Moving to Belgium Forums

Belgium Information · Joined: 18 Oct 2006 Posts: 21 Home Country: belgium

DOING BUSINESS IN BELGIUM

PRINCIPAL FORMS OF BUSINESS

TYPES OF BUSINESS ENTITIES Various types of business entities are permitted in Belgium. They include the following:

Corporations

Private limited companies

General partnerships

Limited partnerships

Partnerships limited by shares

Cooperative companies

The most commonly used entity is the corporation (Naamloze vennootschap/ Société Anonyme or NV/SA). An NV/SA must have at least two founding shareholders who appear before a public notary to establish the company. The NV/SA may issue bearer shares or registered shares. Hence, it is possible to have anonymous shareholders. The NV/SA may issue preferred shares. The shares are fully transferable and the shareholders’ liabilities are limited (i.e. to the extent of the amount of share capital not fully paid up). The minimum initial capital of an NV/SA amounts to EUR 61,500.

A ‘Besloten Vennootschap met Beperkte Aansprakelijkheid/ Société privée à responsabilité limitée (BVBA/SPRL)’ may only issue registered shares. The transfer of shares must be authorized by the shareholders. The shareholders’ liabilities are limited. The minimum initial capital of a BVBA/SARL amounts to EUR 18,600.

A ‘Commanditaire Vennootschap op aandelen/ Société commanditaire par actions (SC(A)/CV(A))’ is a partnership where ‘active partners’ manage the company and are distinguished from ‘silent partners’, who only invest in the company.

In a cooperative company (Cooperatieve vennootschap or C.V. in Dutch, Société coopérative or S.C. in French), shareholders may dissolve their interests by selling their shares back to the company. The share capital of a cooperative company is variable.

A ‘Vennootschap onder Firma/ Société en nom collectif (VOF/SNC)’ is a general partnership in which partners have a joint unlimited liability.

The following are also considered as Belgian partnerships: the ‘Maatschap/ Société de Droit Commun’, the ‘Tijdelijke Handelsvennootschap/ Société Momentanée’, the ‘Stille Handelsvennootschap/ Société Interne’ and the Economic Interest Grouping (Economisch Samenwerkingsverband/ Groupement d’Interet Economique). A legal partnership is basically an agreement whereby the silent partner participates in the profit or loss of certain activities of the active partner, who is mostly also the managing partner. Silent partnerships do not have legal personality. They are tax transparent and have a special tax treatment.

BRANCHES OF FOREIGN COMPANIES Foreign companies may establish Belgian branches provided certain formalities are fulfilled, such as the filing of the articles of incorporation of the foreign company with the Registry of the Commercial Court.
Back to top

JOINT VENTURES A joint venture can be established by two or more companies to perform a special project. Joint ventures do not have separate legal personality.

TRUSTS Trusts may not be established under Belgian law. However, foreign trusts are recognised.

FORMATION PROCEDURES AND BALANCE DATE A company is established by contract by which two or more persons agree to contribute something, with the purpose of performing certain well defined activities with a view to obtain a direct or indirect advantage for the shareholders.
Most foreign investors in Belgium operate through a branch or a Belgian subsidiary. A subsidiary is usually established in the form of an NV/SA.

The principal Belgian rules to establish a Belgian NV/SA can be summarised as follows:

- Each company must file its articles of incorporation and the names of its directors and statutory auditors at the appropriate Register of Commerce and at the office of the clerk of the Commercial Court. After such filing, the company becomes a separate legal entity.

- The establishment and filing of the notary deed containing an NV/SA’s articles of incorporation can generally be completed within one month.

- The costs of establishing a Belgian company consist in a notary fee (calculated as a percentage of capital and contributions in kind), a registration fee (0,5% of the total amount of capital, including contributions in kind) and the cost of publication in the appendix to the Belgian Official Gazette (approximately EUR 50 per page, plus applicable VAT).

- The NV/SA is obliged to notify the local VAT-office (if the NV/SA is subject to VAT).

- If there are employees, the NV/SA has an obligation to register with the social security office and to complete the required monthly returns. Companies or groups of companies that employ more than 50 employees, need to have a workers’ council, that meets at least monthly and whose members are elected every four years.

- The NV/SA must keep books in the legal form and complete an annual tax return; branches of foreign companies have to keep separate books for the activities of the Belgian branch.

