This chapter contains a description of tax provisions applied to agriculture in 2019, unless otherwise specified. They include taxes on income and profit, property, good and services, environmental taxes, and tax incentives for R&D and innovation.
Taxation in Agriculture
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Chapter 6. Belgium
Abstract
6.1. Overview
The number of agricultural holdings in Belgium has decreased steadily year after year and totalled 35 910 in 2017. Farms are mainly owner operated, but the share of corporate farms is increasing and reached 15.8% in 2016. Forty-four per cent of the land surface of Belgium is cultivated with farmland increasingly concentrated. In 37 years, the average utilised agricultural area per farm holding has more than tripled in Flanders (from 8.4 ha in 1980 to 26.4 ha in 2017) and in Wallonia (from 20.7 ha to 56.6 ha). The increase in intensity of farm holdings is most significant for livestock farms with the average number of livestock per pig farm increasing from 141 animals in 1982 to the present average of 1 414 animals.
In principle, the agricultural sector is taxed as any other sector (common law). However, there are specific provisions which are widely used in practice. These include the possibility to calculate taxable income using a valuation method and not actual income, reduced taxation of income from EU agricultural subsidies, reduced land taxes, capital gains tax exemptions on donated or inherited farmland, a flat rate VAT compensation scheme and exemptions from excise taxes for energy products including heavy fuel oil, natural gas, electricity, and coal. In Flanders, livestock producers pay a levy on manure.
6.2. Income taxation
Farmers can calculate their taxable income on the basis of actual income or by using a valuation method landbouwbarema, which can be more beneficial for tax purposes. In the valuation method, profits are determined on a flat rate basis using sector averages of semi-gross profit per unit (based on surface or number of livestock in the case of pig and poultry farmers). The flat rate per unit valuations is published annually by the tax administration and are product specific. About 80% of farmers make use of this system.
There are two specific tax incentives with regard to agricultural support as far as personal income tax (PIT) is concerned. Firstly, EU direct support payments are separately taxed at the reduced rate of 12.5% and at 16.5% for other EU support measures. Secondly ,capital and interest subsidies targeted at farmers are tax exempt. Concerning corporate income tax (CIT), a reduced rate of 5% is applied to capital and interest subsidies under certain conditions (Table 6.1).
From the tax year 2019, farmers can benefit from a carry back scheme giving both companies and the self-employed the possibility to off-set losses in the current year against the profits made in the three preceding years. The measure should help to protect farmers against income loss as a result of exceptional weather conditions or strong price fluctuations in a certain year.
Table 6.1. Tax revenue foregone from taxing income from agricultural subsidies at 5%
Million EUR
|
2012 |
2013 |
2014 |
2015 |
2016 |
|
|---|---|---|---|---|---|
|
Subsidies in the context of agriculture aid taxed at 5% |
4.77 |
5.01 |
5.26 |
4.72 |
3.71 |
Note: Permanent character of the measure since 2015
Source: Federal Tax Expenditure Report 28 November 2018,
6.3. Property taxation
Reduced annual property taxes are charged on agricultural land in the regions. Tax is calculated on an average “cadastral” income. Tax rates range from between 1.25% to 3.97% and there are tax credits of 25% to 50% for small properties.
Regarding the transfers of family businesses and enterprises (including farms) in all regions there are complicated special regimes applied. Some regions exempt these transfers while others apply reduced tax rates. Regional governments use tax regimes to retain family enterprises and businesses in their entirety to avoid enterprises needing to be partially or totally sold, or shares needing to be sold outside the family in order to be able to pay the registration duties.
Registration duties on donations (Gift taxes) – Special regimes for the transfer of family-run businesses and enterprises. (Art 140bis – 140octies Walloon Registration Code, Art 140/1 – 140/6 Brussels Registration Code and Art 2.8.6.0.3 – 2.8.6.0.7 Flemish Tax Code)
Flemish Region: Subject to meeting several conditions, a total exemption of gift tax is applied when donations of family businesses or shares from a family enterprise are made within the extended family. The businesses must practice a real economic activity (excluding real estate holding companies) and continue activities unchanged for at least three years after the transaction. For family enterprises the capital of the donated business may not decrease and the registered office of the company may not be transferred outside the EEA.
