Belgium avoids VAT rise with ‘Fairness Tax’

Tue 9th Jul 2013

As part of Belgium’s attempts to fill the 2014 Budget gap, and meet the Euro-currency 3% deficit target, it has decide to avoid a Belgian Value Added Tax rise.

The current Belgian VAT rate is 21%, which is close to the EU average VAT rate of over 21%.  For some time, Belgium has been considering a rise to plug the fiscal deficit.

However, it has now announced a novel new tax on holding companies which issue dividends.  The new ‘Fairness Tax’ will be charged at 5% of dividends paid out.  It is in effect a type of withholding tax – although it cannot be offset against other income tax charges on the dividend income.  Income from patents will be excluded.

This move still leaves Belgium short by €1 billion for the 2014 budget.