A Review of Belgium’s Draft Pillar Two Law

Overview

On November 13, 2023, draft law No. 55K3678 to implement the EU Minimum Tax Directive was sent to the Belgian Parliament.

The draft law includes an Income Inclusion Rule (IIR) and a domestic minimum tax (intended to be a Qualified Domestic Minimum Top-Up Tax) from December 31, 2023 and an Under-Taxed Profits Rule (UTPR) from December 31, 2024.

Belgium’s approach is to implement the global minimum tax provisions as a separate tax law,

As expected, the draft law closely follows the EU Directive. There are very few options given to member states in the EU Directive in terms of flexibility over national implementation. As provided in the EU Minimum Tax Directive, the GloBE rules also apply to wholly domestic groups.

Whilst the draft law is to implement the EU Minimum Tax Directive into domestic law, it does not currently reflect most aspects of the OECD Administrative Guidance (either the February 2023 or July 2023 guidance issued).

Similarly, only the Transitional CbCR Safe Harbour from the OECD Safe Harbours and Penalty Relief Guidance is included in the draft law. Other Safe Harbours from the Second Set of OECD Administrative Guidance (the QDMTT Safe Harbour and the Transitional UTPR Safe Harbour) are not included.

The draft law also includes other ancillary changes and, for example, in Article 71 it amends its R&D Rax Credit regime to reduce the repayment period from 5 to 4 years, to ensure it qualifies as a Qualified Refundable Tax Credit.