THE POINT
BDO NEWSLETTER
BDO
HEALTHCARE
Accountancy
Dividends from pre-acquisition profits ACCOUNTING AND TAX ASPECTS
TAX
The “Michel I” federal government:
first fiscal and social budgetary measures
PARTNERSHIP NEWS
Rik De Nolf – CEO Roularta
WWW.BDO.BE
EDITORIAL
COLOPHON
An idea or initiative will sometimes become more quickly established when
labelled with an English term. Today, a nice example of this is ‘tax shift’.
BDO NEWSLETTER
#01 | 2015
EDITORIAL BOARD
Werner Lapage
Hans Wilmots
Dirk Vandendaele
Ann Celis
Cindy De Bock
Annick Deklerck
© BDO 2015 : The information
contained in this Newsletter is of an
informative and general nature and is
not intended as professional advice.
Our advisers are at your disposal for
more in-depth advice and to take
appropriate action. If you prefer to
receive this Newsletter electronically,
please then contact us at newsletter@
bdo.be. Our Newsletter can also
be consulted at www.bdo.be. Our
Newsletter is also available in Dutch,
French or German.
R.E. BDO Academy Burg.Ven. CVBA/
Soc. Civ. SCRL, Werner Lapage, p/a The
Corporate Village, Da Vincilaan 9 Box
E6, Elsinor Building – 1935 Zaventem
Essentially, this refers to a shift in the tax burden, though not necessarily an
increase in taxes overall. It’s a charged term that is a very hot topic in Belgium
right now, and it’s a measure that has both supporters and opponents. The shift
being considered is intended to transform the tax burden currently placed on
labour into a (higher) tax on consumption (such as VAT) and/or wealth and
capital gains.
A possible (gains on) wealth tax is creating the greatest furore, and because of
this the issue has evolved into a question of principle. Here it is worthwhile to
keep in mind that many other countries levy some form of (gains on) wealth
tax, with varying degrees of success.
A wealth tax is an (annual) tax on what someone owns (real estate, personal
property, artwork, etc.), whereas a (gains on) wealth tax concerns an
increase in the value of an asset (through interest, dividends, etc.). You are
undoubtedly aware of the fact that Belgium already taxes assets (for example
via registration or inheritance taxes) and certain gains on assets (for example
via 25% withholding tax). As a result, capital gains on shares are the primary
target, because in most cases these remain tax-free.
Proponents of a tax shift (trade unions as well as some political parties) feel
that reducing the (far too high) tax burden on labour while levying additional
taxes on wealth is simply the fair and just thing to do. Moreover, the billions of
tax-free euros that a few leading captains of industry recently received from
the sale of their company was grist for the mill. Nevertheless, the fact that
these company executives took major risks, employed thousands of workers
and incurred high taxes/parafiscal expenses is disregarded in this argument.
Opponents are not convinced that this approach will always result in taxing
the intended assets. Large asset holdings in particular are very mobile, and
there is a real fear that these will flee Belgium (as will those of French and
Dutch citizens who at one time relocated to Belgium for this same reason).
There is also a real fear that the middle class will (once again) have to shoulder
most of the bill. As a specific example, a dividend paid to a private shareholder
of an SME is already subject to an overall tax burden of up to 50% (33.99%
corporate tax and 25% withholding tax).
To be sure, this is a matter full of pros and cons and one that will generate a lot
of debate.
WERNER LAPAGE
CONTENTS
4
8
16
18 28
COVER STORY
BDO HEALTHCARE
4
TAX
THE “MICHEL I” FEDERAL GOVERNMENT:
FIRST FISCAL AND SOCIAL BUDGETARY MEASURES
8
ACCOUNTANCY
DIVIDENDS FROM PRE-ACQUISITION PROFITS ACCOUNTING AND TAX ASPECTS
12
FAQ
WHEN IS THE TAX DEDUCTION OF INTEREST AT RISK?
15
TAX & LEGAL
NATIONAL EXCISE DUTIES AND ENVIRONMENTAL TAXES:
AUDITS AND CHANGES ON 1/01/2015
REAL ESTATE INVESTMENT FUNDS AND REGULATED
REAL ESTATE COMPANIES
NEW TAX “LIQUIDATION RESERVE”:
PRACTICAL IMPLICATIONS FOR SMALL BUSINESSES?
IFRS-NEWS
PARTNERSHIP NEWS
INTERVIEW: RIK DE NOLF – CEO ROULARTA
18
20
22
25
28
CORPORATE NEWS30
APPENDIX
DATASHEET ACCOUNTING AND TAX DUE DATES
COVER STORY
BDO
HEALTHCARE
BDO IS A VALUED ADVISER TO NUMEROUS ORGANISATIONS IN THE
HEALTHCARE SECTOR: HOSPITALS, ELDERLY CARE, HOME CARE, DISABILITY
CARE, CHILD CARE, ETC. A SECTOR WHICH, INCIDENTALLY, IS EVOLVING
VERY QUICKLY AT THE MOMENT AND WHICH HAS TO DEAL WITH MANY
CHALLENGES.
4 2thePOINT | #1 | 2015
David Lenaerts
BELGIAN POPULATION (1955 - 2050)*
AGED 60 AND OLDER
AGED 80 AND OLDER
4,500,000
4,000,000
3,500,000
3,000,000
2,500,000
2,000,000
1,500,000
1,000,000
5000,000
0
1,400,000
1,200,000
1,000,000
800,000
600,000
* SOURCE: 1955-2008:
Predictions, Eurostat;
2009-2050: Population
forecasts, FPS Economy
(ADSEI)
400,000
200,000
0
1955 1965 1975 1985 1995 2005 2015 2025 2035 2045
CARE LANDSCAPE NEEDS
RESTRUCTURING
Our society is faced with an ageing
population. For example, the Federal
Planning Bureau expects that by
2060, just over 11% of the Flemish
population will be over the age of
80, compared with 4.5% in 2007.
This increasing ageing, which is
also accompanied by a steady
population growth, translates into
a growing need for care and rising
health expenditure.
Increasing health expenditure in
times of budgetary constraints
creates significant challenges for
the system of hospital funding and
the affordability of healthcare in
general.
Both developments may seem at
first sight to be contradictory, and
they create tension as well as many
opportunities. However, to be able
to exploit these opportunities, a
thorough restructuring of the care
landscape is a prerequisite.
An upper limit on the total
production capacity of hospitals
will lead to a reduction in the
number of acute beds. Specialised
services will also become more and
1955 1965 1975 1985 1995 2005 2015 2025 2035 2045
more centralised. This trend will be
further strengthened by the public
reporting of quality indicators.
As a result of various savings, the
staff costs of care organisations are
increasing significantly faster than
revenues. This is putting more and
more hospitals in the red. At the
end of 2012, one in five Flemish
hospitals was in the red. In 2013
that was the case for two in five
Flemish hospitals, and one in ten
only just broke even, according to
a study by Zorgnet Vlaanderen.
Within elderly care, we are seeing
a steady increase in the average
daily cost. This currently amounts to
around EUR 50 a day.
A restructuring of the entire care
landscape would appear to be
needed, in which the emphasis
is placed on integral care across
the line. This means hospitals,
nursing homes, home care, doctors,
carers, etc. working together in
a structured way, for the benefit
of both the patient and the
government. The patient from the
point of view of his or her comfort,
the government because this will
enable it to cut hospital costs by
reducing the number of occupant
days.
A care hotel, for example, can offer
an appropriate response to this
social trend, with non-complex
care being shifted from hospitals to
care hotels. This allows the patient
to continue his or her recovery in
a comfortable hotel environment,
while giving the hospital the
opportunity to concentrate
on technical interventions and
complex care.
As a specialist in the healthcare
sector, BDO is perfectly placed to
help care organisations with the
challenges described above.
FINANCING
Besides the classic audit and
accountancy services, our financial
advisers examine the feasibility
of new and innovative healthcare
projects and, together with
the care institutions, seek out
alternative forms of financing to
implement their projects.
Appropriate financing is important
at every stage of a project. Basic
financing is needed as early as the
initiation and exploratory stage.
How are the necessary financial
resources brought together to start
the process?
BDO-NEWSLETTER 5
COVER STORY
«
The healthcare sector: ageing and budgetary
constraints provide many challenges
In the research phase the financial
feasibility of the project is
examined, parallel to the technical
research. This includes mapping
ownership, defining financial/
legal structures and producing a
financial model, with all financial
flows being plotted on the one
hand and on the other a tool being
developed to calculate financial
feasibility.
