EU seals fate of win-win loan

21st February 2013, Comments 0 comments

The win-win loan, a measure that offers financial support to Flemish SMEs and start-up businesses, will be scrapped if the European Commission has its way. Believing that it contravenes European regulations, it will pass a motivated advice on the loan today. This is the last step before the case is brought to the European Court of Justice, which means that Flanders could be condemned and face a penalty. The win-win loan, which serves as one of the cornerstones of the Flemish economic recovery policy, makes it possible for friends and family members of starter entrepreneurs to receive a tax benefit if they extend a loan to the business for a period of eight years. Initially it only applied to start-ups, but today all SMEs can use this measure to gain access to a maximum of 100 000 euros. This loan has worked extremely well in Flanders, helping small businesses who need risk capital but cannot get a bank loan. Since 2006 this friendship loan of sorts has assisted about 3 000 SMEs with a total of 98 million euros. The condition that both the starter and supplier of these loans must live in Flanders is something the Commission considers to be an unacceptable discrimination and violation of the principles of freedom of movement and residence. When the Commission requested adjustments to the favourable taxation at the end of 2010, the Flemish government chose to ignore the criticism. Now the Commission has relaunched its attack on the loan system. This is not the first time Europe has targeted Flanders. On a previous occasion the region was forced to make changes to its regional care insurance and to scrap a discount for job keepers. But Europe has also aims at the discriminatory tax regulations of the Walloon Region, taking steps against a Walloon decree on income tax with the European Court of Justice. Walloons receive a tax cut if they buy shares or bonds from the Walloon Investment Fund, but foreign investors do not enjoy the same benefit. Meanwhile the federal government has also been apprehended by the European Commission for taxing interest payments to foreign investment companies whereas similar payments to Belgian companies are exempt from tax.

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