The Belgian government has recently officially stated that it has no intention to amend  the notional interest deduction regime despite the criticism of widespread abuse. Therefore, Belgian companies and Belgian branches of foreign companies will be able to continue to apply this regime pursuant to which Belgian and non-resident corporate taxpayers can benefit from a deemed interest tax deduction corresponding to a percentage of an adjusted equity basis.
In April the Belgian tax authorities issued a Circular Letter in which they reiterated the specific anti-abuse measures included in the notional interest deduction act, which requires certain deductions to be taken from accounting equity when determining the notional interest deduction basis, such as share participations and investments that by nature do not generate recurring income.
The Circular Letter outlines the general and specific anti-abuse measures, but refers practically only to sham transactions (i.e. transactions the effects of which are fully or partly eliminated by hidden agreements).
The circular letter refers explicitly to structures where the interest deductions are claimed in Belgium on loans financing the equity funding. This kind of deductions can be challenged if they do not correspond to the statutory goal of the company.
The Circular Letter confirms that no notional interest deduction can be claimed against profits derived from “abnormal transactions”, i.e. transactions performed mainly with the objective to evade taxes.
The Circular Letter confirms that notional interest deduction schemes that can be economically justified will not be challenged under this provision.  The Circular Letter does not introduce or impose any new conditions for the application of the notional interest deduction scheme.