When designing financial
structures, the financial advantages
and disadvantages are clarified
in relation to, for example,
VAT schemes and/or other tax
incentives or charges and what
administrative expenses these
involve.
In recent years, BDO has acquired
extensive expertise in the setting
up and supervision of PublicPrivate Partnerships, or PPPs. In a
great many healthcare projects,
this form of cooperation offers
an ideal solution to the funding
problem.
Thanks to budgetary pressures,
proper and timely monitoring of
the results and financial position
of an organisation is of paramount
importance. However, we note that
many smaller care organisations
do not have the tools they need
to provide their management and
board of directors with monthly
or quarterly reports in a quick
and efficient way. To meet this
demand, BDO recently developed
a reporting tool, specifically
6 2thePOINT | #1 | 2015
»
tailored to care of the elderly.
This interactive tool provides the
management of care organisations
with the opportunity to analyse
its main KPIs (Key Performance
Indicators) in a quick and visual
way. This doesn’t just involve
financial indicators, but also
operational indicators such as
absence due to illness, etc.
What our customers particularly
appreciate is that our advisers
speak the language of the sector. n
More information is available
at our Healthcare Department:
healthcare@bdo.be
CITY AND OCMW/CPAS OF GENK
Very recently, BDO provided the
City and OCMW/CPAS of Genk
with financial support for the
privatisation of the Toermalien
Residential Care Facility and in this
process brought about a merger
with the non-profit organisation
Menos, residential care facility.
The secretary of the OCMW/
CPAS summarises the cooperation
as follows: “BDO is a professional
partner that in a very short time
has been able, with the information
provided by both residential care
facilities, to propose various
alternatives from which a business
plan was chosen that will achieve
a break-even result under specific
conditions. In our cooperation with
BDO we above all appreciate their
professionalism and expertise, their
ability to meet tight deadlines,
their flexibility in answering various
questions immediately, their
knowledge of the sector and their
advisory role.” n
David Lenaerts
VIVALTO GROUP
VIVALTO GROUP IS A PRIVATE BELGIAN GROUP THAT OWNS AND
MANAGES NURSING AND CARE HOMES OR SERVICE HOUSING IN
BRUSSELS AND WALLONIA.
Created in 2009, Vivalto grew by acquiring existing infrastructure that
required significant investment:
• either to bring the infrastructure in line with the latest legal and
regulatory constraints,
• or to support development in order to reach a sufficient size to ensure the
sustainability of a long-term operation.
The group’s network is expanding at a rate of 250 to 300 beds a year.
What sets Vivalto apart is the way in which it integrates two activities
that require distinct teams and competencies: on the one hand, property
management, and, on the other, the operation of rest and care homes or
service housing.
Its network currently comprises 15 establishments, or 1,250 beds.
The group’s goal is to bring together more than 2,400 beds by 2019 in
Brussels, Wallonia and Flanders. Vivalto expects to climb into the Belgian top
10 of companies that care for the elderly.
«
Mastering the role of operator
is a key asset for the future.
Our strategy is to retain
control of the property through
refinancing our acquisitions by
implementing property leases
and reserving the value of the
buildings, with a view to making
investments.
»
BENOÎT DELLA FAILLE,
CEO OF THE VIVALTO GROUP
VIVALTO IN FIGURES
The Vivalto Group is active in the development, acquisition, management and
operation of nursing and care homes as well as service housing in Belgium.
It has a turnover of more than EUR 30 million (including the estimate for
developments in the 2014 financial year), employs more than 500 people
(380 FTE) and has 1,250 beds.
Its shareholder status is 100% private. It consists, among others, of
experienced sector operators based around Daniel Caille, Chairman of the
Board of Directors, and Benoît della Faille, CEO, to ensure the success of the
project.
BDO & VIVALTO
The healthcare specialists of BDO Corporate Finance have guided Vivalto
with financial due diligences and all acquisitions. n
BDO-NEWSLETTER 7
TAX
THE “MICHEL I” FEDERAL
GOVERNMENT: FIRST FISCAL
AND SOCIAL BUDGETARY
MEASURES
ON 7 OCTOBER 2014, THE NEW FEDERAL GOVERNMENT WAS FORMED UNDER NEW
PREMIER CHARLES MICHEL. THIS GOVERNMENT (“MICHEL I”) WANTS TO BE A GOVERNMENT
OF RECOVERY THAT BALANCES THE BUDGET BY 2018 BY MAKING ¾ SAVINGS AND
CREATING ¼ NEW INCOME. BROADLY SPEAKING, THE BUDGET MUST BE BALANCED BY
AN INDEX JUMP, A SO-CALLED “TAX SHIFT” IN WHICH TAXES ON LABOUR SHIFT TO OTHER
INCOME AND A NUMBER OF NEW TAXES AND SOCIAL MEASURES.
AN INITIAL LEGISLATIVE INITIATIVE CAME WITH THE PROGRAMME LAW OF 19 DECEMBER
2014 (BELGIAN OFFICIAL GAZETTE OF 29/12/2014).
BELOW IS A BRIEF OVERVIEW OF THE NEW FISCAL AND SOCIAL MEASURES FROM THIS
PROGRAMME LAW.
8 2thePOINT | #1 | 2015
Cindy De Bock
FISCAL MEASURES
PERSONAL INCOME TAX
No index for certain exemptions
and tax reductions
The automatic indexing of tax
exemptions is reducted for the
assessment years 2015-2018.
For example, the amount of the
exemption on savings deposits, or
the amount of the tax reduction
for replacement income or pension
savings will not be indexed.
For pension savings, the index
amount (EUR 950 instead of EUR
940) had already been announced
early 2014. However, pension
savings institutions may not receive
more than the ceiling amount on
an annual basis (EUR 940 when
indexation is frozen). To offer a
solution to those who have already
paid an amount of EUR 950 during
2014, pension savings institutions
may exceptionally receive a
maximum amount of EUR 950. The
EUR 10 excess payment received
then counts as a payment made in
2015.
Effective date:
• from assessment year 2015
• the measures related to pension
savings take effect on the date
of publication in the Belgian
Official Gazette (29 December
2014)
Increase of lump sum deduction for
business expenses
To compensate for an index jump,
employees can benefit from an
increase in the lump sum deduction
for business expenses. This will
increase net earnings after tax.
The lump sum deduction will be
increased in two stages:
• an initial increase in relation to
salaries paid or awarded from
1 January 2015: a maximum
lump sum deduction for business
expenses of EUR 2,676.25
(previously EUR 2,592.50);
• a second increase in relation to
salaries paid or awarded from
1 January 2016: a maximum
lump sum deduction for business
expenses of EUR 2,760.
The new percentages apply only to
salaries (employees).
The adjustment of the scales for
the calculation of the professional
withholding tax is immediately
passed on to the payroll.
Effective date: from assessment
year 2016 (salaries paid or granted
from 1 January 2015)
Decrease in tax on pension savings
To encourage people to save for
their pensions, the tax on pension
savings (third pillar) is being
cut from 10% to 8%. This tax
will be collected progressively.
The outstanding reserves on
31 December 2014 will be taxed for
the next 5 years at 1%, and 3% will
be due at the age of 60. This allows
the government to gain access to
this income more quickly.
Effective date: 1 January 2015
CORPORATE INCOME TAX
Associations of communes subject
to corporate income tax
The proposal to subject associations
of communes to corporate income
tax had already been discussed in
the previous legislature. Now the
new government wants to actually
introduce this tax.
This implies that the express
exclusion of corporate income tax
for associations of communes is
being abolished. Associations of
communes are not automatically
subject to corporate income tax,
but it can be examined on a caseby-case basis whether the criteria
for subjection to corporate income
tax have been met, as is the case for
other legal entities.
Effective date: from the 2015
assessment year, for accounts
closed on 1 July 2015 at the earliest
Liquidation reserve
The liquidation bonus with an
increased withholding tax of 25%
can be avoided: the temporary
secure arrangement for reserves
(conversion into capital with 10%
withholding tax) will become a
permanent regulation for SMEs.
Each year they can transfer some
or all of their accounting profit
after tax to an unavailable equity
account. This transaction is subject
to an advance levy of 10%, which is
not deductible. On liquidation, the
accumulated liquidation reserve can
be paid out tax-free to shareholders.
BDO-NEWSLETTER 9
TAX
If these reserves are paid out after
5 years, an additional withholding
tax of 5% will be charged. But
if these reserves are paid out
as dividends within 5 years, an
additional withholding tax of 15%
will apply.
Effective date: from assessment
year 2015
More information regarding this
subject is available in our article
on the new liquidation reserve on
p. 22.
