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Using the notional interest deduction for risk capital to lower your tax rate in Flanders

The notional interest deduction (NID) – also referred to as the “deduction for risk capital” – allows your company to deduct a specific percentage of its ‘adjusted’ equity capital from taxable profits. It’s a powerful tool to offset operational or financial income, lowering your effective tax rate in the process.

Incremental NID

This deduction is granted based on the average 5-year increase of a company’s full net equity, known as ‘incremental equity’.

In other words, the annual amount of NID that is tax deductible for a given financial year (x) will be 20% of the company’s qualifying net equity for financial year (x) reduced by the corresponding net equity amount of financial year (x-5). Currently, the NID rate amounts to 0.726% for large companies and 1.226% for SMEs. The exact rate is determined on the basis of the linear bonds (OLO) interest.

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