by Arne Decorte and Emiel Vanhée
Pay attention to your group structure when applying the group contribution
From the 2020 assessment year onwards, companies can reap the benefits of the ‘group contribution’ scheme. What exactly is the group contribution, though? And in which cases is it worth looking into? This article discusses the group contribution’s possible advantages to your company or companies.
What is the group contribution?
Under the group contribution scheme, a profitable company within a corporate group may transfer some or all of its profits to an affiliated company that has suffered losses in the same tax year. Applying the group contribution results in less corporation tax for the profitable company. The loss-making company, on the other hand, transfers no or fewer losses to the next financial year.
Compensation
To make use of the group contribution, the profit-making company must compensate the loss-making company. This compensation should be equal to the amount saved on taxes by the profit-making company thanks to the group contribution.
Advantages
By compensating the loss-making company, less money is lost to corporate tax. The compensation goes to the loss-making company instead, after all. Applying the group contribution therefore reduces the group’s total cash out figure.
Affiliated company
Not every company qualifies for the group contribution scheme. Only affiliated companies are eligible. In practical terms, companies or establishments must have been regarded as parent and subsidiary companies or sister companies for a five-year continuous period. Additionally, there is a participation requirement of at least 90%.
Optimising your group structure
If you wish to apply the group contribution, having such a group structure is crucial. It can be a good idea to set up a holding structure pre-emptively in order to be able to benefit from the group contribution scheme in future. Besides qualifying you for the group contribution scheme, such holding structures have plenty of additional benefits. Possibilities include the optimisation of financing and compensation flows, centralised staffing, enterprise risk management, succession planning, etc. In other words, this type of group structure is of enormous importance.
Do you require further information about group structure optimisation? Please don’t hesitate to contact one of our experts.
Arne Decorte
Manager Tax arne.decorte@vdl.be
Emiel Vanhée
Advisor Tax emiel.vanhee@vdl.be
Disclaimer
In our opinions, we rely on current legislation, interpretations and legal doctrine. This does not prevent the administration from disputing them or from changing existing interpretations.
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