- Large companies must appoint one or more statutory auditors to audit their financial statements.

These rules also applies for B/SPRLs.

LEGAL, ACCOUNTING AND AUDIT REQUIREMENTS
Companies are required to file annual financial statements in a required format with the National Bank of Belgium. This makes them available to the public.

The information that must be included in the annual financial statements and audit requirements vary according to the size of the company.

Branches are required to file the accounts of their parent company only. However, they must prepare their own annual accounts in accordance with Belgian accounting law.

FINANCIAL AND TAX YEAR
A company’s taxable period is its accounting year. If this accounting year ends on December 31, the relevant tax year is the following calendar year. In all other cases, the relevant tax year is the year in which the accounting year ends.

The tax year for individuals is the calendar year.

GENERAL STRUCTURE
Resident companies are subject to Belgian tax on their worldwide income. A company is deemed to be resident if it is domiciled or managed and controlled in Belgium.

Belgian residents are individuals that keep their permanent home or the centre of their economic interest in Belgium. They are subject to income tax and municipal tax on their worldwide income. The place of residence for a married taxpayer is the place where his family is located.

Non-resident companies are subject to tax on Belgian-source profits that can be attributed to a permanent establishment in Belgium.

Non-resident individuals are only taxable on their Belgian source income.

Partnerships are generally transparent for tax purposes, although certain partnerships may be treated as corporate entities and thereby subject to corporate taxes.

Special tax regimes: Belgian tax law provides for special tax regimes to apply to coordination centres, distribution centres and service centres.

A special expatriate non-resident tax status can be granted to foreign executives if they have been transferred to Belgium on a temporary basis by a multinational group.

CORPORATION TAXATION

BRANCH VERSUS SUBSIDIARY
A Belgian branch of a foreign company is subject to non-resident income tax on the profits attributable to the Belgian branch. Taxable income of a branch is determined in almost the same way as for a subsidiary.

All expenses incurred by the Belgian branch are deductible, including the general and administrative expenses regardless of whether they are incurred in Belgium or abroad. The same principles apply to subsidiaries.

After Belgian taxation, the profits of the branch are repatriated without any further tax burden, whilst profits of a Belgian subsidiary (after taxation) are repatriated as dividends, subject to withholding taxes. A Belgian branch will, in principle, not be able to invoke the double tax treaties concluded by Belgium. However, it will, in principle, be able to invoke the double tax treaty concluded by the country where its head-office is located and the other.

BUSINESS TAX RATES The normal rate of corporate income tax on resident companies amounts to 40,17% (i.e. 39% tax rate plus a 3% crisis surcharge), but will, as from tax year 2004, be decreased to 33,99% (33% tax rate plus a 3% crisis surcharge).

Progressive lower rates apply for resident companies and branches that meet a number of conditions.

The same tax rates apply to distributed and undistributed profits.

DETERMINATION OF TAXABLE PROFIT Taxable income is based on the profit disclosed in the financial statements, which is then adjusted for tax purposes. Gross income therefore includes all business profits, capital gains, dividends, interests, royalties, rent, etc.

TAX ADJUSTMENTS To be tax deductible, business expenses must have been actually paid or borne by the tax payer in order to obtain business income.

Some expenses are however not or only partly tax deductible, for instance car costs, restaurant expenses, gifts, penalties, etc.

Accruals are tax deductible provided they cover charges that are clearly described and have become likely during the accounting year.

TAX LOSSES Tax losses can be carried forward indefinitely, but can not be carried back.
No tax losses carried forward can be offset against profits derived from abnormal or benevolent advantages received from another affiliated company.

No tax losses carried forward can be offset against the profit of the accounting year in which the company has been taken over or in which there was a substantial change of control of the company, nor against the profits of subsequent years, unless the transaction is justified by financial or economic needs.

In the framework of a merger or division, tax losses carried forward can, in principle, not be transferred from one company to another. An exception is made in case of a tax-free merger or division. In that case, the tax losses carried forward of the disappearing company prior to the merger or division will be reduced in proportion to the net fiscal value of the disappearing company prior to the merger or division over the sum of this net fiscal value and the net fiscal value of the absorbing company or the company receiving the contribution. The same reduction applies to the tax losses carried forward of the absorbing company or the company receiving the contribution.

