The Belgian tax law enables companies to deduct a fictitious interest calculated on the basis of their shareholder’s equity, the so called notional interest deduction (NID). This measure reduces the cost disadvantage of equity in the capital structure of Belgian businesses and effectively lowers the corporate income tax rate.
The applicable NID rate is determined every year, based on the average return on the secondary market of a Belgian government bond with a remaining maturity of 10 years (OLO10).
Business plan practitioners may be confronted with the question which NID rate to use, especially in long term forecasts? The current NID rate is known, but what within 5 or 30 years? Making an accurate estimate for every year during the thirty years to come is practically impossible, so a thirty year average might be an easy-to-use alternative.
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