Secret commissions’ tax
The 309% secret commission’s tax
scheme has changed fundamentally.
It can be pummarised as follows:
• The secret commission’s tax
still applies as a sanction for
non-compliance with the
requirement to file individual
tax sheets, however with a
number of exceptions:
- If the company can prove
that the costs or benefits
in kind have been timely
included in the beneficiary’s
income tax return or similar
tax return filed abroad; or
- In case no such tax return
was filed, the beneficiary can
still be identified ultimately
within 2 years and 6 months
following 1 January of the
assessment year concerned;
• The secret commissions’ tax
is intended as an exceptional
measure: it will only be applied
if the secret commission cannot
be taxed at the beneficiary;
10 2thePOINT | #1 | 2015
• The secret commissions’ tax
will be only compensatory
(and therefore not repressive) in
nature: the tax must cover the
loss in Belgian income tax. So
the rate is dropping significantly,
but will vary, depending
on who the beneficiary is:
for the beneficiary who is
a natural person subject to
Belgian personal income
tax, the rate will be 103%,
including supplementary crisis
contribution, for a beneficiary
subject to Belgian corporate
income tax, the rate will drop to
51.5%;
• The special tax remains
deductible as a business
expense;
• Smaller expenses that are in
the twilight zone between the
private and professional worlds
will no longer fall within the
scope of the special tax. Under
the new scheme, restaurant
expenses, reception expenses,
modest ICT expenses, etc. that
are still adequately justified
will be rejected as deductible
business expenses.
Effective date: 29 December 2014
Exemption payment professional
withholding tax
The Law of 15 May 2014 increased
the exemption from payment of
professional withholding tax in
companies that work in shifts and/
or at night from 15.6% to 18% as
of 1 January 2015 and to 20.40% as
of 1 January 2017.
This measure is now being deferred
by 1 year, but will then increase to
20.4% more quickly as of 1 January
2016.
VAT
On 1 January 2015 the “Mini One
Stop Shop” scheme (MOSS) comes
into effect. All electronic services,
telecommunications services and
radio and television broadcasting
services will henceforth take
place for VAT purposes where
the consumer is established (or
resident or based), regardless of
whether this consumer is liable
for tax. This means that, in B2C
situations, as is now the case if
the service provider or customer
is established outside the EU, EU
entrepreneurs will always have to
charge VAT in the Member State
where the consumer is established
or based.
In order to avoid multiple VAT
registrations in different EU
member states, entrepreneurs will
be able to pay in their Member
State of establishment the VAT
they owe in the various other EU
Member States where they supply
customers, without additional VAT
registrations.
More information can be found
at: http://www.bdo.be/nl/news/
professional-news/2014/mossregistratiemodule/).
Effective date: 1 January 2015
Cindy De Bock
OTHER INDIRECT TAXES
Excise duties on tobacco and
diesel are again being increased.
Excise duties are also being indexed
annually.
From 2015, the tax on stock
exchange on secondary market
transactions in shares will amount
to 0.27%, with a cap of EUR 800
(previously EUR 700).
Transactions in capitalisation
funds will be subject to a 1.32 %
stock exchange tax, with a cap of
EUR 2,000 (previously EUR 1,500).
Effective date: 1 January 2015
SOCIAL MEASURES
prior to 1 December 2014 they
fulfilled the conditions for early
retirement or if they reached the
age of 65. These regulations only
apply when a career of at least
40 years is proven.
A similar regulation has been made
for self-employed persons where
the same age and career conditions
apply. Effective date: 1 January 2015
STRUCTURAL REDUCTION
There will be an increase of the
structural reduction of social
security contibutions for the first
3 recruitments. The amounts are
increased with 50 EUR.
Effective date: 1 January 2015
PENSIONS
AVERAGE DAILY WAGE
Frontier worker’s pension
The pension-complement that
frontier workers receive will be
reduced for those who never
contributed to the Belgian social
security.
Only employees proving that they
had the frontier worker’s status
prior to 1 January 2015 will still be
able to receive the complement in
the future. The entitlement to the
complement will be delayed until
the foreign legal pension is granted.
Pension bonus
The pension-bonus fades out
starting from 1 January 2015. As
of this date, employees are only
entitled to the pension-bonus if
A uniform notion for “average daily
wage” will be introduced that will
be the calculation basis for several
benefits in case of sickness and
unemployment. The reference will
presumably be the wages of the
12previous months.
The practical implementation will
be determined by Royal Decree.
Effective date: 1 January 2015. n
More information and regular
updates of the measures from the
Michel I coalition agreement can
be found on our website (Dutch/
French): http://www.bdo.be/nl/
news/professional-news/2014/
federale-begrotingsmaatregelenmichel-i/
BDO-NEWSLETTER 11
ACCOUNTANCY
DIVIDENDS FROM PRE-ACQUISITION
PROFITS - ACCOUNTING AND TAX
ASPECTS
THE LAW REFERS TO DIVIDENDS FROM
PRE-ACQUISITION PROFITS WHEN A
COMPANY, FOLLOWING ITS ACQUISITION,
DISTRIBUTES DIVIDENDS FROM RESERVES
(RETAINED EARNINGS) THAT WERE EARNED
PRIOR TO ITS DATE OF ACQUISITION. FOR
THE ACQUIRING ENTITY, THIS IS ESSENTIALLY
A REFUND OF ITS PURCHASE PRICE. FOR THE
TAX AUTHORITIES, THIS STILL REPRESENTS
SHAREHOLDER COMPENSATION AND AS
SUCH IS TAXABLE INCOME.
12 2thePOINT | #1 | 2015
ACCOUNTING
In contrast to English-speaking
countries, accounting law in
Belgium is closely linked to
tax law. Accounting law takes
precedence over tax law unless
explicitly stated otherwise in the
tax law. This means that, when
a company’s annual accounts
are drawn up, accounting
principles often go unobserved
or are applied in a distorted
way. In the example below, we
examine a situation in which the
recommendations specified by the
Belgian Commission for Accounting
Standards (CBN) are applied to
a computation, which can result
in a discrepancy between the
economic reality and the way it is
processed in the annual accounts;
annual accounts that are intended
to provide third parties with a true
and fair view of the assets and
liabilities, financial position and
results of operations.
Example:
Company A acquires the shares
of Company B. The balance sheet
of this acquired Company B is
Nathalie Claes
COMPANY A
Participation
10,000
Capital
10,000
COMPANY B
Real estate
Cash and cash
equivalents
2,000
Capital
2,000
8,000
Reserves
8,000
presented as follows: the sole
asset consists of real estate that
generates annual rental income as
well as cash and cash equivalents.
The liabilities consist of capital and
reserves. These reserves consist
of non-distributed profits from
a previous business activity. An
acquisition price of EUR 10,000 K
was agreed upon. The acquisition
is made by a newly established
company, the purpose of which is
to take participating interests in
companies that engage in a similar
business activity.
Following the acquisition,
the general meeting resolves
to distribute a dividend of
EUR 8,000 K. Because the available
cash and cash equivalents
were taken into account when
determining the acquisition price,
the value of the participation
exceeds its value in use in this
simple example. To arrive at a
fair and true view of the annual
accounts, an adjustment to the
value of the participation is
essential. CBN Standard 151-2
provides two options for processing
this adjustment:
1. the received dividend is
considered to be income and
is processed via the profitand-loss account. To bring the
value of the participation in
line with its value in use for
the company, an entry for
depreciation is made.
2. distributions of profits earned
prior to the acquisition are
viewed as a decrease in the
investment made by the
shareholder and are posted
directly from the participation.
Applying these to our example
produces the following balance
sheets:
METHOD 1
COMPANY A
Participation
10,000
- Depreciation
- 8,000
Cash and cash equivalents
Capital
10,000
2,000
Result carried forward
-136
8,000
Estimated tax
136
COMPANY B
Real estate
Cash and cash equivalents
2,000
0
Capital
Reserves
2,000
0
METHOD 2 (no tax adjustment)
COMPANY A
Participation
10,000
Capital
10,000
- 8,000
Dividends (Pre-acquisition)
2,000
Cash and cash equivalents
8,000
COMPANY B
Real estate
Cash and cash equivalents
2,000
0
Capital
Reserves
2,000
0
BDO-NEWSLETTER 13
ACCOUNTANCY
THE TAX IMPACT?
1. Assuming that the conditions for
applying the dividend-received
deduction have been met, the first
method results in a 5% tax on the
distributed amount.
2. According to the second method
- a direct debit against the
initial cost of the shares - these
dividends, with no tax adjustment,
would not be taxable.
