April 03, 2005
The introduction of the so-called notional interest deduction (as announced in the February edition) is on the right track
February 20, 2005
At the outcome of the cabinet meeting on December 23 2004, the Belgian government announced plans to introduce legislation in June 2005 that will allow companies to deduct a notional (deemed) interest deduction on equity and retained earnings (not stated in the accounts) in calculating the taxable base. This measure will alleviate the different tax treatment between debt and equity, that is, borrowing or equity financing. At present, companies have more to gain from debt than equity financing, because loan interest is tax-deductible and dividend distributions are included in calculating the company's taxable base. In addition, Belgian tax law knows no general thin-capitalization rules.