Editors: IBFD. Visitors address: Rietlandpark DW Amsterdam The Netherlands. Postal address: P.O. Box HE Amsterdam The Netherlands

Transcription

1 DOING BUSINESS IN BELGIUM 2018

2 Editors: Africa: Ridha Hamzaoui, Emily Muyaa Asia-Pacific: Mei-June Soo, Nina Umar Caribbean: Priscilla Lachman, Sandy van Thol Europe: Larisa Gerzova, Adrián Grant Hap, Ivana Kireta, Magdalena Olejnicka, Andreas Perdelwitz, Marnix Schellekens, Kristina Trouch, Ruxandra Vlasceanu Middle East: Ridha Hamzaoui Latin America: Vanessa Arruda Ferreira, Maria Bocachica, Diana Calderón Manrique, Lydia Ogazón Juárez North America: John Rienstra, Julie Rogers-Glabush IBFD Visitors address: Rietlandpark DW Amsterdam The Netherlands Postal address: P.O. Box HE Amsterdam The Netherlands Tel.: IBFD All rights reserved. No part of this publication may be reproduced, stored in a retrieval system or transmitted in any form or by any means, electronic, mechanical, photocopying, recording or otherwise, without the written prior permission of the publisher. Applications for permission to reproduce all or part of this publication should be directed to: permissions@ibfd.org. Disclaimer This publication has been carefully compiled by IBFD and/or its author, but no representation is made or warranty given (either express or implied) as to the completeness or accuracy of the information it contains. IBFD and/or the author are not liable for the information in this publication or any decision or consequence based on the use of it. IBFD and/or the author will not be liable for any direct or consequential damages arising from the use of the information contained in this publication. However, IBFD will be liable for damages that are the result of an intentional act (opzet) or gross negligence (grove schuld) on IBFD s part. In no event shall IBFD s total liability exceed the price of the ordered product. The information contained in this publication is not intended to be an advice on any particular matter. No subscriber or other reader should act on the basis of any matter contained in this publication without considering appropriate professional advice. Where photocopying of parts of this publication is permitted under article 16B of the 1912 Copyright Act jo. the Decree of 20 June 1974, Stb. 351, as amended by the Decree of 23 August 1985, Stb. 471, and article 17 of the 1912 Copyright Act, legally due fees must be paid to Stichting Reprorecht (P.O. Box 882, 1180 AW Amstelveen). Where the use of parts of this publication for the purpose of anthologies, readers and other compilations (article 16 of the 1912 Copyright Act) is concerned, one should address the publisher.

3 DOING BUSINESS IN ARGENTINA BELGIUM JANUARY

4

5 DOING BUSINESS IN BELGIUM 2018 INTRODUCTION This publication has been prepared by the International Bureau of Fiscal Documentation (IBFD) on behalf of BDO, its clients and prospective clients. Its aim is to provide the essential background information on the taxation aspects of setting up and running a business in this country. It is of use to anyone who is thinking of establishing a business in this country as a separate entity, as a branch of a foreign company or as a subsidiary of an existing foreign company. It also covers the essential background tax information for individuals considering coming to work or live permanently in this country. This publication covers the most common forms of business entity and the taxation aspects of running or working for such a business. For individual taxpayers, the important taxes to which individuals are likely to be subject are dealt with in some detail. We have endeavoured to include the most important issues, but it is not feasible to discuss every subject in comprehensive detail within this format. If you would like to know more, please contact the BDO firm(s) with which you normally deal. Your adviser will be able to provide you with information on any further issues and on the impact of any legislation and developments subsequent to the date mentioned at the heading of each chapter. About BDO BDO is an international network of public accounting, tax and advisory firms which perform professional services under the name of BDO. The global fee income of BDO firms, including the members of their exclusive alliances, was US$8.1 billion in These firms have representation in 162 countries and territories, with over 73,800 people working out of 1,500 offices worldwide. BDO s brand promise is to be the leader for exceptional client service - always, and everywhere. When you choose to work with BDO you quickly discover why we re different from the rest. BDO offers a comprehensive collection of high quality tax services and assets designed to support exceptional performance, and all our tax engagements benefit from the hands-on involvement of experienced professionals, backed by world-class resources. We are agile enough to handle the biggest and the smallest names in the industries we serve, and our relationship-driven culture means that we can provide responsive and personalised advice to all our clients. We work hard to understand our clients businesses and ensure that we match both our service offering and our people to their complex individual needs. We believe that providing our clients with access to experienced professionals who are actively engaged in addressing their tax and business issues is the most reliable way to provide exceptional service, always with a strong focus on trust and transparency. Regardless of your location, size or international ambitions we can provide effective support as you expand into new areas of the world. In an ever-evolving economic environment, businesses need a global organisation that provides exceptional, bespoke service combined with local knowledge and expertise. BDO is uniquely positioned to serve this demand, providing effective support and a truly global integrated global footprint. 3