Brussels Capital Region: Similar rules to those in the Flemish Region apply.
Walloon Region: An exemption from donation rights may be granted if the transaction fulfils a number of conditions (the donation of housing is not included in the exemption). For example in the case of the donation of agricultural land this must be transferred to the farmer’s spouse or to a descendant (and not to all members of the family). In the case of an actively farmed farm, this can be donated to any person and it is possible to transfer land, stocks, livestock, equipment and farm buildings. All donations and inheritance are tax exempt.
To maintain the benefits of the exemption, the business must: continue its activities for at least five years after the date of the donation agreement; not reduce employment by more than 25% nor reduce the capital of the enterprise during the same period; and maintain a registered office within the EEA.
Inheritance tax – Special provisions for family businesses and enterprises. (Art 60bis Walloon Registration Code, Art 60bis – 60quater Brussels Registration Code and Art 2.7.4.2.2 – 2.7.4.2.4 Flemish Tax Code)
Flemish Region: For inheritance taxes a virtually identical regime to the transfer by donation of family businesses or family enterprises exists however, there are no full exemptions granted. The inheritance tax scheme provides reduced tax rates of 3% (for full descendants and spouses) or 7% (for inheritances between all other persons).
Walloon Region: A total exemption for inheritance tax.
Brussels Capital Region: Applies similar rules and rates to those in the Flemish Region for inheritances.
Registration duties on rental agreements involving agricultural land or agricultural buildings.
When a farmer rents agricultural land or buildings from an owner they must pay the normal registration duty of 0.2% of the value of the accumulated rents. For open-ended contracts, the tax is levied on the value of 10 years of accumulated rents, regardless of the duration of the contract. A special increased tariff of 1.5% is applicable if the renting agreement concerns fishing or hunting grounds.
Registration duties (Sales duty) on barter trades of land between farmers and agricultural enterprises. (Art 72 Walloon and Brussels Registration Code and Art 2.9.4.2.8 Flemish Tax Code).
When the value of the land is similar an exemption from the sales duty is granted on barter trade of land between farmers and only a small lump-sum registration duty of EUR 50 is levied. If the value of the land is not the same, then the ordinary sales rights apply on the excess. If the value of the excess is less than 25% of the value of the property with the lowest value, a lower rate of 6% applies on the excess.
6.4. Tax on goods and services
Apart from specific excise duties, Belgium applies a value added tax. The standard VAT rate is 21%, but reduced rates of 6% and 12% apply for certain goods and services.
Non-VAT registered farmers can use the flat rate VAT scheme charging 6% on their goods and services to compensate for paying VAT on inputs.
The main excise duty exemption regards energy products i.e. gas oil, kerosene, heavy fuel oil, LPG, natural gas, electricity, coal, coke or lignite used strictly and exclusively in agricultural, horticultural or piscicultural works and in forestry.
Taxes on hunting and fishing permits apply in the Flemish Region and in the Walloon Region whereas in the Brussels Capital Region a levy on the delivery of fishing permits exists. In all cases lump sum tariffs apply.
Contributions to the budgetary fund for the health and the quality of animals and animal products (more commonly known as the Sanitel-levy) are collected on behalf of the Public Health Department. The proceedings from the levy are used for actions aimed at the prevention of animal diseases, disease and disease outbreak control, support for farmers that have an animal disease outbreak, and specific research. Farmers who produce certain animals or animal products (cattle, pigs, poultry and eggs, sheep, goats and cervids, and dairy) are required to pay contributions. There are five different species-based tax regimes each with a different tax base, tariff scheme and possible exemptions.