CAPITAL GAINS/LOSSES

TANGIBLE AND INTANGIBLE FIXED ASSETS Capital gains arising on the disposal of tangible and intangible assets are taxable at the normal corporate tax rate. If business assets have been held for more than five years, and the sale proceeds are reinvested in qualifying assets within three/five years, the tax can be spread across the period over which the replacement assets are depreciated.

Capital losses on business assets can be deducted from other income in the accounting year in which they are incurred.

SHARES Capital gains on shares are not taxable provided that the dividends from the shares qualify for the dividend received exemption (see ‘Dividends’). However, there is no minimum participation requirement.

Capital losses on shares are not tax deductible, unless they are incurred at the occasion of the liquidation of the company, to the extent that effectively paid-up capital is lost.

DIVIDENDS Up to 95% of the dividends received by a Belgian company may be deducted from its taxable results provided the following conditions are met:

- The shareholding in the distributing company amounts to, at least, 10% or the shareholding must have an investment value of at least EUR 1,200,000.

- The dividends must be paid by a company subject to Belgian corporate income tax or to a foreign tax similar to Belgian corporate income tax.

- The shares must be held without interruption during at least one year.

The dividend received deduction is not available for dividends paid from certain companies.

Dividends that do not qualify for the dividend received deduction are taxed at the full corporate income tax rate.

FILING AND PAYMENT Corporate income tax returns must be filed with the local tax administration within the term mentioned on the corporate income tax return.

If the tax return is not filed in time, the tax authorities have the right to establish a taxation on a presumed income.

Corporate income tax can be prepaid during the accounting year in four instalments. A company with an accounting year ending December 31 can make prepayments on April 10, July 10, October 10 and December 20. The tax due by the company will be increased with a percentage. A credit is however given for each prepayment. The percentages for the computation of the increase and the credits are determined by reference to the Belgian National Bank rate as at January 1 (f.i. increase of 11,25% for tax year 2002, increase of 9% for tax year 2003). However, to companies having an accounting year ending December 31, a tax credit is given amounting to 12% for prepayments on April 10, 10% on July 10, 8% on October 10 and 6% on December 20).

During the first three taxable periods of certain small and medium sized companies, the tax due will not be increased for lack of sufficient prepayments.

Tax underpaid is due and tax overpaid is refundable within two months following the month of issue of the tax bill.

Late payments of tax are subject to an interest charge and various administrative penalties can apply.

PERSONAL TAXATION

INCOME TAX RATES
2005 income tax rates (not including municipal tax and crisis surcharge):
0 to 6.730 EUR: 25%
from 6.730 to 9.580 EUR: 30%
from 9.580 to 15.960 EUR: 40%
from 15.960 to 29.250 EUR: 45%
over 29.250 EUR: 50%

Income (net of foreign tax) from foreign real property and foreign earnings taxed abroad, is taxed in Belgium at 50% of the normal rate, unless a tax treaty applies. If such income is exempt from Belgian tax under a tax treaty, it is still taken into account to determine the marginal rate applicable to non-exempt income (under the ‘exemption with progression’ rule).

DETERMINATION OF TAXABLE INCOME Earned income includes fringe benefits. For some categories of fringe benefits (such as the private use of a company car, free housing, stock options granted by the employer) the taxable basis is determined on a lump-sum basis.

Earned income of spouses is separately taxed. If only one spouse has business income, 30% of the earned income of the spouse (up to a certain limit) is attributed to the other spouse and is taxed separately. Income other than earnings is taxed jointly and is added to the earned income of the spouse with the highest earned income.

For the year 2003, there is a tax-free allowance of EUR 5,480 for single taxpayers and EUR 4,350 for married tax payers.). For tax year 2004 the tax-free allowance increases to EUR 5.570 for single tax payers and EUR 4.610 for married tax payers.. As from tax year 2005 there will be no longer a distinction between single and married tax payers.

The tax-free allowance is increased if there are dependent children.

Every taxpayer is entitled to a deduction for employment expenses, which is calculated as a percentage of income, but can not exceed EUR 2,950 (tax year 2003) or EUR 3,000 (tax year 2004). The taxpayer can however opt to deduct actual expenses.

A tax reduction between 30% and 40% is given for life insurance premiums (up to a certain maximum) and for contributions made to a pension savings plan (up to a certain maximum).

Other deductible items include 80% of civil law alimony payments, interest on loans to acquire real estate (limited) and cash donations to specific Belgian charities.