6

7 DOING BUSINESS IN BELGIUM 2018 TABLE OF CONTENTS CORPORATE TAXATION... 9 ABBREVIATIONS... 9 INTRODUCTION CORPORATE INCOME TAX TYPE OF TAX SYSTEM TAXABLE PERSONS Residence TAXABLE INCOME General Exempt income Deductions Deductible expenses Non-deductible expenses Depreciation and amortization Reserves and provisions CAPITAL GAINS LOSSES Ordinary losses Capital losses RATES Income and capital gains Basic rates Austerity surcharge Withholding taxes on domestic payments Dividends Interest Royalties INCENTIVES Accelerated depreciation Investment deduction Incentives for research and development Notional interest deduction (NID) Tonnage tax regime Innovation income deduction Incentives for start-up companies Regulated and specialized real estate companies and companies with fixed capital for investment in real estate ADMINISTRATION Taxable period Tax returns and assessment Payment of tax Rulings TRANSACTIONS BETWEEN RESIDENT COMPANIES GROUP TREATMENT INTERCOMPANY DIVIDENDS OTHER TAXES ON INCOME SECRET COMMISSIONS TAX IMMOVABLE WITHHOLDING TAX FAIRNESS TAX TAXES ON PAYROLL PAYROLL TAX

8 DOING BUSINESS IN BELGIUM 2018 TABLE OF CONTENTS 4.2. SOCIAL SECURITY CONTRIBUTIONS TAXES ON CAPITAL NET WORTH TAX REAL ESTATE TAX INTERNATIONAL ASPECTS RESIDENT COMPANIES Foreign income and capital gains Foreign losses Foreign capital Double taxation relief Unilateral relief Treaty relief NON-RESIDENT COMPANIES Taxes on income and capital gains Taxes on capital Administration WITHHOLDING TAXES ON PAYMENTS TO NON-RESIDENT COMPANIES Dividends Interest Royalties Other Withholding tax rates chart ANTI-AVOIDANCE GENERAL TRANSFER PRICING THIN CAPITALIZATION CONTROLLED FOREIGN COMPANY OTHER ANTI-AVOIDANCE MEASURES VALUE ADDED TAX GENERAL TAXABLE PERSONS TAXABLE EVENTS TAXABLE AMOUNT RATES EXEMPTIONS NON-RESIDENTS MISCELLANEOUS TAXES CAPITAL DUTY TRANSFER TAX Immovable property Shares, bonds and other securities STAMP DUTY CUSTOMS DUTY EXCISE DUTY INDIVIDUAL TAXATION ABBREVIATIONS INTRODUCTION INDIVIDUAL INCOME TAX TAXABLE PERSONS TAXABLE INCOME General Exempt income

9 TABLE OF CONTENTS DOING BUSINESS IN BELGIUM EMPLOYMENT INCOME Salary Benefits in kind Pension income Directors remuneration BUSINESS AND PROFESSIONAL INCOME INVESTMENT INCOME CAPITAL GAINS PERSONAL DEDUCTIONS, ALLOWANCES AND CREDITS Deductions Allowances Basic allowance Allowance for dependants Credits Tax deduction for the purchase of employee stock Long-term pension savings and life insurance schemes Other LOSSES RATES Income and capital gains General rates Rates for separately taxed items of income Calculation of the federal and regional part of the tax due Withholding taxes ADMINISTRATION Taxable period Tax returns and assessment Payment of tax Rulings OTHER TAXES ON INCOME SURCHARGES IMMOVABLE WITHHOLDING TAX SOCIAL SECURITY CONTRIBUTIONS EMPLOYED SELF-EMPLOYED TAXES ON CAPITAL NET WEALTH TAX REAL ESTATE TAX INHERITANCE AND GIFT TAXES TAXABLE PERSONS Inheritance tax Gift tax TAXABLE BASE Inheritance tax Gift tax PERSONAL ALLOWANCES Inheritance tax Gift tax RATES Inheritance tax Brussels region Walloon region Flemish region Gift tax

10 DOING BUSINESS IN BELGIUM 2018 TABLE OF CONTENTS 5.5. DOUBLE TAXATION RELIEF INTERNATIONAL ASPECTS RESIDENT INDIVIDUALS Foreign income and capital gains Foreign capital Double taxation relief EXPATRIATE INDIVIDUALS Inward expatriates Outward expatriates NON-RESIDENT INDIVIDUALS Taxes on income and capital gains Employment income Business and professional income Investment income Capital gains Taxes on capital Inheritance and gift taxes Administration KEY FEATURES

