ms. L. ONKELINX
____
Note
(1) Parliamentary references:
Documents of the House of Representatives:
51-1778-2004/2005:
Number 1: Bill.
nbones 2 and 3: Amendments.
Number 4: Report.
No. 5: Text corrected by the commission.
No. 6: Amendments.
No. 7: Text adopted in plenary and transmitted to the Senate.
Full report: 2 June 2005.
Documents of the Senate:
3- 1223-2004/2005:
No. 1: Project not referred to by the Senate.