Belgian Chamber of Representatives approves carry-back of tax losses

The Chamber of Representatives has on June 18 approved new fiscal legislation allowing professionals and companies (as well as Belgian permanent establishments of foreign companies) to apply a carry-back of tax deductible losses. This measure aims to ease the financial damages and liquidity problems caused by the Corona pandemic.

For individual taxpayers, this implies that profits or revenues relating to tax year 2020 (income year 2019) can be entirely or partially fiscally compensated by tax deductible losses incurred during tax year 2021 (income year 2020). 
Companies and Belgian permanent establishments are also allowed to apply a carry-back of losses. The carry-back will be realized by imputing such "Corona" losses on profits realized in a financial year which is, or will be closed during the period from March 13,  2019 until December 31, 2020 (new art. 194septies/1 Income Tax Code). For many companies, this means that profits realized in 2019, can be entirely or partially compensated by means of losses suffered in 2020.

Various conditions and limitations apply on the application of this new rule. For example, the tax exemption applied may not be superior to 20 Mio EUR. Also, certain taxpayers are excluded from the benefit of the new rules (such as so-called "investment companies").

It is evident that the application of the carry-back of losses will require careful tax planning, and even impose a review of structuring and transactions concluded before the Corona pandemic. Indeed, taxable results of companies and the tax burden on transactions will be retro-actively modified, which equally changes certain agreements made between parties involved in M&A transactions or financing operations.