Supreme Court ruling of January
2013
Prior to the January 2013 ruling of
the Supreme Court adherents of the
second method did not believe it
had any impact on taxes. The ruling
clarified the tax position and stated
that, in this case, tax law explicitly
derogates from accounting law. The
tax term “income” only takes capital
subject to tax into account, not a
transfer of property.
The court made the following
argument:
I. Based on Articles 17, §1, 1°; 18,
first paragraph, 1°; 24; and 183
of the Belgian Income Tax Code
(WIB92), dividends that a company
receives from a another company
are income subject to corporate
tax.
Nathalie Claes
14 2thePOINT | #1 | 2015
More information is available at our
Accountancy department:
accountancy@bdo.be
As a consequence, the dividend is
always taxable from a tax perspective
provided the application of the
dividend-received deduction is
possible. When applying the second
method, a tax adjustment is therefore
essential.
After a tax adjustment, method 2
produces the following balance sheet:
METHOD 2 (with tax adjustment)
COMPANY A
Participation
10,000
Pre-acquisition dividend
- 8,000
Cash and cash equivalents
Capital
10,000
2,000
Result carried forward
-136
8,000
Estimated tax
136
COMPANY B
Real estate
II. These tax provisions prevent the
portion of the dividends related
to the profit earned prior to the
shareholding acquisition from
being excluded from taxable
earnings.
Method 2 produces the same
tax result, but by representing
it this way, the annual accounts
show a realistic valuation of
the participation in the holding
company going forward. n
To the extent that the accounting
rules allow dividends from profit
earned prior to the acquisition
of shares to not be entered as
income on the profit-and-loss
account but instead to be entered
as a reduction of the investment
that must be deducted from the
acquisition price of the shares in
question, tax law derogates from
accounting law. The argument
does not meet the test of the law.”
Cash and cash equivalents
2,000
0
Capital
Reserves
2,000
0
FAQ
Dirk Vandendaele
WHEN IS THE TAX
DEDUCTION OF
INTEREST AT RISK?
LOANS ARE A COMMON, IF NOT THE MOST COMMON,
FORM OF FINANCING FOR A COMPANY. EVEN THOUGH
THE TAX ADMINISTRATION ASSUMES THAT THE ASSOCIATED
INTEREST IS FUNDAMENTALLY DEDUCTIBLE, A NUMBER
OF RULES HAVE TO BE FOLLOWED. AN OVERVIEW OF THE
POSSIBLE PITFALLS...
WHAT ARE THE MAIN PITFALLS?
In general, there are restrictions on the deductibility
of interest that is linked, among other things, to
the interest rate applied as such, the identity of the
borrower, the solvency ratio of a company or indeed
the purpose of the loan.
Only if interest is paid to a financial institution
(e.g. a bank) the interest is guaranteed to be taxdeductible. This is because in that situation, it is
assumed that all the rules have been followed.
IS INTEREST DEDUCTIBLE BY DEFINITION?
Yes, Article 52, 2° of the Income Tax Code confirms
the fundamental deductibility of interest on capital
borrowed and used in the company. A company takes
out a loan to finance an investment project, pay its
creditors or purchase a stake. At first sight the interest
associated with these loans is tax-deductible without a
problem. After all, the loans were taken out to finance
business investments or expenses.
But nothing could be further from the truth! Our Income
Tax Code in fact contains numerous exceptions to the
main principle that must be examined in detail. If these
rules are ignored, you risk no longer being able to deduct
the interest as a business expense.
BDO-NEWSLETTER 15
FAQ
FROM WHAT IS SAID ABOVE,
THE IDENTITY OF THE
BORROWER ALSO SEEMS TO BE
IMPORTANT, IS THAT RIGHT?
WHAT MUST YOU LOOK
OUT FOR WHEN FIXING THE
INTEREST RATE?
That it corresponds to the normal market rate.
Market rate is understood to mean the interest
rate that applies on the market, taking into
account the information specific to the assessment
of the risks associated with the loan, the credit
rating of the borrowing company and the term of
the loan. The market rate will therefore differ for
each company.
However, Article 56 of the Income Tax Code
stipulates that the interest rate is deemed to
correspond with the market rate if it is fixed in
accordance with the interest paid on publicly
issued bonds and similar securities or is paid to a
financial institution (see above). Thus, you could
base yourself, for example, on the interest rate
charged by the bank for a cash credit for loans of
unlimited duration.
In any event, the burden of proof for the deductible
interest lies with the company. Non-deductible
interest constitutes disallowed expenditure.
16 2thePOINT | #1 | 2015
Absolutely. Interest that is paid directly or indirectly to
a foreign taxpayer who is not liable for income tax in
his or her country or where interest earnings are subject
to a much more favourable tax regime than in Belgium,
will in principle not be deductible.
Even more important in the everyday practice of family
businesses are the loans granted by shareholders
(natural persons), company directors (natural persons)
or the spouse(s) or children of such a shareholder or
representative. To counter the undercapitalisation of
Belgian companies, interest paid in connection with the
aforementioned loans is only deductible within certain
limits. That portion that exceeds one of the thresholds is
requalified as a paid dividend.
In concrete terms, the interest will not be deductible
(and be requalified as dividends) in the following
instances:
I. if the stipulated interest is higher than the
market rate (see above);
II. if the loan is too high. That is the case if the loan
exceeds the sum of the taxable reserves at the
start of the taxable period (if positive) and the
paid-up capital at the end of the taxable period.
Dirk Vandendaele
TO WHAT EXTENT DOES SOLVENCY PLAY A PART?
The solvency ratio represents the ratio between the
equity and debt in a company. To the extent that
there is an imbalance between the two balance sheet
components, the interest deduction may also be at
risk here. The maximum permitted ratio is 1/5 (the
so-called “thin cap” rule). In other words, the total
amount of the loans may be up to 5 times greater
than the taxed reserves (start of taxable period)
and the paid-up capital (end of taxable period).
Deductibility is only ruled out for interest paid on
that part of the loan(s) that exceeds this threshold
(1/5).
The tax legislator has two types of lender in mind
here. Firstly, interest paid to an affiliated company
within the meaning of Article 11 of the Companies
Code is intended. These include parent companies,
subsidiaries or sister companies.
Secondly, acquirers are targeted who are not subject
to income tax (e.g. in a tax haven) or who only benefit
from a much more favourable tax regime on interest
earnings.
For the application of this interest restriction, cash
pool companies only have to take into account net
interest payments, i.e. after compensation between
interest paid and interest received.
For the sake of completeness, this “thin cap” rule does
not apply to leasing companies, factoring companies
and companies active in the field of public-private
partnerships.
CAN THE MONEY OBTAINED BE USED FOR ANYTHING?
No, restrictions also apply here.
As with all other expenses, the
interest deduction is subject to the
condition that the financing must
be provided to obtain or retain
taxable earnings (application of
Article 49 of the Income Tax Code).
Thus, a company that borrows
money to in turn grant an interestfree loan (i.e. no taxable earnings)
will jeopardise the deductibility of
the interest. It must be possible for
the link between both transactions
to be demonstrated.
A more common situation is
the taking out of a loan to make
advance payments. In most cases,
the associated interest is taxdeductible as a business expense.
If the company in question
subsequently receives the tax
assessment, the tax administration
also allows the deduction of
interest on the loan that also
has to be taken out to cover the
tax yet to be paid. However, if a
correction is later granted and
back taxes have to be paid, then
neither the interest on arrears nor
the interest on the financing taken
out for this is deductible.
More information is available at our Accountancy
Department: accountancy@bdo.be
BDO-NEWSLETTER 17
TAX
NATIONAL EXCISE DUTIES
AND ENVIRONMENTAL
TAXES: AUDITS AND
CHANGES ON 1/01/2015
LAST YEAR, THE CUSTOMS AUTHORITIES
BEGAN AUDITS IN RELATION TO NATIONAL
EXCISE DUTIES AND ENVIRONMENTAL
TAXES, AMONG OTHER PLACES IN THE
CATERING INDUSTRY (HORECA). AUDITS
ARE CARRIED OUT ON THE BASIS OF THE
INTRA-COMMUNITY FLOW INTO BELGIUM
OF CERTAIN PRODUCTS AS REFLECTED IN
THE VAT RETURN.
THE AUDITS FOCUS ON NATIONAL EXCISE
DUTIES AND ENVIRONMENTAL TAXES.
18 2thePOINT | #1 | 2015
NATIONAL EXCISE DUTIES
National excise duties are levied on
the products below. The applicable
rates were increased slightly on
1 January 2015.
For water without extra additives and
pure fruit juices, the rate of excise duty
is zero euros.
