- Tax Law , Corporate Law and M&A
- Income Tax , report on income tax information , Country-by-Country Reporting Directive , CBCR , reporting obligation , reporting requirement , Stand-alone companies , Belgian subsidiary companies within international groups , Branches of non-EU enterprises , ultimate parent company , turnover of more than EUR 750 million
News
The Law of January 8, 2024, imposes an obligation on certain companies and branches to prepare a report on income tax information.
This Law implements the Country-by-Country Reporting (CBCR) Directive, which contains transparency requirements for multinational companies on the corporate tax paid in member states and jurisdictions outside the European Union. It aims to achieve maximum and reliable transparency, which can be ensured by reporting on a per-country basis.
It complements the Law introducing a minimum tax for multinational companies (read our earlier contribution about this item). This law can only achieve its objectives (guaranteeing, among other things, an effective tax rate of 15%) thanks to an optimal and reliable transparency, which can certainly be achieved through country-by-country reporting.
1. Who is required to comply with the reporting obligation?
Since February 5, 2024, certain companies and branches are obligated to compile and disclose a report on income tax information.
We will briefly outline below who must comply with this reporting requirement, and for whom exemptions may apply.
1.1 Stand-alone companies
The reporting obligation under this law is primarily aimed at companies that are not part of a group, namely stand-alone companies.
To fall under the obligation, these companies must have reported a net turnover of more than 750 million euros in each of the last two consecutive fiscal years.
However, exempt from the obligation are stand-alone companies that are only subject to the Belgian income tax system. Credit institutions and stock exchange companies that have had to prepare and publish a similar report are also exempt from this obligation.
1.2 Belgian subsidiary companies within international groups
Belgian subsidiary companies that are part of a group with a non-EU established parent company and where the group has reported a net group turnover of more than 750 million euros in each of the last two fiscal years are also subject to this reporting obligation.
However, small companies as defined by Article 1:24 of the CAC (Companies and Associations Code), as well as companies whose parent company has published a comparable report in another EU member state, are exempt.
1.3 Branches of non-EU enterprises
Branches with a net turnover of at least 9 million euros during each of the last two consecutive fiscal years are subject to the reporting obligation, provided they were established by an enterprise not governed by the law of an EU member state.
It is important here that the net turnover must be determined in the name of the branch alone.
However, a branch is not subject to the reporting requirement if its ultimate parent or stand-alone company was already required to prepare and disclose a report.
1.4 The ultimate parent company
Finally, the ultimate parent company that according to the consolidated financial statements has a turnover of more than EUR 750 million in each of the last two consecutive fiscal years, is also subject to the reporting obligation.
However, the parent company is exempted from the obligation if it is only subject to the Belgian income tax system. Credit institutions and stock exchange companies that have been required to prepare and publish a similar report are also exempt from this obligation.
2. What is the information that the reporting requirement refers to?
The information in the report refers to the identity of the reporting company and possibly a list of all subsidiaries included in the consolidated financial statements of the ultimate parent company.
In addition, a description of the nature of operations, number of employees, financial results, attributable income tax, income tax paid and accumulated profit should be included in the report.
3. How to comply with the reporting requirement?
The governing body is responsible for preparing the report. This report must then be submitted to the National Bank of Belgium within twelve months after the end of the fiscal year and published on the website of the company or branch.
4. What are the penalties for non-compliance?
Sanctions are provided for non-compliance with these obligations. Members of the governing body and persons charged with the management of an establishment in Belgium may be fined up to ten thousand euros. In the case of demonstrable fraudulent intent, even a prison sentence can be imposed.
5. Conclusion
By implementing the CBCR Directive, the legislator intended to combat tax avoidance and aggressive tax planning by multinational companies through additional transparency obligations.
Given the consequences that directors can potentially face, it is important to be aware of the new reporting requirement.
In case you have questions about this item, do not hesitate to contact our specialists: +32 (0)2 747 40 07 or info@be.andersen.com.
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Pieterjan Smeyers
Tax Partner