11 CORPORATE TAXATION DOING BUSINESS IN BELGIUM 2018 BELGIUM This chapter is based on information available up to 25 January Abbreviations Abbreviation English definition French definition Dutch definition AR CIR/KB WIB Royal Decree to the Income Tax Code Arrêté Royaux Code Impôts Revenues Koninklijk Besluit Wetboek Inkomstenbelastingen CDTD/WDRT Code on various rights and taxes Code des droits et taxes divers Wetboek diverse rechten en taxen CEHG/WRHG Code on Registration Duty, Mortgage and Court Fees Code des droits d enregistrement, d hypothèque et de greffe Wetboek der registratie, hypotheek- en griffierechten CIR/WIB Income Tax Code Code Impôts Revenues Wetboek Inkomstenbelastingen CTVA/WBTW Value Added Tax Code Code de la taxe sur la valeur ajoutée DS/SR Succession duty code Code des droits de succession LDA/WVB Code to amend the corporate income tax and to introduce an advance ruling system LP 2 août 2002/PW 2 augustus 2002 LSST/WMZA SME Introduction Program Law of 2 August 2002 Law on social security for employees Small and medium-sized enterprise Corporate income tax is levied on the worldwide income of resident companies. Belgian-source income of non-resident companies is subject to the income tax on nonresidents. An austerity surcharge is levied on these two income taxes. In addition, companies must pay social security contributions. A VAT system applies. The term Belgium includes the territorial sea and the seabed and subsoil and the superjacent waters of the adjacent submarine areas beyond the territorial sea over which Belgium exercises sovereign rights in accordance with international law. Belgium has no ring-fencing regimes for companies. The applicable currency is the euro (EUR). Loi modifiant le régime des sociétés en matière d impôts sur le revenu et en instituant un système de décision anticipée en matière d impôt Loi Programme 2 août 2002 Loi concernant la sécurité sociale des travailleurs Wetboek van de belasting over de toegevoegde waarde Wetboek der successierechten Wet tot wijziging van de vennootschapsregeling inzake inkomstenbelastingen en tot instelling van een system van voorafgaande beslissingen in fiscale zaken Programmawet 2 augustus 2002 Wet maatschappelijke zekerheid der arbeiders The General Fiscal Administration (Administration générale de la Fiscalité (AGFisc)/Algemene Administratie van de fiscaliteit (AAFisc)) is responsible for the administration and collection of taxes. 9

12 DOING BUSINESS IN BELGIUM 2018 CORPORATE TAXATION 1. Corporate Income Tax 1.1. Type of tax system The Belgian corporate tax system is a classical double taxation system, modified by an exemption for dividends from qualifying participations held by corporate shareholders (see section 2.2.) and a reduced rate for dividends from participations held by individual shareholders. Tax is levied annually on the worldwide profits (see section ) Taxable persons Only entities with legal personality are subject to corporate income tax. According to the Income Tax Code, which governs corporate income taxation, taxable persons include resident companies, associations, cooperatives, establishments and organizations engaged in a business or other profit-making activities (articles of the CIR/WIB). Also pension funds, trusts, investment companies and collective investment companies are taxable entities, whereas investment funds are regarded as a transparent vehicle. Limited partnerships and partnerships limited by shares have legal personality and are therefore subject to corporate income tax at the level of the partnership (articles 2(5)(a) and 179 of the CIR/WIB). Other partnerships are taxed as a transparent entity. Non-resident entities, with or without legal personality (including permanent establishments of non-resident entities), that have a legal form comparable to the abovementioned Belgian entities are subject to income tax on non-residents (see also section 6.2.). Resident legal entities not engaged in a business or in other profit-making activities are subject to the tax on legal entities, instead of the corporate income tax. Such entities include the state, provinces, communities, intercommunity organizations and resident non-profit organizations. This special tax falls outside the scope of this survey. With effect from 1 July 2015, intercommunity organizations which carry out profitable activities with an aim to realize profits are subject to corporate income tax. This survey is restricted to the taxation of corporations (SA/NV) and limited liability companies (SPRL/BVBA) as well as foreign-incorporated entities of a similar description, whether resident or non-resident. These entities are referred to as companies Residence A legal entity is a resident of Belgium if it has its legal seat, main establishment or place of effective management in Belgium (article 2(1)(5)(b) of the CIR/WIB). For permanent establishments, see sections 6.1. and Taxable income General Generally speaking, the taxable base for corporate income tax purposes is the worldwide income (articles 1(1)(2) and 185 of the CIR/WIB), less allowable deductions. All income derived by a company constitutes taxable business income (profit). For the calculation, the accrual method is used. 10

