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In brief

Various new corporate income tax measures entered into force in Belgium as of 1 January 2023, the most impactful being a temporary increase of the minimum corporate tax base under the so-called “basket rule”. This measure will be in force until the European Minimum Tax Directive (Pillar Two) is implemented into Belgian legislation and takes effect (in principle as of 1 January 2024). Below we provide a brief overview of the main changes.


  1. Key takeaways
  2. In depth

Key takeaways

  • The minimum corporate taxable base under the so-called “basket rule” has been temporarily increased as of FY 2023 (financial years ending on or after 31 December 2023), from 30% to 60%, until the EU Minimum Tax Directive (which implements Pillar 2) enters into force (what will in principle be the case as of 1 January 2024). The “basket rule” applies to all Belgian corporate taxpayers, irrespective of whether they fall within the scope of Pillar 2. By contrast, the EU Minimum Tax Directive (Pillar 2) is only applicable to groups with a combined annual turnover of at least EUR 750 million (certain exceptions apply). For these groups, the Directive will have a major impact. In this newsletter, we, therefore, give you a few insights on how to prepare for it.
  • The notional interest deduction (NID) has been abolished as of FY 2023. The impact thereof will however be rather limited.
  • The computation method of the Foreign Tax Credit on foreign royalty income has been amended: it is now equal to the actual foreign tax withheld (capped at 15%) instead of a lump sum amount of 15%.
  • Finally, the tax deductibility of certain annual taxes applicable in the financial sector is now limited to 20%.

In depth

Temporary increase of the minimum corporate taxable basis from 30% to 60% and Pillar 2

The rule up to 1 January 2023

Since 2018, the application of certain corporate tax deductions in Belgium has been limited to a “basket” of EUR 1 million, increased by 70% of the taxable income above EUR 1 million.

This limitation rule currently applies to the following tax deductions: the notional interest deduction (NID), the carried forward dividend received deduction, the carried forward innovation deduction, the carried forward tax losses and the tax carried forward NID.

As a result of the limitation rule, 30% of the taxable profit exceeding the amount of EUR 1 million constitutes a de facto minimum taxable base (as no deduction can be made against that amount).

The rule as of 1 January 2023

As of 1 January 2023 (tax year 2024), this minimum taxable base is increased to 60% of the taxable profit exceeding the amount of EUR 1 million, as the “basket” for corporate tax deductions will now be equal to EUR 1 million increased by 40% (instead of 70%) of the taxable income above EUR 1 million.

This increase of the minimum taxable basis is temporary and will be abolished as soon as the upcoming Belgian legislation implementing the EU Minimum Tax Directive takes effect (normally as of 1 January 2024). At that time, the basket rule will become again a minimum taxable base of 30% of the amount of taxable profit in excess of EUR 1 million (there will be an interplay however with the ETR rules of the EU Minimum Tax Directive for taxpayers that fall within the scope of the Directive – cfr. below).

The impact of Pillar Two Global Minimum Tax (GloBE) rules

By way of context, on 14 December 2022, the Council of the EU unanimously adopted the Minimum Tax Directive 2022/2523, the aim of which is to enact the Pillar 2 rules into the EU. According to the Directive, the European member states have until 31 December 2023 to transpose the Minimum Tax Directive implementing said Pillar 2 rules into local legislation, with effect as of 1 January 2024.

Main provisions of the European Union Minimum Tax Directive

The key items of the EU Minimum Tax Directive are as follows:

  • The Directive is applicable to groups that have a combined annual turnover of at least EUR 750 million. There are some exceptions based on:
    1. Activities carried out: exemptions for groups that carry out activities of general interest, governmental entities, international organizations, pension funds, non-profit organizations, real estate investment vehicles or investment funds.
    2. De minimis rule: exemption for groups which (i) earned profits in a jurisdiction that are less than EUR 10,000,000; and (ii) have an average qualifying income of less than EUR 1,000,000 (or a loss) in that same jurisdiction.
  • The Directive introduces a minimum effective tax rate (ETR) of 15% across every jurisdiction where the group has operations.
  • In order to implement this ETR, the Directive includes a system consisting of two rules, the Income Inclusion Rule (IIR) and the Undertaxed Profit Rule (UTPR), through which an additional amount of tax, called a “top-up tax”, should be collected each time that the ETR due on the income of an MNE group in a given jurisdiction is below 15%. Please see our former news alerts for more information (here).

