As from assessment year 2014, dividend distributions made by Belgian companies that do not qualify as SMEs may trigger a new tax, dubbed the "fairness tax.”
This new fiscal measure is a separate tax (5.15%) aimed at sanctioning Belgian companies that issue dividend amounts that are larger than their net corporate income tax base.
The fairness tax applies in the year of a dividend distribution with regard to the profits of the same year; the net corporate income tax base of the distributing entity is reduced by the deduction of carried forward tax losses or notional interests (a fictitious interest computed on the equity base of the company, which may be deducted under Belgian tax law).
The fairness tax is not tax deductible. Its tax base may not be offset by means of tax deductions - such as dividend received deduction, notional interest deduction and carried forward tax losses.
This new tax may have a substantial effect on multinational groups as it also applies to foreign companies holding a Belgian establishment. For the purposes of this tax, such Belgian branches will be deemed to distribute a dividend insofar as the foreign company distributes a dividend. The amount of the dividend "distributed" by the Belgian branch should be determined on the basis of the Belgian branch's share in the foreign company's global positive financial result. Hence, the distribution of a dividend by a foreign company could trigger the fairness tax if that company has a Belgian branch benefiting from the deduction of carried forward tax losses or notional interests in that same year of distribution.
The introduction of the fairness tax has been heavily criticized for being (possibly) in breach of Belgium's international obligations under the Parent-Subsidiary directive and double taxation treaties. Moreover, its complex computation may lead to adverse consequences that are beyond the intention of the legislature. Finally, this fairness tax may also require a re-evaluation of Belgian company's deferred tax assets, as the value of carried forward tax losses and notional interest may be affected by this tax.