Notional interest deduction rates for tax year 2021 and 2022
The rates for the notional interest deduction (NID, deduction for venture capital) are fixed annually. In the Belgian Official Journal of 8 December 2020, not only the rate for 2021 was published, but also for 2022.
Decrease compared to tax year 2020
The basic rate for the deduction for venture capital for tax year 2020 was 0,726%.
This basic rate significantly decreases, even to the extent that the basic rate for the notional interest deduction for both tax year 2021 and 2022 is negative.
For tax year 2021 the basic rate is -0,092%.
For tax year 2022 the rate is -0,160%.
SMEs benefit from an increased rate, i.e. 0,5% higher than the basic rate. In other words:
for tax year 2021: 0,408%
for tax year 2022: 0,340%.
Calculation of the NID rate
Since 2014, the notional interest deduction rate is calculated on the average of the reference indexes J with respect to the 10-year linear bonds for July, August and September of the penultimate year before the tax year. For tax year 2022, these are the average reference indexes of July 2020 (0,096%), August 2020 (-0,198%) and September 2020 (-0,185%), which leads to a negative total of -0,160%.
Small companies (SMEs) receive an extra 0,5%, so they can apply a deduction of 0,340% for tax year 2022. In this respect, a small company is defined as a company with legal personality which on the last balance sheet date does not exceed more than one of the following criteria (art. 1:24, §1-§6 CAC - Company and Associations Code):
annual average number of employees: 50
annual turnover, excl. VAT: 9 million euro
balance sheet total: 4,5 million euro.
The new rate can never deviate more than 1% from the previous rate. Additionally, the percentage can never be higher than 3% for 'big' companies and 3,5% for SMEs.
None of these thresholds is exceeded for this year.
Calculation of the venture capital
In order to calculate your notional interest deduction, you should look at the average increase of the equity capital over a period of five years. This means: the venture capital is one fifth of the positive difference between the adjusted equity capital at the end of the accounting year and the adjusted equity capital of the five preceding accounting years.
For both tax years the notional interest deduction for normal companies is negative. When announcing the rates on 8 December 2020, the tax authorities informed that the minister of Finance will propose a change in the law, so that the notional interest deduction does not apply (or is put at zero) in case of a negative rate.