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Corona crisis relaxes 30% fiscal EBITDA thin cap rule

As of 1 January 2020, companies are exposed to a new thin cap rule in Belgium. In summary, the corporate tax deduction of net interest expenses is limited in function of one of the following limitation rules: either 30% of the company’s fiscal EBITDA or EUR 3.000.000. However, the new thin cap rule does not apply if the company at hand is eligible for a transition rule. To what extent does the corona crisis impact such transition rule?

The new thin cap rule does not come into play when it concerns an “old loan” as the latter is eligible for a transition regime. Indeed, loans that were concluded prior to 17 June 2016 and to which no fundamental changes were made ever since are not envisaged by the new thin cap rule whilst they remain subject to the old 5/1 thin cap rule.

Specifically, due to the COVID-19 crisis a lot of companies are facing liquidity issues and try to negotiate some “financial oxygen” with their lenders. That is why the Belgium tax authorities have issued a circular letter confirming that there is no “fundamental amendment” of an “old loan” if specific payment conditions are now allowed stemming from payment issues in the following circumstances:

  • The company needs to demonstrate that the payment difficulties result from the COVID-19 crisis which has led to liquidity and solvency issues. Taxpayers can demonstrate this by evidencing a decrease in turnover or activities, temporary or full unemployment of staff and/or a temporary closure of the company as a result of the measures taken by the Government ;
  • The specific payment conditions need to be laid down in a request approved by a financial institution or in a supplementary agreement ;
  • These payment conditions are granted prior to 30 June 2020 and run until 31 December 2020.

Under the above-mentioned circumstances, old loans are not exposed to the new thin cap rule despite fundamental changes made to the loan agreement. Taking into account the complexity of the new thin cap rule, you have all interest to ascertain whether you can benefit from the transition regime or not.

Contacteer

Kurt De Haen

E: kurt.dehaen@pkf-vmb.be
T: +32 (0)2 460 09 60

Wouter Brackx

E: wouter.brackx@pkf-vmb.be
T: +32 (0)2 460 09 60