How can businesses prepare?

Even though the rules are not implemented in Belgium yet, businesses should already start preparing for what is to come. Certain steps that could be considered in this context are the following:

  • Evaluate and model the impact of the new measures to assess the additional data and reporting requirements as well as opportunities to optimize the calculation of the “top-up tax”.
  • Make sure that the existing IT system operating the group’s data is up-to-date and has the capabilities to make the relevant computations/ extraction in order to ensure an unobstructed flow of information within the MNE group (and towards tax administrations).
  • Identify gaps in the data needed for reporting.
  • Establish processes and controls by agreeing internally on the entities and the team that will be responsible for compiling the numbers at the level of each entity and filing the relevant top-up tax information returns.
  • Discuss how reporting procedures are to be coordinated at a group level.
  • Prepare and train the right people in your tax and finance team and make sure the right people are aware of the impact of the new measures.

Our teams can assist you with any of the above. Please reach out to us if you would like to discuss.

Abolition of the notional interest deduction (NID)

The NID regime is entirely abolished as of FY 2023. While due to the low long-term interest rates over recent years, the NID rate for big companies was equal to zero and was limited to 0.443% for SMEs for tax year 2023. The NID rate would normally have significantly increased as of tax year 2024 as a result of the increasing long-term interest rates. Given the incremental equity computation method introduced as of 2018, this abolition will however have a limited impact.

The stock of carried forward NID remains deductible going forward (subject to the basket rule). Belgium may have to reintroduce a notional interest deduction regime if and when the EU DEBRA proposal is adopted.

Amendment of the Foreign Tax Credit (FTC) computation method for foreign royalty income

Up to 1 January 2023, foreign source royalty income (other than royalties eligible for the innovation income deduction) could benefit from the FTC if such income had effectively been subject to taxation in the source country and the FTC was computed based on a lump-sum equal to 15/85 of the net amount (i.e., after deduction of foreign WHT) of the foreign royalty.

As of 1 January 2023, the FTC for foreign source royalty income will be computed on the basis of the actual withholding tax levied by the source state, capped at 15%.

The limited deductibility of certain annual taxes for the financial sector

Up to 1 January 2023, certain annual taxes applicable for credit institutions, collective investment, and insurance undertakings were fully deductible for corporate income tax purposes up to 1 January 2023.

As of 1 January 2023 (tax year 2024), the tax deductibility of these taxes is now limited to 20%.

In case you have any questions or would like to discuss the latest tax measures described above, please reach out to your local Baker McKenzie contact or to one of the authors of this alert.


Géry Bombeke heads Baker McKenzie's Tax Practice Group in the Brussels office. He joined Baker McKenzie in 2004, after several years of experience in a Big 4 and related law firm. He became partner in 2010.


Alain Huyghe is a partner in the Tax Practice Group of the Brussels office. He joined Baker McKenzie in 1986 and became partner in 1994. Alain has been mentioned consistently over the past 25 years as a leading tax lawyer in Belgium in publications such as the International Tax Review, Chambers and The European Legal 500.


Julie Permeke is a partner in the Tax Practice Group of the Brussels office. She joined Baker McKenzie in 2016 after several years of experience as a tax lawyer in other well reputed Benelux law firms. She also works as a voluntary researcher in the tax department of the Free University of Brussels (VUB). Julie has been listed as a recommended tax lawyer in Legal 500.

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