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Tax reform: Van Peteghem proposes an increase in the tax-exempt portion of 4,390 euros

  • Post category:Economy News
  • Reading time:4 mins read

Our colleagues from LN24 got their hands on the “first stage” tax reform project that Finance Minister Vincent Van Peteghem (CD&V) would propose to his partners in December, as planned in the framework of the budgetary conclave. We remember, the CD&V had pushed so much and more but its majority partners had postponed the discussion for December. It was thought that the minister would move towards abolishing the special social security contribution (CSSS), already cut by 25% at the start of the year. Well no, Vincent Van Peteghem would focus more on the blueprint submitted in July. A kind of mini-pure, in short, intended to “strengthen purchasing power and increase the employment rate”. The 7-page document thus proposes raise the tax-exempt portion from 9,270 to 13,660 euros, which would raise the net pocket salary by around 1,000 euros per year. Including a cost of 3.3 billion euros at cruising speed from 2025 (825,000 euros in 2023, 2.2 billion euros in 2024). This increase in the tax-exempt portion would in particular make it possible to reduce employment traps, as the gap between low incomes from work and allowances is widening.

“RDT” regime in the viewfinder

As this first step in reducing labor charges must be budget-neutral, the Minister is considering the end of certain deductions, or certain niches. Which ones? The Minister first proposes a reform of the “RTD deduction”, in reference to the deduction of definitively taxed income. “The RDT deduction is reformed into an exemption, instead of a deduction (increase in the situation at the start of the reserves). The 10% participation condition remains unchanged, that of 2.5 million euros will be linked to the provided that the participation has the nature of a financial fixed asset”, according to the document. As a reminder, this “RDT deduction” is an exemption scheme for companies that invest in shares of other companies. Since the corporate tax reform of 2017, these companies can, under certain conditions, fully deduct dividends and capital gains generated by shares from their profits. This rather technical measure would save 750 million euros.

Alimony and marital quotient: phasing out

That’s not all, the minister is also proposing the phasing out of marital quotient over a period of 10 years. Company cars will be a new fis affected by a change. As already mentioned in the July draft, the idea here is, for new company cars, “to replace the system of non-allowed expenses increased by 40% by a benefit in kind for non-professional travel. For existing company cars, the current system would be maintained for another 5 years”. The Minister of Finance also proposes to modify the tax system for stock options and to limit the deduction of premiums paid under the second pillar of pensions. It would only be deductible to the extent that “such bonuses do not exceed 10% of the periodic gross annual compensation paid in the year to which the bonus payments relate,” according to the document. Finally, among the measures envisaged by the minister, mention should also be made of the gradual end alimony deduction over a period of 10 years. So much for the first phase of the reform, which would therefore come into force in April 2023. Morality of the proposal: lively political discussions guaranteed.7

Second phase in 2026

In a second phase, the Minister of Finance will draw up the rest of the wider tax reform by September 2023. The reform will be spread over a period of 7 years to allow a gradual transition to the new system, and will come into force on January 1, 2026.

Reread also: Income from assets, gas card, extralegal benefits…: here is Vincent Van Peteghem’s 10 billion tax reform project