PRODUCT SUBJECT TO NATIONAL
EXCISE DUTY
2014 RATE
2015 RATE
Non-alcoholic beverages (including nonalcoholic beer, non-alcoholic wine, other nonalcoholic fermented beverages)
EUR 3.7184
per hectolitre
EUR 3.7284
per hectolitre
Substances that are clearly intended for the
manufacture of non-alcoholic beverages
presented in liquid form
EUR 22.3104
per hectolitre
EUR 22.3706
per hectolitre
Substances that are clearly intended for the
manufacture of non-alcoholic beverages
presented in powder or granular form or in
another solid form
EUR 37.1840 per
100 kg net weight
EUR 37.2844 per
100 kg net weight
Unroasted coffee
EUR 0.1983
per kg net weight
EUR 0.1988
per kg net weight
Roasted coffee
EUR 0.2479
per kg net weight
EUR 0.2486
per kg net weight
Coffee extracts, essences and concentrates,
in solid or liquid form, as well as preparations
based on coffee extracts, essences and
concentrates and coffee-based preparations
EUR 0.6941
per kg net weight
EUR 0.6960
per kg net weight
Customs 4 trade
PACKAGING CHARGE
RATE (EUR)
Individual reusable packaging
1.4100 per hectolitre of product content
of the packaging
Individual disposable packaging
9.8600 per hectolitre of product content
of the packaging
ENVIRONMENTAL CHARGES
PARTIALLY ABOLISHED
Environmental taxes consisted, of
packaging and environmental charges.
Since 1 January 2015, however,
this last category of taxes has been
repealed. This was a levy on a number
of disposable items made from
plastic that was set up because of the
harmful substances emitted during
their production and the burden
this placed on the environment. It
was levied on the following plastic
products: disposable bags, disposable
cutlery, but also on domestic and
aluminium foil.
The packaging charge, better known
as the former ecotax, is an indirect
charge on the individual, non-reusable
packaging used for beverages such
as water, lemonade and other soft
drinks, beer, wine, vermouth and
other fermented beverages, ethyl
alcohol, spirits and fruit juice or juice
from unfermented vegetables.
- Individual packaging is understood
to mean: any packaging,
regardless of the material from
which it is made, intended to be
delivered to the end user without
having undergone a change in
packaging.
- Reusable packaging is understood
to mean: packaging that can
be refilled at least seven times,
which is taken back through a
deposit system, and which must
actually be used. The amount of
the deposit is at least EUR 0.16 for
packaging with a capacity of more
than 0.5 litres and EUR 0.008 for
packaging with a capacity less than
or equal to 0.5 litres.
AUDITS AND FORMALITIES
For several years there has been
increased vigilance regarding the
above products because it has been
established that foreign companies
that place such products on the
Belgian market often do not comply
with the formalities and do not pay
the taxes in question.
National excise duties and packaging
charges are payable at the time
of release for consumption in the
country:
• as a result of the withdrawal
of products from a suspension
arrangement;
• as a result of possession outside a
suspension arrangement;
• as a result of the manufacture of
products subject to excise duty
outside a suspension arrangement;
• as a result of their import into
Belgium.
Specifically, the excise duties and
packaging charges to be paid must
be declared prior to consumption
and are submitted by means of the
PLDA system via the AC4 excise duty
declaration (for details see http://plda.
fgov.be/nl/AC4_NL).
For products purchased outside
Belgium, e.g. purchases from Dutch
suppliers, or purchases through a
central European purchasing body,
foreign vendors are often not familiar
with the formalities involved in
bringing goods into Belgium. The
products they provide are in many
cases not subject to national excise
duties in their country, and so are
supplied without formalities. These
intra-Community acquisitions are
easily detected at the Belgian buyer
through its VAT return. Based on
possession of these products (see
payability point 2, above), the holder of
these products is liable for this tax… n
For more information:
Contact our joint venture partner,
Customs4Trade:
Pieter.Haesaert@customs4trade.com
BDO-NEWSLETTER 19
LEGAL
REAL ESTATE INVESTMENT
FUNDS AND REGULATED
REAL ESTATE COMPANIES
scope of the Directive. This new
structure was dubbed a Regulated
Real Estate Company (GVV/SIR), in
literature also called B-REIT (Belgian
Real Estate Investment Trust) after its
foreign counterparts.
… BASED ON THE REAL ESTATE
INVESTMENT FUND
HISTORY - REAL ESTATE
INVESTMENT FUNDS
The Law of 4 December 1990 on
financial transactions and financial
markets made it possible to invest in
real estate in Belgium by means of an
Investment Fund with Fixed Capital
(BEVAK/SICAFI), known as a ‘Real
Estate Investment Fund’. Since 1995,
Real Estate Investment Funds have
been considered as an undertaking
for collective investment (UCI) and
governed by a specific set of laws (law
of 3 August 2012 on UCIs and the
Royal Decree of 7 December 2010 on
Real Estate Investment Funds). A Real
Estate Investment Fund was (and is)
required to satisfy a number of specific
conditions. It must (among other
things):
• be listed;
• invest exclusively in real estate;
• invest in multiple primises
(a maximum of 20% of the equity
may be invested in one single
building), but it may not operate as
a property developer;
• have a limited equity/debt ratio
(the 65% rule: the debt level is
20 2thePOINT | #1 | 2015
limited to 65% of the balance
total sheet;
• distribute at least 80% of rental
income in the form of dividends to
shareholders.
REGULATED REAL ESTATE
COMPANIES…
To provide investors with better legal
protection, a Directive was issued at
the European level in 2011 (Alternative
Investment Fund Managers Directive,
or AIFMD) that imposed new rules
on management of alternative funds.
Based on their status as an Investment
Fund, Real Estate Investments Funds
fell under the scope of this Directive
and additional measures were
imposed which made their status and
operations more complex. When the
AIFMD Directive was converted into
Belgian law, the Belgian Parliament
decided (via the Law of 12 May 2014
on regulated real estate companies)
to create an alternative to the Real
Estate Investment Fund that would
allow a real estate company to be
set up without being considered an
investment fund and - as a result would not fall within the primary
The Royal Decree of 14 July 2014
governing the status and operation
of Regulated Real Estate Companies
was founded entirely on the
aforementioned Royal Decree of
7 December 2010 on Real Estate
Investment Funds. The conditions
which a real estate investment fund
must satisfy were duplicated for
Regulated Real Estate Companies,
only changing a number of specific
elements, but with a more general
and broader scope of activities for
Real Estate Companies. In addition
to offering an investment instrument
that generates its yield from the (longterm) lease of real estate, a shift in
emphasis was made for Regulated Real
Estate Companies by focusing their
activities on the development of real
estate projects and the day-to-day
management of properties, etc. Those
task had traditionally been outsourced
by Real Estate Investment Funds.
The status of a Regulated Real Estate
Company moreover allows - under
certain conditions - to provide services
to third parties. To do this, a Regulated
Real Estate Company must engage
sufficient staff force and develop
operational capacity on its own.
As a result, a Regulated Real Estate
Company has a more general and
Steven Strobbe - Marc Verbeek
broad converted commercial purpose
that is oriented towards a business
strategy. This stands in contrast to
the profile of a real estate investment
fund, which, as an undertaking for
collective investment, acts in the
exclusive interest of its shareholders.
only be acquired by qualified
investors. An Institutional
Regulated Real Estate Company
is always under the control of
one or more public Regulated
Real Estate Companies.
TAX REGIME
Like Real Estate Investment Funds,
Regulated Real Estate Companies are
subject to the supervision of the FSMA.
A transitional regulation was provided
in the new law for existing Real Estate
Investment Funds, which was applied
en masse such that all known Real
Estate Investment Funds (Befimmo,
Cofinimmo, Montea, Warehouses De
Pauw, etc.) abandoned the status of
Real Estate Investment Fund and opted
the status of Regulated Real Estate
Company by submitting an application
for a licence to that effect to the FSMA
before 16 November 2014 and by
amending their articles of association.
TYPES OF REGULATED REAL
ESTATE COMPANIES
The law of 12 May 2014 on
Regulated Real Estate Companies
provided for two different types:
1. the Public Regulated Real Estate
Company, is primarily publicly
funded, in Belgium or abroad,
without excluding leave it other
forms of financing (private
placements, bond issues, loans,
etc.);
2. the Institutional Regulated Real
Estate Company, is funded, in
Belgium or abroad, exclusively
through securities that can
The same tax regime that applies to
Real Estate InvestmentFunds applies
to Regulated Real Estate Companies.
