Belgium Tax & Business Guide - Deloitte

/Home/A-B Countries/Belgium (Country Code 32)/Belgium Tax Resources

Basic facts
Population 10.4m Inflation 1.8% (2006)*
Main languages Dutch, French, German GDP per head US$38,010*
Currency Euro (ƒ) GDP growth 3.0% (2006)*
Economic communities European Economic Area, EU, WTO, OECD
GDP sources 1.0% agriculture, 24.0% industry, 75.0% services
*Economist Intelligence Unit estimates.
Political environment

Belgium is a constitutional monarchy (the king is Albert II) and can be considered as a federal parliamentary democracy. It is divided into three regions: Flanders, Wallonia and Brussels-Capital. There are three distinct cultural and linguistic ÏcommunitiesÓ (Flemish, French and German), which have their own parliaments and executives.

The Christian, Democratic and Flemish Party (CD&V) won the federal election on June 10th 2007. Yves Leterme, the party leader, will become the new prime minister.
Foreign trade and investment
Exports US$283.6bn (2006)* Imports US$279.8bn (2006)*
*Economist Intelligence Unit estimates.

Leading export markets: Germany, France, the Netherlands, the UK and the US.

Major exports: Chemicals and plastics, transport equipment and machinery.

Belgium depends heavily on trade, and exports account for more than 80% of GDP.

Foreign investment is welcome, especially in greenfield projects or ailing firms, but labour costs are high. Tax breaks favour new service and high-tech industries. Fiscal- and employment-related incentives are decided nationally; project- and investment-related incentives are regional issues.
Business and financing
Business forms Subsidiary, branch, public limited company

Foreign companies generally use the subsidiary and branch forms of business organisation. A foreign subsidiary in Belgium generally takes the form of a soci»t» anonyme/naamloze vennootschap (SA/NV) or corporation (public limited company). Companies that have no trading activities tend to opt for the soci»t» civile/burgerlijke vennootschap (SC/BV), as this form is governed by civil rather than commercial law.
Labour environment
Unemployment rate 8.2% (2006)* Minimum wage ƒ1,259 (monthly)
*Economist Intelligence Unit estimate.

Almost two-thirds of employed and unemployed workers are labour union members.

Wages are governed by collective-bargaining agreements, concluded at both the national and industry levels. The level of the guaranteed monthly minimum wage is adjusted every 12Ò24 months. As part of the 2007Ò08 inter-sectoral agreement, there was an increase of ƒ25 on April 1st 2007 and another is scheduled for October 1st 2008.
Taxation
Corporate tax
Main rate 33%, with lower rates for small profits. Effective tax rate can be lower due to notional interest deduction

A company with its main establishment, registered office or place of management in Belgium is subject to corporate income tax on its worldwide income. The general rate of corporate income tax is 33%. Small and medium-sized companies with income of less than ƒ322,500 pay lower rates, provided certain conditions are satisfied. Double taxation of foreign-source income is avoided or mitigated by treaty or domestic law provisions. Most Belgian-source income of non-resident corporations is subject to the income tax on non-residents; some income is taxed by withholding.

As of tax year 2007 (accounting period ending on December 31st 2006), taxable profits are lowered by a notional interest deduction, calculated as a percentage of equity. The application of the notional interest deduction can reduce the effective tax rate.

Limited partnerships and partnerships limited by shares are subject to corporate tax at the entity level. General partnerships are transparent for tax purposes, with the partners being taxed on their share of partnership income.
Individual tax
Progressive rates up to 50%

Individuals whose domicile or principal economic interests are in Belgium are considered residents and taxed on their worldwide income. Persons in the national register are deemed to be resident unless there is evidence to the contrary. Non-residents pay tax only on Belgian-source income. Executives on temporary assignment in Belgium may apply for the special expatriate regime. Communal taxes are between 0% and 10%.
Capital gains
Taxed as income

Capital gains realised by corporations on the disposal of tangible and intangible assets are regarded as business income and subject to tax at the ordinary corporate tax rates. Tax deferral is possible subject to certain conditions. Realised gains on shareholdings in other companies are exempt if dividends from the shares meet the Ïsubject to taxÓ requirement for application of the dividends received deduction.

Capital gains on assets realised by individuals engaged in business activities generally are taxed in a similar manner to gains realised by corporations, although special rules and separate tax rates apply. Capital gains on shares in an enterprise, qualifying as professional income, are normally taxed at the ordinary individual income tax rate, unless the shares were acquired more than five years earlier, in which case the gains are taxed separately at a rate of 16.5%. Capital gains realised on fixed tangible assets that have been used for more than five years in the enterprise are also taxed at the 16.5% rate.

Capital gains of individuals not engaged in business activities are not taxable unless the capital gain is related to (1) a speculative transaction, (2) the sale of immovable property within five years of acquisition, and (3) the sale of a substantial participation to a non-EU-based company, or the sale of rights in intangible property.
Indirect tax
Standard rate 21% Other rates 12%, 6%, 0%

Value-added tax (VAT) applies to most transactions. The standard rate is 21%. A lower 12% rate applies to social housing and agricultural products, and a 6% rate applies to basic foodstuffs, water, hotel services, property restoration, newspapers and certain other supplies. Exemptions are available for certain services.
Tax administration and compliance
Tax year Corporations: fiscal year; Individuals: calendar year

Companies pay advance tax in four equal quarterly instalments. The final payment of tax is due within two months of receiving an assessment. In principle, a tax return must be filed no later than six months after the end of the companyÌs financial year, although an extension may be granted by the tax authorities. Employment income of individuals is taxed by deduction at source.
Additional tax information
Withholding taxes Dividends 0%/15%/25% (on liquidation 10%), Interest 15%, Royalties 15%. Rates may be reduced by tax treaties or under an EC Directive. As from January 1st 2007, Belgium no longer imposes withholding tax on dividend payments by a Belgian company to its parent located in a tax treaty country, provided the parent holds at least 15% (10% as of January 1st 2009) of the company paying the dividends for one year provided certain conditions are satisfied.
Tax treaties Belgium has concluded more than 80 tax treaties.
Dividends Dividends are in principle taxable, but qualifying dividends are 95%-exempt (that is, under the dividends received deduction, but only for corporations).
Revenue protection There are transfer-pricing rules and a general anti-abuse rule.
Groups There is no tax consolidation.
Incentives Film production; R&D; employment of researchers; investment deductions; deduction of notional interest representing cost of equity (applicable as of tax year 2007).
Other taxes Asset and lease transfer taxes, Customs and excise duties, Stock exchange tax on transactions in public securities, Transfer tax on bearer securities and other financial instruments.