Contribution for the protection of plant variety rights is due by farmers who invented, discovered or created a new plant variety, and who seek to protect their invention with a patent-like instrument.
All parties involved in the global food chain are required to pay a yearly levy. The levy is used to finance the services provided by the food safety fund such as extensive controls to safeguard and protect the safety of food products intended for human consumption.
Agricultural vehicles are exempt from traffic taxes, i.e. a tax on traffic circulation and a kilometre levy.
6.5. Environmental taxes
Most environmental taxes are not specific to the agricultural sector. A notable exception to this is the tax on manure. More common however, the general tax rules are in principle applicable to agricultural enterprises but with sector-adjusted provisions i.e. exemptions or reduced tax base calculation methods.
Tax on water pollution (Law against water pollution of 26/03/1971, Flemish Decree on measures concerning underground water of 24/01/1984, Art. 252-316 of the Walloon Water Code).
Flemish Region: Agricultural enterprises are mostly subject to an agriculture-specific-adjusted-flat rate tax system in which the total amount of the tax due equals the number of pollution units multiplied by a fixed rate (amount in EUR per pollution unit). The number of pollution units are estimated based on the different activities for which the water was used. The origin of the water has no influence on the tariff (underground water, surface water, rainwater).
An additional levy on the extraction of underground water is due by agricultural enterprises abstracting more than 500m³ each year.
Walloon Region: The agricultural tax system is based on the environmental burden generated by the farm and takes into account:
The number of livestock held or environmental charges generated by run-off from on-farm livestock effluent storage facilities that reach groundwater and surface water.
Cultivation activities that generate, through the application of nitrogen fertilisers and the use of phytosanitary products, damage to the aquatic resource.
The tax on environmental charges is determined by applying an environmental coefficient to the areas of crops and grasslands and livestock. A levy contribution is also applied to farms with more than 3 000m³ of groundwater (wells). Farms liable for the tax on environmental charges are exempt from cost-truth-remediation (CVA) on the volumes of water consumed, with the exception of the volume equal to the presumed water consumption of the household, i.e. 90 m³.
The levy on manure is charged on the amount of manure produced by farms because of the heavy pollution this waste substance can cause to surface and non-surface waters. This tax is a regional tax. Since 2006 the Flemish government has implemented a system which allows a certain fixed amount of manure to be discharged by each agricultural company free of charge. Administrative fines are applicable to those who exceed their allowable discharge limits. In the Walloon and Brussels Capital Region no manure levy exists.
Packaging levy (Art. 370-375 Law of 16/07/1993). A specific packing levy is charged to a certain segment of the food industry for individual packaged beverages. There are two tariffs: one for non-reusable packaging and a levy for reusable packaging, which is significantly lower.
6.6. Tax incentives for R&D and innovation
There are tax incentives for R&D in Belgium but these are not agriculture specific.
6.7. Other taxes
In general, all social security contribution schemes for self-employed persons apply equally to the agricultural sector as to other sectors. However, some specific schemes, such as the “assisting spouse” regime might be more frequently applied in the agricultural sector. Under this scheme depending on the age of the “assisted spouse”, full social coverage or only sickness risks coverage is granted at reduced contribution rates. Also of relevance to the agricultural sector are the reduced contributions available for new entrepreneurs for up to three years.
Temporary reductions or advantageous payment facilities for social security contributions can be granted to the agricultural sector in circumstances such abnormal weather conditions, or trade measures impacting exports (i.e. the Russian fruit embargo) or specific food safety crises.
In the agriculture and horticultural sectors there is a specific social contribution regime of presumptive daily wages for occasional labour. The tax base is a (lower) daily wage instead of the actual remuneration limited to a maximum number of days work.
There is a conditional exemption to filing obligations for labour in agriculture undertaking the following activities: planting hop plants, picking hops and tobacco, and cleaning and sorting wicker. The exemption applies to a maximum of 25 labour days per year for employees during specified periods.