Corporate income tax
A Regulated Real Estate Company is
not taxable on the accounting result,
including capital gains.
The tax base consists solely of the
abnormal or benevolent advantages
received and disallowed expenses
(other than depreciations and capital
losses on shares). The Regulated Real
Estate Company is excluded from
the dividend received deduction
and the notional interest deduction,
among others. The standard rate
of 33.99% applies in this case. The
secret commissions tax can also be
applied.
from a BEVAK/SICAFI to Regulated
Real Estate Company can be tax
neutral.
Taxation of shareholders
Dividends paid by a Regulated Real
Estate Company are subject to 25%
withholding tax, except for dividends
from a ‘residential’ Regulated
Real Estate Company, for which
a rate of 15% applies. Corporate
shareholders cannot take advantage
of the dividend received deduction
for dividends received from the
Regulated Real Estate Company.
Stock exchange tax
The same rules that apply to real
estate investment funds apply here
as well. n
More information is available at our Real
Estate Sector Group:
marc.verbeek@bdo.be
steven.strobbe@bdo.be
Exit tax
For tax purposes, the recognition
of a normally taxed company as
a Regulated Real Estate Company
is treated the same as a - taxed
- dissolution and liquidation. The
tax rate for latent capital gains
and exempt reserves amounts
to 16.995%. The same regime
applies to restructurings in which a
Regulated Real Estate Company is
involved. However, the conversion
BDO-NEWSLETTER 21
TAX
NEW TAX “LIQUIDATION
RESERVE”: PRACTICAL
IMPLICATIONS FOR SMALL
BUSINESSES?
22 2thePOINT | #1 | 2015
Olivier Gios - Caroline Meirte
THE PROGRAMME LAW OF 19 DECEMBER 2014 (BELGIAN OFFICIAL GAZETTE OF 29
DECEMBER 2014) INTRODUCES THE SO-CALLED “LIQUIDATION RESERVE” FOR SMALL
BUSINESSES AS FROM THE 2015 ASSESSMENT YEAR. THIS ALLOWS THE WITHHOLDING TAX
ON LIQUIDATION BONUSES AND DIVIDENDS TO BE LIMITED, SUBJECT TO A PRIOR ADVANCE
LEVY OF 10%. IN OTHER WORDS, IN THE FUTURE, AND DESPITE THE STANDARDISATION OF
THE RATE IN 2012, TWO SPECIAL REDUCED-CHARGE REGIMES WILL BE PROVIDED FOR SMALL
BUSINESSES. ALTHOUGH THE PURPOSE OF THE LIQUIDATION RESERVE IS ESSENTIALLY
THE SAME AS THE TEMPORARY TRANSITIONAL REGIME FOR LIQUIDATION BONUSES AND
THE PREVIOUS VVPR REGIMES FOR DIVIDENDS, THERE ARE A NUMBER OF SUBSTANTIAL
DIFFERENCES. THE QUESTION ALSO ARISES AS TO WHAT EXTENT THE NEW REGIME
COMPLEMENTS THE EXISTING VVPRBIS REGIME AND OFFERS NEW OPPORTUNITIES FOR TAX
OPTIMISATION.
INTRODUCTION OF A
NEW TAX CONCEPT: “THE
LIQUIDATION RESERVE”
The new regime specifies that each
year small businesses can place
some or all of their profits in a
liquidation reserve at a separate tax
rate of 10% (new article 184quater
of the Income Tax Code (WIB) and
article 219quater WIB).
When an SME chooses to include
taxed profit from the financial year
(after tax) in the special liquidation
reserve, the following two
preferential regimes will apply:
• the pay-out on liquidation is
tax-free; and
• the reserved profit will be able
to be paid out as a dividend at
a supplementary withholding
tax rate of just 5% (for payouts after 5 (full) years) or 15%
(for pay-outs within 5 years).
The waiting period runs from
the closing date of the financial
year in which the reserves were
created.
In other words, the reduced
withholding tax rate is now linked
to whether or not the liquidation
bonuses or the dividend pay-outs
come from the reserved taxed
profit from which the “advance
levy” of 10% has been deducted.
The advance levy cannot under any
circumstances be reduced by tax
deductions, nor can withholding tax
on advance payments be offset with
this charge.
“NEW” CONCEPT BUILDS ON
EXISTING PREFERENTIAL TAX
REGIMES
1. “Liquidation reserve” vs
“Transitional withholding tax
measure for liquidation bonuses”
The measure must be seen in the
light of the transitional measure
pertaining to the increase in
withholding tax for liquidation
bonuses from 10% to 25%. It
allowed the reserves that existed
on 31 March 2013 to be ‘secured’
in the capital at the withholding
tax rate of 10%. Since many ‘old
reserves’ have already been secured
in this context, the government is
now focusing its full attention on
the ‘new reserves’.
Although the new regime is de
facto a permanent extension of
the transitional measure, there
are nevertheless a number of
noteworthy differences:
• the scope of application is
limited to ‘small companies’
within the meaning of article 15
of the Companies Code.
• no prior payment of dividends
from specific taxed reserves is
required that must immediately
be followed by a capital
increase.
• the special ‘liquidation reserve’
can only be paid out tax-free
upon liquidation, whereas under
the transitional regime this was
possible for small businesses
after four years, irrespective of
whether liquidation was taking
place.
• withholding tax is to be paid
by the company (and not the
shareholder) and is due at the
time the liquidation reserves are
created.
BDO-NEWSLETTER 23
TAX
Olivier Gios - Caroline Meirte
are essentially the same, i.e. to
encourage equity capital increases
in SMEs by means of a reduced
withholding tax rate on dividends.
2. “VVPRter” vs “VVPRbis”
The term “VVPR” stands for
Verlaagde Voorheffing / Précompte
Réduit [‘Reduced Withholding Tax’]
and was introduced by the Law
of 30 March 1994. However, this
VVPR regime was abolished as
of 1 January 2013 following the
standardisation of the withholding
tax rate at 25%. For some dividends
of small businesses, however,
the Programme Law of 28 June
2013 again introduced a reduced
withholding tax rate (VVPRbis). This
measure not only applies to capital
increases, but also when establishing
new SMEs.
The Programme Law of
19 December 2014 also represents
the introduction of a new, additional
VVPR regime for dividends of small
businesses (VVPRter).
The conditions for application of the
VVPRbis are stricter than those for
the applications of VVPRter:
• the scope of application is
limited to cash contributions
from 1 July 2013;
• these must be ‘new’
contributions, i.e. the
incorporation into capital of
reserves, issue premiums or
previously-existing capital
gains is not regarded as a cash
contribution;
24 2thePOINT | #1 | 2015
• shares may not create any
preferential rights;
• there may not be any share
transfers;
• liquidation bonuses are not taxexempt; and
• the law provides for a number of
specific anti-abuse provisions.
The existing system nevertheless
provides for a waiting period of
four years as from the contribution
of the net amount of the dividend
in capital, while the new regime
prescribes a longer period of five
years.
RELAXING OF PROCEDURAL
REGULATIONS IN THE NEW
SYSTEM
The procedure envisaged under
the new system is relatively easily
applied:
• liquidation reserves are created
by transferring to a separate
account on the liabilities side;
• an annual statement must be
included with the corporate
income tax return; and
• the status is only retained
as long as the condition of
inviolability is complied with.
The question then arises as to
whether this partially undermines
the VVPRbis regime, since it can be
presumed that the intention and
tax benefit of both VVPR regimes
ACTION CAN ALREADY BE
TAKEN FOR FINANCIAL
YEAR 2014
The Programme Law of 19
December 2014 has the system of
liquidation reserves take effect as
of the 2015 assessment year. This
means that a liquidation reserve
can be created for profits for the
2014 financial year. If a reserve is
created for the 2014 financial year,
one year’s waiting time is gained
for financial years that end on
31 December! n
More information is avalaible at our
Tax Departement: tax@bdo.be
IFRS
Dominique Milis
IFRS-NEWS
BACKGROUND
In May 2014, the International
Accounting Standards Board
published IFRS 15 Revenue from
Contracts with Customers. The new
Standard contains comprehensive
guidance for accounting for
revenue and will replace existing
requirements which are currently
set out in a number of different
Standards and Interpretations.
IFRS 15 is fully converged with
equivalent new US GAAP guidance
and contains significantly
more prescriptive and precise
requirements in comparison with
existing IFRS. This means that
for many entities, the timing and
profile of revenue recognition will
change. In some areas the changes
will be very significant and will
require careful planning, including
for commercial effects.
