Annual tax on NPOs: what it is and how it works
Every year the returns for ‘wealth tax’ have to be submitted before 31st March. This article aims to refresh your memory about this tax and explain a number of points for consideration.
What is the annual tax on NPOs?
The annual tax on NPOs (non-profit organizations), or ‘wealth tax’, is a tax on NPO assets. It is a federal tax that is classified as an inheritance tax. For people, inheritance tax is paid at the time of inheritance, usually as a result of a death. It’s a different for NPOs, however, because it is assumed that they will continue to pursue their purpose forever.
They will therefore never be subject to inheritance tax as such, as the assets of an NPO must always pass to another NPO with similar purpose should it ever be wound up. The Belgian government therefore sought to compensate itself for the income it would otherwise lose by levying an annual tax on NPOs.
Who is subject to the tax?
In principle, every NPO is subject to the ‘wealth tax’. A number of NPOs are completely exempt, however, due to the nature of their purpose.
What is the basis for the tax?
The tax is based by law on the ‘mass of the assets’: the NPO’s property or goods, in other words. If the ‘mass of the assets’ is equal to, or more than, € 25,000 then tax is due.
What does the assets of an NPO comprise?
All investments in moveable property (non-real estate) or immovable property (real estate), stocks, claims, cash investments, liquidities and other assets.
Operating funds are not included when calculating the ‘wealth tax’. In most cases, these are the NPO’s current account and cash balances which are used throughout the year to fund its purpose.
Assets may be eligible for a reduction in taxation if they are:
- +The as yet unpaid instalments of a mortgage, on condition that it is based on assets belonging to the NPO that underwrite at least 50% of the principal amount of the loan.
- +Amounts associated with special legatees, if the NPO is a general legatee of an inheritance.
How much is the tax?
0.17% is levied on an amount of €25,000 or more in assets.
What are the obligations?
The tax return must be submitted to the registration office where the NPO is established no later than 31st March following the year assessed. Furthermore, any taxes due must be paid before 31st March following the year to which those taxes apply.
If you have any questions about the NPO wealth tax, don’t hesitate to contact one of our experts. We’ll be only too happy to help.
We base our advice on current legislation, interpretations and legal doctrine. This does not prevent the administration from being able to challenge it or to change existing interpretations.
