Reduced corporate tax rate: the 20% benefits-in-kind limit applies from the start, even to new companies

You have just incorporated your company and know that, during its first years of activity, it is not required to pay you the minimum remuneration needed to qualify for the reduced corporate income tax rate. You therefore pay yourself a modest cash remuneration, supplemented by a company car. Caution: from assessment year 2027 onwards, a new condition applies to the reduced rate, and this condition is not covered by the exemption for newly established companies. In practice, it is even likely to affect young companies first.

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Reminder: minimum remuneration and the exemption during the first years

A small company can only benefit from the reduced corporate income tax rate — 20% on the first €100,000 of taxable profit instead of 25% — if, among other conditions, it pays a minimum remuneration to at least one of its directors. For assessment year 2027, this remuneration amounts to €51,000 or, where the company's taxable profit is lower than this amount, at least an amount equal to that taxable profit (Article 215, paragraph 3, 4° of the Belgian Income Tax Code 1992).

However, this requirement only applies from the fifth financial year following incorporation: the first four financial years are exempt. The incorporation date is, in principle, the date on which the deed of incorporation is filed with the registry of the enterprise court.

There is one important point to watch. A company that continues the activity of a sole trader or another legal entity is deemed to have been incorporated from the date of the sole trader's first registration with the Crossroads Bank for Enterprises, or from the date on which the deed of the other legal entity was filed. In that situation, the exemption period is calculated from this earlier starting point rather than from the date on which the new company itself was incorporated.

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The new rule: the 20% cap on benefits in kind

From assessment year 2027 onwards, an additional condition applies to the reduced rate. The value of benefits in kind assessed on a lump-sum basis, such as a company car, housing or a telephone, may no longer exceed 20% of the total director remuneration granted during the financial year (Article 215, paragraph 3, 5° of the Belgian Income Tax Code 1992). The ratio is assessed at company level by comparing the total lump-sum benefits in kind granted to all directors with their total remuneration.

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The trap: two separate conditions, only one exemption

This is the key point. The minimum remuneration requirement and the 20% cap on benefits in kind are not one single rule. They are two separate grounds for exclusion from the reduced rate, respectively set out under points 4° and 5° of Article 215, paragraph 3. A company can therefore fully comply with the first condition and still lose the reduced rate because it fails the second.

The exemption for newly established companies only applies to the minimum remuneration requirement. The 20% cap on benefits in kind applies from the very first financial year. The result is somewhat paradoxical: this condition primarily affects the type of director who might have expected to be protected by the start-up exemption.

A director of a young company will often pay themselves relatively low cash remuneration while also using a company car privately or benefiting from other lump-sum benefits in kind. The proportion of benefits in kind compared with total remuneration can therefore quickly exceed 20%, causing the company to lose the reduced rate even though it believed it was protected by the start-up exemption.

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THE LIMIT CAN BE EXCEEDED QUICKLY

The situation
Your company pays you gross cash remuneration of €1,000 per month, or €12,000 per year, and provides you with a company car carrying a benefit in kind of €3,500.

The calculation
‍Total remuneration amounts to €15,500, of which €3,500 consists of benefits in kind. The benefits therefore represent 22.58% of total remuneration. The 20% threshold is exceeded and the reduced corporate tax rate is lost.

How to stay within the limit
With €12,000 of cash remuneration, the benefit in kind should not exceed €3,000. Conversely, to keep a company car generating a €3,500 benefit in kind, cash remuneration would need to amount to at least €14,000. Even one euro of benefits in kind above the limit is enough to cause the reduced rate to be lost on the company's entire taxable profit.

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The reassuring nuance: tax losses

One important qualification is worth mentioning because, in many cases, it considerably reduces the concern. If your company is tax-loss-making during its first years, exceeding the 20% cap has no practical consequence. The company does not pay corporate income tax anyway, meaning that the applicable tax rate makes no difference.

The 20% rule only becomes a real issue once the young company starts generating taxable profit. From that moment onwards, the ratio must be checked and the remuneration package structured accordingly.

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TO BE CHECKED FROM THE FIRST PROFITABLE FINANCIAL YEAR

Do not rely solely on the start-up exemption. It exempts you from the €51,000 minimum remuneration threshold, but not from the 20% cap on benefits in kind. As soon as your company generates taxable profit, calculate the proportion of lump-sum benefits in kind within your total remuneration and adjust either the benefits or the cash remuneration before year-end to remain below the 20% threshold. A company car combined with low cash remuneration is the configuration most exposed to this risk. Catalyst can review your situation and calibrate your remuneration package to help secure the reduced corporate tax rate.

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In 30 seconds

✅ Reduced corporate tax rate: 20% instead of 25% on the first €100,000 of taxable profit

✅ Minimum remuneration requirement — €51,000 for assessment year 2027 — does not apply during the first 4 financial years

✅ New condition from assessment year 2027: lump-sum benefits in kind may not exceed 20% of total remuneration

✅ This 20% condition is not covered by the exemption for newly established companies

✅ It primarily affects new directors receiving low cash remuneration combined with a company car

✅ No impact while the company is tax-loss-making: the rule becomes important from the first taxable profit

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