US eyes notional interest deduction

"After the European Commission had already ruled the system of the excess profit rulings against state aid rules, the US is now also increasing pressure on our corporate tax," states Minister of Finance Johan Van Overtveldt. For example, the United States are no longer willing to grant treaty benefits on interest paid from their own country to Belgian affiliated companies that enjoy the notional interest deduction. "The US is the biggest foreign investor in Belgium. Therefore we must not underestimate the impact of their decision. For the time being this probably means the end of the notional interest deduction in a Belgian-American context," Johan Van Overtveldt explains.

In practice, the United States will apply a levy of thirty percent to interests paid to a Belgian affiliated company. In doing so, they not only fail to take into account the activities of the Belgian company, but also fail to account for the present situation in Belgium.

Reviewing corporate tax

For Minister Johan Van Overtveldt, these and other current developments are crucial to our economic fabric and retaining and creating thousands of jobs. "We face tremendous challenges in keeping entrepreneurship in Belgium attractive for SMEs as well as big enterprises. In this context, it is becoming increasingly clear that our corporate tax needs review. The persistent international pressure on the Belgian niche tax system must inspire us to take action. If we wish to safeguard economic growth and employment, we must now abandon the recipes and tax systems of the past," the Minister concludes.