Tax exemption for Covid-19 compensation in 2021 too
September 2021 – Shortly after the start of the coronavirus crisis in March 2020, various authorities enacted measures at a rapid pace to help companies survive their mandatory closure. In order to prevent the financial support of the regions, communities, provinces or municipalities from ending up partly in the federal treasury, these compensations are tax exempt. This exemption was recently extended until 31 December 2021.
The first measures
The law of 29 May 2020 on various urgent fiscal measures due to the Covid-19 pandemic provides that the allowances granted within the framework of the aid measures taken by the regions, communities, provinces and municipalities are, under certain conditions, exempt from tax.
This applies to natural persons subject to personal income tax (or non-resident tax) (natural persons) and taxpayers subject to corporate income tax (Isoc) or non-resident corporate income tax (INR/SOC).
The exemption applies to financial assistance provided by regions, communities, provinces and municipalities to taxpayers suffering the economic consequences of the Covid-19 pandemic.
However, there are a few conditions associated with it:
the compensation does not constitute direct or indirect compensation for the supply of goods or services;
the regulation under which the compensation is granted expressly states that the compensation is granted in order to deal with the direct or indirect economic or social consequences of the Covid-19 pandemic;
the compensation is paid or awarded between 15 March 2020 and 31 December 2020.
Note that these allowances are exempt from income tax and that you do not have to declare them. They will, however, appear on the calculation note attached to the personal tax assessment notice, as they will be taken into account for the granting of income-related benefits.
The information is provided directly by the granters of the benefits.
In corporate tax, the amounts received are in principle included as income in the result of the tax period in which they were received. The exemption is achieved through an increase in the initial reserve position.
Extension of the measures
The exemption was initially limited to compensation paid or granted between 15 March and 31 December 2020.
However, at the end of 2020, the health crisis was not yet over. The exemption was therefore extended by means of a law of 20 December 2020. It therefore also applies to compensation paid or granted up to and including 31 March 2021.
A law of 2 April 2021 extended the exemption once again, i.e. until 31 December 2021 inclusive.
You will therefore also benefit from a tax exemption for financial assistance received in 2021. The terms and conditions of the exemption remain unchanged.
Repayment
Initially, the possible repayment of financial assistance was not regulated. If an entrepreneur has unduly received (tax-exempt) assistance, the repayment is not a deductible business cost.
