BELGIUM INFORMATION: LOW-TAX AND INCENTIVE REGIMES

Belgium has a corporate income tax rate of 33.99% (including a 3% so-called 'crisis surcharge') and has never been considered a financial center. However in order to attract the headquarters of foreign multinational companies Belgium accords favorable tax treatment to entities known as "co-ordination centers" (currently being phased out). It also offers a low-tax regime to expatriate employees with specialist skills, and has a relatively benign holding company taxation regime.

On 1st January 2006 Belgium introduced a 'notional interest deduction', taking effect in tax year 2007, which allows all companies subject to Belgian corporate tax (including Belgian branches of foreign companies) to deduct from their taxable income an amount equal to the interest they would have paid on their capital in the case of long-term debt financing.

At the same time, the 0.5% registration duty on capital contributions will be abolished.

The calculation of the tax deduction will begin with the ‘equity capital’ as stated in the company’s opening balance sheet of the taxable period. Based on Belgian accounting law, ‘equity capital’ includes capital, share premiums, revaluation gains, reserves, carry-forward of profits or losses and capital investment subsidies. The notional interest rate will be set each year and will follow the average annual 10-year government bond rate. The law sets a maximum deviation of 1% from one year to the next and a maximum percentage of 6.5%. The government may change these percentages by Royal Decree.

The notional interest deduction does not discriminate between companies and complies fully with existing Belgian and EU law. Discussions with EU authorities have taken place and the measure is compatible with EU State Aid rules and the Code of Conduct.

The 2010 Budget

In October, 2009, the Belgian government unveiled key details of its 2010 budget, containing both a series of new tax initiatives, as well as provisions extending certain stimulus measures already in application.

Endeavouring to find a delicate balance between maintaining support for the country’s economy, while at the same time retaining careful control of the budgetary situation, the government has categorically ruled out any increase in the existing tax burden on employment, and has also attempted to maintain the purchasing power of individuals at the same level.

Specifically designed to support employment, key measures highlighted in the budget affecting value added tax (VAT) include the following:

• From January 1, 2010, the government has decided to reduce to 12% the rate of VAT within the catering industry. In return, the government is requiring a commitment from employers regarding employment. After one year, the government intends to re-evaluate the measure, with a view to then reducing the rate yet further to a possible 6%.
• The reduced 6% VAT rate, already in application in the construction industry, will be extended until March 31, 2010. The reduced VAT rate will apply to all work for which an application has been submitted before this date.

Other tax initiatives included in the Belgian government’s 2010 budget include the following:

• Determined to support the agricultural sector, and in particular the milk industry, the government has announced its commitment to granting around EUR20m to the sectors in the form of tax reductions.
• The government will increase the amount of tax-deductible childcare costs for severely handicapped children.
• The government has decided to raise duties on diesel, a measure which is thought will generate in the region of EUR140m.

Belgium’s Employment Minister, Joëlle Milquet, welcomed the proposals, highlighting in particular the importance of the government’s decision to reduce VAT in the catering and construction industries.

Belgium Knowledge Base

- BELGIAN CO-ORDINATION CENTRES
- BELGIAN SPECIAL EXPATRIATE FISCAL REGIME
- BELGIAN HOLDING COMPANIES