The European Union Wants to Simplify Notional Interests

The European Commission is to promote a notional interest system in the context of its revival of tax harmonization. Specifically, the Common Consolidated Corporate Tax Base (CCCTB) would be a single tax base for companies operating in Europe, which would be shared by member States according to a distribution key to be defined; allowing them the opportunity to compete on rates.

Among the proposals that will soon be on the table, there is one of particular interest to Belgium. Indeed, the Commission is considering how to simplify the notional interest system that allows companies to reduce their taxable income by deducting notional interest based on their equity. A system that Belgium considers deleting, pressed, among others, by Europe. Paradoxical? No, to the extent that the notional system that the Commission dreams to promote is similar to that applied in Italy, and more resistant to abuse than the Belgian regime.

This worries the Federation of Belgian Enterprises (FBE). "The problem of the Italian system is that it does not eliminate tax discrimination between debt and equity", says Jean Baeten, ?Head of Tax Department at FBE. Rather, it is "a system to stimulate the increase of equity."

The Commission refused to confirm officially its preference for the system, because the issue is not yet finally solved.