IFRS 15 also introduces significantly
more disclosures about revenue
recognition. It is possible that new
and/or modified internal processes
will be needed in order to obtain
the necessary information.
This article highlights certain areas
that are of particular significance
for the first time application of
IFRS 15 and looks briefly at the
commercial effects that are likely
to be relevant. These commercial
effects may be very significant,
meaning that entities would
be well advised to carry out an
assessment of the likely effects of
IFRS 15 at an early stage.
OVERVIEW
The core principle is that a vendor
should recognize revenue to depict
BDO-NEWSLETTER 25
IFRS
the transfer of promised goods or
services to customers in an amount
that reflects the consideration
to which the vendor expects to
be entitled in exchange for those
goods or services.
Revenue will now be recognized by
a vendor when or as control over
the goods or services is transferred
to the customer. In contrast,
IAS 18 Revenue based revenue
recognition around an analysis of
the transfer of risks and rewards;
this now forms one of a number
of criteria that are assessed in
determining whether control has
been transferred.
The application of the core
principle in IFRS 15 is carried out in
five steps.
• The first step is to identify the
contract(s) with the customer.
Whatever the form, a contract
creates enforceable rights and
obligations between a vendor
and its customer.
• After identifying the contract(s)
with the customer, a vendor
identifies the ‘performance
26 2thePOINT | #1 | 2015
obligations’. A performance
obligation is a promise by the
vendor to transfer goods or
services to a customer. Each
performance obligation is
‘distinct’, being either:
- a good or service from
which the customer can
benefit on its own (or in
combination with other
readily available goods and
services); or
- two or more distinct goods
and services (such as the
supply of construction
material and labor) are
combined if, in reality,
they represent one overall
obligation.
• In the third and fourth steps,
a vendor determines the
transaction price of the entire
contract and then allocates
the transaction price among
the different performance
obligations that have been
identified.
• In the fifth step, a vendor
assesses when it satisfies each
performance obligation (which
may be at a point in time,
or over time) and recognizes
revenue. The principle is based
around the point at which the
customer obtains control of the
good or service.
EFFECTIVE DATE
IFRS 15 is required to be
applied retrospectively for
periods beginning on or after 1
January 2017. Early application
is permitted. The retrospective
application can be made using one
of the following methods:
• Retrospective application to
each reporting period presented
in accordance with IAS 8
Accounting Policies, Changes in
Accounting Estimates and Errors
(that is, full restatement of
comparative figures)
• Retrospective application with
practical expedients which
simplify the transition
• Retrospective application
with the cumulative effect
of initially applying IFRS 15
recognized directly in equity
(retained earnings).
If an entity chooses the latter
method, additional disclosures
need to be provided stating the
amount by which each financial
statement line item is affected as
compared to IAS 11 Construction
Contracts and IAS 18 and
their related Interpretations.
Additionally, the entity is required
to explain the reasons for
significant changes identified.
SIGNIFICANT ISSUES
Our initial analysis of IFRS 15
indicates that the following areas
may be of particular significance:
• Is revenue recognized at a
single point in time, or over a
period of time?
• If revenue is recognized over
time, how should progress
towards completion be
Dominique Milis
measured and recognized?
• Will a contract need to be
‘unbundled’ into two or more
components, or two or more
contracts ‘bundled’ into a single
overall obligation?
• How should contracts which
include variable amounts of
consideration (including rights
of return) be dealt with?
• How should modifications to
contracts be dealt with?
• Should costs associated
with obtaining a contract
be capitalized, or expensed
immediately?
• What adjustments are required
for the effects of the time
value of money (a ‘financing
component’)?
COMMERCIAL EFFECTS
The adoption of IFRS 15 may
lead to significant changes in
the pattern of revenue and profit
recognition. Careful consideration
and planning will be needed for a
wide range of issues, including the
effect on:
• Compliance with bank
covenants
• Performance based
compensation (including sharebased payments)
• Internal budgeting processes
• Market and investor
communications, including
compliance with regulatory
requirements (which might
arise from significant expected
future changes to an entity’s
reported financial position or
performance).
A review of the terms and
conditions of existing contracts
will be needed (in particular long
term contracts which extend
into periods covered by financial
statements affected by the
adoption of IFRS 15) as well as
those which are to be entered into
in future. In some cases, entities
may wish to consider whether
changes should be made to
contracts.
free copy at ifrs@bdo.be indicating
which sector has your interest:
•
•
•
•
•
•
•
Manufacturing
Construction & Real Estate
Media
Professional Services
Retail
Software
Telecommunications n
More information is available at our
Competence Center IS: ifrs@bdo.be
It is also likely that sales
departments will need to liaise
more closely with the accounting
department in future, in order
that the effects of any proposed
contractual terms on the related
financial statements can be
understood in advance.
OTHER POTENTIAL ISSUES
TO CONSIDER
Different businesses will be
affected by various elements of
the standard depending on their
individual circumstances including
how they operate. Much of this
may be driven by specific industry
sector dynamics and methods of
operation.
BDO Belgium has prepared a
number of IFRS Industry Issues
publications highlighting how
businesses in specific industry
sectors may be affected. Please
do not hesitate requesting your
BDO-NEWSLETTER 27
PARTNERSHIP NEWS
INTERVIEW
RIK DE NOLF –
CEO ROULARTA
FOR THE SECOND YEAR IN A ROW, IN THE MONTHS OF NOVEMBER AND DECEMBER 2014, TRENDS
ORGANISED THE “TRENDS BUSINESS TOURS” JOINTLY WITH BDO, WHICH HONOURED COMPANIES
IN EACH PROVINCE THAT DISPLAY INNOVATION, CREATIVITY AND DYNAMISM. FROM JANUARY
2015, BDO WILL ALSO BE A PARTNER OF “MANAGER OF THE YEAR”, AN EVENT THAT NEEDS NO
FURTHER EXPLANATION... A CONSCIOUS CHOICE, BECAUSE BDO IS ESPECIALLY SYMPATHETIC
TOWARDS BELGIAN COMPANIES AND ENTREPRENEURS, WHICH TOGETHER CONSTITUTE THE
ENGINE OF THE BELGIAN ECONOMY
28 2thePOINT | #1 | 2015
Ann Celis
TRENDS SETS THE NETWORK TREND
In 1975, a new magazine appeared for the Belgian
entrepreneur - Trends Magazine. From the outset it was
clear that the reader of Trends attached considerable
importance to networking opportunities. In 1984, what
had begun as a popular annual New Year’s event
developed into the first “Manager of the Year”, and was
an immediate success. The trend had been set, since
informal meetings between fellow entrepreneurs are the
perfect way to engage in healthy cross-fertilisation.
Over the years a great many new initiatives were
launched, from the “Trends Gazellen” to the “Trends
HR Manager of the Year”, and 3 years ago the “Trends
Tendances Business Tour” as well.
RDN: “For Roularta, BDO was immediately a logical
partner. BDO has the same entrepreneurial DNA, which
means it speaks from experience, and is also always
striving for top quality.”
By organising these special networking opportunities,
Roularta wants to stimulate a healthy entrepreneurial
climate in its own way, and ensure that companies,
from young starters to large international groups - and
from a wide range of sectors and specialist areas are given sufficient visibility and recognition. Bringing
together specific target groups with the same outlook
also guarantees a host of fresh new ideas. In addition,
at each “Trends event”, particular attention is paid to the
quality label, since nominees are carefully selected on
the basis of specific criteria.
RDN: “It continues to amaze us how much potential and
talent there is on the Belgian market. Despite the difficult
economic climate, or perhaps maybe even because of
it, the Belgian entrepreneur has become particularly
innovative... Roularta also continues to launch new
initiatives and to innovate.”
For example, Roularta created a series of specific niche
magazines, took the initiative to launch TV channels and
radio stations and more and more digital initiatives.
With the recently launched “Daily Trends”, the Trends
reader can follow the main financial and economic news
items from 6 a.m. via tablet, smartphone or the website.
And Roularta also expects the necessary creativity and
out-of-the-box thinking from the editors. With the launch
of the “Knack-Cruise”, the editors are acknowledging
the importance of a proper work-life balance. A relaxing
holiday atmosphere with the family, but linked to the
presence of fellow entrepreneurs and engaging guest
speakers from the business world. A completely new
initiative, with immediate success, as a result of which a
new version is planned for 2015.
«
Growth is a matter of independent, repeatedly
innovative and creative initiatives.