CAPITAL GAINS In principle, capital gains arising on non-business assets are tax exempt. However, capital gains realised on real estate sold within five/eight years of acquisition may be subject to tax as well as gains on certain transactions of a speculative nature.

FILING AND PAYMENT The tax returns must be filed with the local tax administration within the term mentioned on the tax return, i.e. in principle by June 30 of the year following the income year.

If a tax return is not filed in time, the tax authorities have the right to establish taxation based on a presumed income.

For most types of income, tax will be withheld at source by the payer. Any tax underpaid must be paid within two months following the month of issue of the tax assessment.

Late payments of tax are subject to an interest charge and various administrative penalties can apply.

SPECIAL RULES FOR FOREIGN NATIONALS Foreign executives can be granted a special expatriate non-resident tax status if they have been transferred to Belgium on a temporary basis by a multinational group.

The expatriate’s Belgian tax liability is computed on worldwide earned income. Income relating to work performed outside Belgium is excluded from taxable income (travel exclusion).

Additional expenses incurred by the employee as a result of the assignment in Belgium and reimbursed by the employer (such as cost-of-living, housing and tax equalisation allowances, home leave, education and relocation expenses) are, within certain limitations, excluded from taxable income.

OTHER TAXES

VAT. RATES
VAT is applicable to most sales of goods and services at a standard rate of 21%.

Certain transactions are zero-rated (such as intracommunity supplies of goods, export of goods) or exempt from VAT (such as services rendered by lawyers, letting of immovable property, insurance operations, financial services).

A 12% rate is applicable to supplies of margarine, pay television, certain fuels, social housing, certain car tyres.

A 6% rate is applicable to supplies of basic necessities (such as food, pharmaceuticals, under certain conditions the renovation of houses more than five years old,…).
Filing and payment

In principle, a monthly VAT return has to be completed. If the annual turnover (exclusive of VAT) does not exceed EUR 500.000, the VAT payer can file a quarterly VAT return.

Periodical VAT returns have to be filed no later than the 20th of the month following the month or the calendar quarter concerned. By this date, the balance of VAT due has to be paid.

If quarterly VAT returns are filed, two monthly instalments are due on the 20th of the second and third month of each quarter. These instalments amount to one third of the VAT due for the preceding quarter.

In principle, each VAT taxpayer has to file an Annual Sales Listing, including all taxpayers registered for Belgian VAT to whom services and/or goods have been supplied during the year, by March 31 following the year concerned.

VAT payers performing intracommunity supplies of goods have to file a European Quarterly Sales Listing by the 20th of the month following the quarter concerned. If certain thresholds are exceeded, a monthly Intrastat return must be filed for intracommunity transactions of goods.

CAPITAL TAXES
Estate and gift tax
The world-wide estate of an individual who is resident in Belgium at the time of death is subject to estate taxes varying in Flanders from 3% to 27% on property inherited by close relatives and from 30% to 65% in other cases and varying in the rest of Belgium from 3% to 30% on property inherited by close relatives and from 20% to 80% in other cases.

Gifts documented by a formal deed and made by resident individuals are taxable at the same rates.

Stamp duty
Stamp duties are payable on documents providing title to real estate, on certain documents issued by the courts, on transactions in listed shares or securities, on insurance contracts etc.

Others
Registration duties amounting to 10% (or 5% under certain conditions) apply on transfers of real property. Registration duties also apply on capital contributions.

WITHHOLDING TAXES
Dividends
In principle, 25% withholding taxes are due on dividends. For certain dividends there is a reduced rate of 20% or 15%.

Under certain conditions dividend payments made to an EU parent company could qualify for the withholding tax exemption provided for by the EU Parent-Subsidiary directive.

As from January 1, 2002 and as far as the liquidation has not been closed before March 25, 2002, 10% withholding taxes are due on liquidation proceeds. The same goes in case of an acquisition of own shares.

Interest and royalties
The withholding taxes on interest payments and royalties amount in principle to 15%.

Double tax treaties
Belgium has concluded a number of tax treaties for the avoidance of double taxation. Most treaties foresee an exemption or a reduced withholding tax rate on the payment of dividends, interest and royalties.


Regions South America North America Middle East Europe Eastern Europe Asia Pacific Africa Countries Spain Netherlands Ireland France England Others Contact Us Advertise with Us Policy Belgium News Send This Page