Wallonia offers one of the lowest tax rates in the Euro zone, both for companies and expat managers. This global tax performance can be explained by various measures that are described below.
When it comes to tax matters, it is important to have a clear idea of not only the tax rate but also the income to which the tax will be applied. For this, it is very useful to be able to discuss in advance with the tax authorities. In Belgium, the tax authorities are very open to dialogue and regularly analyse and predict the tax consequences of a planned situation or a specific operation. This is known as the “tax ruling” or “anticipated decision”. To find out more about this measure, click here.
The taxable base
As a general rule, the taxable base is calculated on the basis of the gross profits from which a series of fiscally deductible expenses are subtracted.
The deductible expenses include:
- miscellaneous goods and services,
- social security and pension contributions (excluding meal vouchers and hospitalisation insurance premiums),
- depreciations (linear or degressive).
It is also possible to deduct prior tax losses and to carry them forward to following financial years without restrictions in terms of time and amount.
Corporate tax rate and reduced rate
The corporate tax rate generally stands at 33.99%. However, SME, mainly held by physical persons, whose profit does not exceed € 322,500 are eligible for a reduced rate of 24.98%.
Avoiding double taxation
Belgium has concluded several tax agreements to avoid the problem of double taxation with a large number of countries. This can be a very attractive argument when the company’s activities are consolidated at global level.
Notional interest deduction
This system allows companies to deduct a fictitious interest from their taxable profits calculated on the company’s capital increase. The aim is to encourage recourse to this self-financing method, as in the past only loans taken out to increase the company’s capital were eligible for a tax break. This has the effect of reducing the taxable base and therefore the tax applied to the company.
The big advantage of this measure is that it reserves the same tax treatment to this form of financing as to borrowed capital financing from a taxation point of view (currently the financial interests paid can in fact be deducted from the taxable base) putting it on a par with equity financing. This encourages company self-financing.
Thanks to this deduction, companies that increase their equity through self-financing can deduct from their taxable base a non-accounting fictitious charge corresponding to a certain percentage of their “adjusted” equity.
To obtain the calculation base for the deduction, you start with the amount of the accounting equity at the end of the taxable period preceding that for which the deduction is requested. Various elements must then be deducted from this amount.
To find out more about this measure, click here.
Service centres and distribution centres
This scheme, which allows the application of “cost plus” or “resale minus” systems, concerns service centres (shared service centres, call centres, etc.) and the distribution centres.
Tax incentives that make it possible to drastically cut the tax bill
- Under certain conditions, it is possible to apply accelerated deductions.
- The exoneration of the registration duties from the contributions of capital to companies is also possible.
- Other direct advantages can be obtained under certain conditions:
- The tax deduction for investment: 14.5% for R&D investments.
- Tax exoneration for the recruitment of qualified staff assigned to research, quality control or exports (up to 75%).
- The deduction for patent income is designed to encourage technological innovation and activities linked to R&D. It reduces the tax burden on net income to 6.8% instead of 33.99%.
- The abolition of the capital duty (0.5% of capital).
- The tax exoneration of certain regional subsidies.
- The exoneration of 65% of the professional withholding tax for researchers employed by universities and companies active in research and development (R&D).
- The transformation of the deduction for R&D investment into a tax credit.
- Company traineeships: deduction of 120% of costs incurred by employers.
The “tax shelter” scheme for audiovisual works grants an exoneration from corporate tax for sums invested in “recognised Belgian audiovisual works”.
- The “customs warehouse” scheme makes it possible to import goods into the European Union without having to immediately pay customs duties.
- Status of expat foreign managers: attractive conditions for employers. In certain conditions, it is possible to obtain a reduction on the wage costs of foreign managers.
- Innovative tax measures for research and development.
THE TAX SYSTEMS FOR PHYSICAL PERSONS
Basic rate for foreign residents
The rate varies progressively from 25% to a maximum of 50%. There is no wealth tax. Resident taxpayers are taxed on their world-wide incomes.
Status of expat foreign managers
If they live for fewer than 180 days in Belgium, expat managers may be entitled to a limited taxation that only relates to income generated by their work in Belgium, excluding any professional activity carried out abroad, also including business trips.
The expenses refunded by the company for supplementary real costs such as moving or adjustment costs, certain travel expenses to return to the country of origin, schooling costs for children, “tax equalisation”, etc. are therefore not taxable.
Presentation of Belgium’s unique tax incentives by the foreign investment taxation unit of the Federal Public Service for Finance
Web site of the Federal Public Service for Finance: http://minfin.fgov.be