RIK DE NOLF, CEO ROULARTA
»
RDN: “For the Belgian entrepreneur, and also for
Roularta, innovation has become a must, and the
only way to create business value. And innovative
companies network, and are fascinated by the
perspectives of others; they dare to actively seek out
fellow entrepreneurs who approach an opportunity with
different eyes. Roularta wants to be actively involved in
this area, together with its partners, including BDO, and
so we will continue to organise events like this with as
much enthusiasm.” n
TRENDS BUSINESS TOUR - WINNERS IN 2014
The 10 winners of the Trends Business Tour 2014
• Nearly New Office Facilities – Flemish Brabant
• Vanheede – Brussels
• GRL Recycling – Limburg
• Sky Man International – Antwerp
• Dija-Oostcolor – West Flanders
• Verhaert New Products & Services – East Flanders
• Ecophos – Walloon Brabant
• Sopura – Henegouwen
• Macors – Namur/Luxembourg
• Procoplast – Liège
ROULARTA MEDIA GROUP
Roularta Media Group is a strong family business that has
expanded since 1954 from a small printer/publisher with
two local weeklies into a multimedia group with around
3,000 employees and a total turnover of EUR 700 million. The
company is headed up by Rik De Nolf, who joined his father’s business
in 1972 as director of magazines. In 1975, he was a co-founder of Trends
magazine, which has since become a more-than-established name in the
media landscape.
BDO-NEWSLETTER 29
CORPORATE NEWS
KEY FIGURES 2014
BDO BELGIUM
Special Advisory
Services
10,2 M€
Audit
& Assurance
22,7 M€
TOTAL 2014
67,2 M€
Tax&Legal
12,4 M€
Accounting
& Reporting
21,9 M€
PARTNER AND STAFF (AVERAGE FTE)
BDO PUBLISHES
ANNUAL FIGURES
FOR 2013-2014
FINANCIAL YEAR
BDO BELGIUM PROPOUNDS
A STAKEHOLDERS VISION
74
PARTNERS
345
TOTAL
PROFESSIONNAL STAFF
491
72
SUPPORT STAFF
REVENUE PER STAFF
STAFF RETENTION %
(WHEIGHTED AVERAGE)
NUMBER OF STAFF
OCTOBER1ST (HEADCOUNT)
137.000
84,1%
548
BDO INTERNATIONAL
TURNOVER
5.173 M€
Others
21 %
FEE SPLIT
Tax Advices
21 %
Audit
/Accounting
58 %
59.428
PARTNERS & STAFF
1.328
OFFICES
151
COUNTRIES
BDO Services CVBA/SCRL, a limited liability company incorporated in Belgium, is a member of BDO International Limited, a
UK company limited by guarantee, and forms part of the international BDO network of independent member firms. BDO is
the brand name for the BDO network and for each of the BDO Member Firms.
Follow us
www.bdo.be
30 2thePOINT | #1 | 2015
BDO BELGIUM PUBLISHES
ITS ANNUAL FIGURES FOR
2013-2014 FINANCIAL
YEAR AND ONCE AGAIN
RECORDS GOOD GROWTH
WITH REGARD TO THE
PREVIOUS FINANCIAL
YEAR, THANKS TO A CLEAR
FOCUS ON HEALTHY
ENTREPRENEURSHIP.
Hans Wilmots, CEO BDO Belgium: “an
entrepreneur is daring, weighs up risks.
An entrepreneur is organised and takes
decisions. An entrepreneur formulates
a vision, and acts consistently with
it. An entrepreneur assesses the
opportunities and challenges and
responds quickly and wisely to them.
As a service provider, BDO has a great
deal of respect for anyone who is
entrepreneur, as BDO understands
what it is to conduct a business. With a
number of fundamental values at the
basis of its model: integrity, respect
for others, and an exceptional quality
of service at a fair price – these are the
cornerstones of our organisation. In
short, BDO propounds a stakeholder
vision, rather than a pure shareholder
vision!”
FROM SHAREHOLDER TO
STAKEHOLDER VISION
In a service organisation like BDO,
a stakeholder vision translates into
pursuing a loyal, sustainable bond,
a strong long-term relationship
between clients, employees
and Partners – three groups of
stakeholders who deserve their
interests to be served equally.
We can only achieve this
“exceptional client service” if we are
willing to make an extra effort for
the client if required, and even more
so when offered spontaneously. If
we are willing to step out of our
comfort zone every so often. If we
dare to show the client that we will
go through fire for them.
NEED FOR INTROSPECTION
We want the client to feel that
we will go that “extra mile” for
him. To be sure that we can follow
this through, in 2014 we had the
courage to question many aspects
of our own organisation. The object
of this exercise was to find out
what we should be doing better to
support our vision.
A healthy profitability underpinning
future investment is, in our
experience, a combination of
refined planning, efficient use of
available time, the valorisation of
our work by the client, and the
sensible use of non-productive time
(including commercial development,
supervision and training of people,
investment in new products,
and management of our own
organisation).
Hans Wilmots says “We are pleased
to have done this. It is important
for every company to engage in a
little introspection – one always
learns from it, and specific points
for improvement are found in all
possible areas that can help secure
the future of the organisation – in
our case in relationship to the client,
our employees and our Partners!”
ANNUAL STATEMENT
2014
BDO PEOPLE ARE PASSIONATE ABOUT
DELIVERING EXCEPTIONAL CLIENT SERVICE
The annual report is available on our website via:
www.bdo.be/en/academy/publications/annual-report/2014/
BDO-NEWSLETTER 31
BDO IS ALWAYS ON THE
LOOKOUT FOR NEW TALENT
BDO IS CURRENTLY LOOKING TO FILL THE FOLLOWING POSITIONS
FINANCIAL AUDIT
l Senior Manager - Gent
l Senior – Gent
RISK & ASSURANCE SERVICES
Senior – Antwerp
l
ACCOUNTANCY
Manager – BXL
l Senior – BXL
l Senior – La Hulpe
TAX
Manager - BXL
l Supervisor – La Hulpe
l
LEGAL
Senior Advisor – Antwerp
l Senior Advisor – Luik
l Senior Manager – BXL
l
OUR OFFICES
l
CENTRALE DIENSTEN
Project Leader ICT
l Director Operations
l Controller
l Marketing & Communication
Officer
l
SERVICES
Secretary Antwerp
l Secretary Hasselt
l
BDO ANTWERPEN
BDO GENT
BDO LIÈGE
BDO BRUSSELS (AIRPORT)
BDO HASSELT
BDO NAMUR-CHARLEROI
BDO BRUSSELS (CENTRE)
BDO LA HULPE
BDO ROESELARE
Uitbreidingstraat 72/1
B-2600 Antwerpen
T. +32 (0)3 230.58.40
F. +32 (0)3 218.45.15
bdoantwerpen@bdo.be
The Corporate Village
Da Vincilaan 9, Box E.6
B-1935 Zaventem
T. +32 (0)2 778.01.00
F. +32 (0)2 771.56.56
bdobrussel@bdo.be
Blue Tower
Louisalaan 326 bus 30
B-1050 Brussel
T. +32 (0)2 640.07.96
F. +32 (0)2 640.53.43
bdobrusselscentre@bdo.be
Axxes Business Park
Guldensporenpark 100 - blok K
B-9820 Merelbeke
T. +32 (0)9 210.54.10
F. +32 (0)9 232.43.40
bdogent@bdo.be
Prins Bisschopssingel 36/3
B-3500 Hasselt
T. +32 (0)11 28.60.60
F. +32 (0)11 28.52.78
bdohasselt@bdo.be
Nysdam Office Park
Avenue Reine Astrid 92
B-1310 La Hulpe
T. +32 (0)2 352.04.90
F. +32 (0)2 351.04.87
bdolahulpe@bdo.be
Rue Waucomont 51
B-4651 Battice
T. +32 (0)87 69.30.00
F. +32 (0)87 67.93.58
bdobattice@bdo.be
Parc Scientifique Crealys
Rue Camille Hubert 1
B-5032 Les Isnes
T. +32 (0)81 20.87.87
F. +32 (0)81 20.14.14
bdonamur@bdo.be
Accent Business Park
Kwadestraat 153/5
B-8800 Roeselare
T. +32 (0)51 26.08.40
F. +32 (0)51 24.10.89
bdoroeselare@bdo.be
BDO Services CVBA / SCRL, a limited liability company incorporated in Belgium, is a member of BDO International Limited, a UK company limited by
guarantee, and forms part of the international BDO network of independent member firms. BDO is the brand name for the BDO network and for each
of the BDO Member Firms.
Follow us
www.bdo.be