The measures which have been imposed during the last weeks with regards to COVID-19 (coronavirus), have without a doubt an economic impact on your company.
In case your company was profitable during the last years, it is possible that for the accounting year 2019 year-end closing (assessment year (AY) 2020), an important amount of corporate income tax will be due, while the current accounting year 2020 will possibly leave you in financial distress. Furthermore, the applicable standard corporate income tax rate is set at 29,58% for AY 2020, while said rate will further decline to 25% as from AY 2021.
Besides the corona support measures which the government has announced, it can hence be worthwhile to verify whether the taxable result of assessment year 2020 could be optimized.
As a result, the below optimizations can possibly offer some relief for your company at the 2019 year-end closing:
- The general assembly that must decide in 2020 on the annual accounts per 31/12/2019, could opt for granting a director’s profit share (“tantième”) (instead of a dividend distribution or an addition to the reserves). Said director’s fee stands as a profit distribution towards the directors and can, under certain conditions, be considered as a deductible expense on behalf of the distributing company, accounted on the 2019 result. On behalf of the beneficiary said fees are taxable at the moment of distribution, being 2020.
- Verify whether the depreciation regimes are optimized from a tax perspective. Note that for assets acquired or developed until 31 December 2019, it is possible to apply a declining balance depreciation regime. This degressive depreciation regime will no longer be applicable for assets acquired from 1 January 2020 onwards.
- It could be appropriate to account additional provisions for risks and charges. These provisions can be accounted in case several conditions are complied with, amongst others the following risks and charges: warranty obligations, pending disputes following the company’s legal or regulatory obligations, certain environmental requirements such as soil sanitation, dismissals after designation of redundancies or early retirement, compensation received with regards to damages.
- Impairments on doubtful debtors can be recorded in case several conditions are complied with. For debtors of which the recovery is uncertain based on events that took place during the taxable period, an impairment can be accounted.
- Make sure that the stock valuation is optimal, also for goods-in-process and orders-in-progress.
- Verify whether an (at arm’s length) interest is applied on the current account credit of the company
- Optimize the deferrals and accruals accounts (e.g. maximum usage of the invoices to be received, accrued charges, deferred income). For instance, the revenue received in 2019, can be deferred to 2020, in case said revenue relates to 2020.
- Under certain conditions, realized capital gains on assets can benefit from the spread taxation regime.
- Certain regional support measures, such as employment premiums, professional transition premiums and certain capital- and interest subsidies are exempt from corporate income tax
- Optimization of the tax deductions, such as the innovation-deduction and the investment deduction.
- Is the company’s result considered as at arm’s length within a group context, from a transfer pricing perspective? Optimizations are possible via modified transfer pricing, management fees, payments for licenses, royalties or interest
Note that the abovementioned overview should be considered as an indicative list which is not exhaustive. However, via this overview we wish to provide you with some ideas which can be applied in practice, under certain circumstances and in case the relevant conditions as mentioned in the tax code are complied with. An assessment of these legal requirements is necessary following the specific circumstances of the company. In order to assure you that said accounting and/or tax optimizations at year-end closing are applied correctly from a tax perspective, your trusted contact person within RSM InterTax is at your disposal.
If you would like to receive additional information on this matter or VAT assistance, the tax team of RSM Belgium is at your disposal: [email protected].