The ‘tax to reimburse inheritance tax’ (‘taxe compensatoire des droits de succession’ in French and ‘taks tot vergoeding der successierechten’ in Dutch), also known as the ‘wealth tax’, is an annual tax payable by non-profit organisations such as (international) non-profit Associations and private foundations (hereafter: “NPOs”). Recently, the new law of December 28, 2023, containing various tax provisions has increased the applicable wealth tax rate, with an impact not to be underestimated.
What are the main changes?
Under the old regime, NPOs owning more than 25,000 EUR in assets were annually taxed at a 0.17% flat rate on specific tangible assets (such as real estate and cash investments) and intangible assets (such as trademarks and copyrights).
Under the new legislation, instead of a flat tax rate of 0.17%, a progressive ascending rate will be applied, based on the value of the NPO’s eligible taxable assets:
Progressive brackets (eligible taxable assets) | Applicable tax rate |
≤ 50,000 EUR | Exempted |
50,000.01 EUR – 250,000 EUR | 0.15 % |
250,000.01 EUR – 500,000 EUR | 0.30 % |
> 500,000 EUR | 0.45 % |
What is the impact on your NPO?
As is clear from the above table, this mainly leads to two conclusions:
The group of NPOs that remains under the surface becomes bigger: the exemption threshold has now been doubled (from 25,000 EUR to 50,000 EUR). The fact that an NPO is exempted from the wealth tax does however not exempt it from filing a tax return each year; and
The ‘wealthier’ or ‘richer’ NPOs face almost triple the amount of wealth tax that will have to be paid. The practical impact of this reform is illustrated with several examples in the below table
Eligible taxable assets | Previous 0.17% flat rate | New progressive rate |
600,000 EUR | 1,020 EUR | 1,500 EUR |
1,500,000 EUR | 2,550 EUR | 5,550 EUR |
3,000,000 EUR | 5,100 EUR | 12,300 EUR |
Are there any exceptions?
The rate increase of the wealth tax goes hand in hand with a longer list of exceptions than before. The following sectors fall outside the scope or are now neutralised (and thus still pay a maximum of only 0.17% in taxes) under one or more conditions:
Exempt sector | Condition(s) |
Healthcare, sports, and culture sectors + the patrimonial NPOs active in these sectors* | The NPO ‘mainly’ performs operations in the healthcare sector (e.g. hospitals, care for the elderly, etc.), the operation of sports facilities or the organisation of cultural events (i.e. more than half of the turnover comes from operations exempt from VAT).
|
Education sector + the patrimonial NPOs active in this sector* | The NPO ‘mainly’ performs operations in the education sector (i.e. more than half of the turnover comes from operations exempt from VAT), insofar as the old exemption of article 149,4° of the Belgian Inheritance Tax Code does not apply. |
Medical homes and other healthcare structures + the patrimonial NPOs active in these sector* | The NPO is a medical home as referred to in article 32, §1, 2nd paragraph of the Royal Decree of July 3, 1996, or another medical home, an integrated health association or district health centre recognised by the competent regional or community government. |
Animal shelters + the patrimonial NPOs active in this sector* | The NPO has as its purpose the management of animal shelters and has received the recognition referred to in Article 5 of the Law of August 14, 1986, on the protection and welfare of animals or in Article D.32 of the Walloon Animal Welfare Code. |
Private archives + the patrimonial NPOs active in this sector* | The NPO is a centre for private archives recognised by the competent community government or institution. |
*The rate increase also does not apply to so-called ‘patrimonial’ NPOs active in the abovementioned sectors. These are NPOs of which the patrimony/assets are used for at least 75% by another NPO for the realisation of transactions that can benefit from the VAT exemption referred to above (e.g., an NPO that owns real estate that is being made available to another NPO operating in the healthcare sector).
Finally, it should be underlined that public utility foundations (‘Fondations d’utilité publique’ in French and ‘Stichtingen van openbaar nut’ in Dutch) are also exempted from this annual tax. As a result, some larger NPOs decide to shelter their (real estate) assets in a foundation of public utility to avoid the wealth tax.
When will these changes enter into force?
Account will be taken of the total assets on 1 January 2024. This implies that the progressive system will already apply to the tax returns that must be submitted by 31 March 2024, at the latest.
Conclusion
It can be concluded that although the rate for the ‘wealthier’ NPOs (i.e., with more than 500,000 EUR in assets) within the new progressive system ‘only’ increases from 0.17 % to 0.45 %, this can lead up to a tripling of the taxes to be paid. This is undoubtedly a significant legislative change.
If you have any questions or concerns about non-profit law, Antoine DRUETZ, Partner, and his team will gladly assist your organisation.
Valérie HAVAUX
Senior Counsel
+32 (0)479 58 65 35
Pauline VANSTEENKISTE
Junior Associate
+32 (0)494 91 96 97
Antoine DRUETZ
Partner
+32 (0)499 69 33 01
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