All companies that are subject to corporation tax can deduct notional interest. This is a fictive notional interest that does not appear in the profit and loss account (unlike financial charges).

The notional interest deduction cannot be combined with the investment reserve system. Each entrepreneur should therefore choose the most attractive measure for its own circumstances. But be careful, once you have made your choice, it applies for three tax years.

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If your project is financed by borrowing, you can deduct the interest on these loans from your taxable base. Previously, no similar deduction was available for financing from the company's capital and reserves. This is the discrimination that the government is trying to address by introducing the notional interest deduction. A certain percentage of equity can now be deducted from the taxable base: this is the notional interest deduction.

It is important to remember that this measure is permanent! The deduction does not only apply to newly brought-in capital, but also to the existing equity of the company!

The calculation of the amount that can be deducted from the taxable base is simple:

The corrected amount of capital and reserves is multiplied by interest rate X (based on the interest rate of 10-year linear bonds)

What corrections have to be applied to the amount of equity?

1. Capital subsidies and revaluation gains
2. Own shares
3. Financial fixed assets coming from participations and other shares
4. Shares issued by investment companies, where the income is deductible from the profit, such as the DTI (definitively taxed income)
5. The net book value of the tangible fixed assets or parts thereof, to the extent that the costs relating to them unreasonably exceed the business needs
6. Elements that are held as an investment, and by their nature, are not intended to generate a taxable regular income
7. Buildings lived in by a business manager
8. Equity that relates to foreign permanent establishments of Belgian companies, of which the income is exempted from tax in Belgium under a double-taxation agreement
9. Equity that relates to real estate located abroad, and which are exempted from tax in Belgium under a double-taxation agreement.

Want to find out more about the corrections that have to be applied to the equity? Click here

The interest rate to be applied to this adjusted equity is determined each year. For the 2007 assessment year, this rate is 3.781% (4.307% for the 2009 assessment year). It is pointed out that this interest rate is increased by 0.5% for small companies (according to the accounting definition, i.e. companies that file abridged annual accounts) (4.281% for the 2008 assessment year and 4.807% for the 2009 assessment year).

In order to immediately benefit from this tax reduction, your company must make a profit. If this is not the case, then the notional interest deduction can be carried forward for up to 7 years.

Tax return (assessment year 2009) in French or Dutch
Appendix to tax returns: Calculation of the deduction for risk capital (assessment year 2009) in French or Dutch
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