13 CORPORATE TAXATION DOING BUSINESS IN BELGIUM 2018 The Income Tax Code describes the successive steps to determine the taxable base of the company, starting from the annual accounts (articles of the CIR/WIB and articles of the AR CIR/KB WIB): profit determination (increases in reserves, non-deductible expenses and distributed dividends); classification of the profit according to its source (Belgian-source profit, profit from non-treaty countries, profit from treaty countries); deduction of profit from treaty countries and deduction for certain gifts made and additional staff hired; deduction of other exempt profits such as premiums and subsidies received from the state; deduction of intercompany dividends (participation exemption); patent income deduction (transitional regime); innovation income deduction; investment deduction; incremental notional interest deduction; carry-forward of deduction for intercompany dividends; carry-forward for innovation income deduction; carry-forward of previous losses; and carry-forward of notional interest deduction. The incremental notional interest deduction, the carry-forward of deduction for intercompany dividends, the carry-forward for innovation income deduction, the carryforward of previous losses and the carry-forward of notional interest deduction is restricted to 70% of the remaining taxable profit exceeding EUR 1 million, to guarantee a minimum taxable base for large companies. The remaining 30% is taxed at the standard corporate income tax rate (see section ). The tax computation does not fully follow the commercial accounts. Capital gains are in principle taxable (see section 1.4.) unless the participation exemption applies (see section 2.2.) Exempt income For exempt capital gains and exempt domestic and foreign dividends, see sections 1.4. and 2.2., respectively Deductions Deductible expenses are those incurred, borne or booked as a debt by the company during the financial year in order to obtain or safeguard taxable business income (articles and 198bis of the CIR/WIB) (see Individual Taxation section 1.4.). To be deductible, the expenses must be proven by documents. From 1 January 2018, prepaid costs are only deductible in the period to which they relate Deductible expenses The following deductible business costs are expressly listed by law: salaries paid to managers and related social security contributions are deductible (article 195(1) CIR/WIB); 11

14 DOING BUSINESS IN BELGIUM 2018 CORPORATE TAXATION premiums for life insurances contracted for the business of a manger (195(1) CIR/WIB); company car costs, which are not considered as excessive (article 196(1) CIR/WIB); the amount of depreciation of purchased or manufactured tangible or intangible assets (article 196(2)(1) CIR/WIB). For companies which are not qualified as an SME, the amount of depreciation in the first year must be calculated pro rata the period of ownership of the purchased or manufactured fixed asset (article 196(2)(1) CIR/WIB). For the definition of an SME see section The depreciation base is reduced with the amount of purchase costs (article 196(2)(2) CIR/WIB); and costs which cannot be verified by records such as secret commissions together with the special separate tax levied on them (article 197 CIR/WIB). Other deductible expenses include financial charges (interest on loans), expenses related to the use of immovable property (rent, maintenance) and to the use of movable property (royalties), remuneration of staff (including social security contributions), management fees and overhead expenses, etc. The immovable withholding tax (see section 3.2.) and the secret commissions tax (see section 3.1.) are deductible. Dividends are not deductible. However, an incremental notional interest deduction (déduction pour capital à risque/aftrek voor risicokapitaal) is available for resident companies and non-resident companies (see section ). Interest and royalty payments are generally deductible. If paid to an affiliated company, the payments must correspond to what parties dealing at arm s length would charge. Service and management fees and overhead expenses are generally deductible. If paid to an affiliated company, the fees must correspond to what parties dealing at arm s length would charge (article 185(2) of the CIR/WIB). For the thin capitalization rules, see section Non-deductible expenses Deduction of the following items is disallowed (article 198 of the CIR/WIB): Belgian direct taxes, such as the corporate income tax itself and the fairness tax; certain regional taxes, e.g. environmental taxes; special social security contributions for the closure of companies (see section 3.); commercial penalties, including those paid to a state company; certain benefits granted by the company (even if those are taxed at the level of the receiving company); non-deductible pensions; capital losses on shares; interest, licence fees and service fees directly or indirectly paid to any foreign company, establishment or individual if, according to the law of the country where they are established, those items are not subject to tax, or are subject to a tax which is considerably more favourable than that in Belgium; 31% of restaurant costs; 50% of entertainment expenses (other than restaurant); 12

15 CORPORATE TAXATION DOING BUSINESS IN BELGIUM 2018 company cars: 17% of 6/7 of the list price of company cars multiplied by a percentage (between 4% and 18%) linked to the car s CO 2 emission rate and type of fuel consumption (gasoline or diesel); and employee participation rights (from 8 January 2018). For the thin capitalization rules, see section Depreciation and amortization Fiscal depreciation is not based on accounting law. Depreciation of business assets must be taken every year, irrespective of the amount of corporate income. Depreciation is taken starting from the financial year in which the asset was acquired or produced. Delayed depreciation is not allowed. Depreciation is calculated on the basis of cost price and the useful economic life of the asset. The law provides for two methods of depreciation, i.e. the straight-line method and the declining-balance method (articles of the CIR/WIB). The straight-line depreciation is the normal method. Depreciation periods and rates are normally fixed by agreement between the taxpayer and the tax authorities, although for certain assets rates are set by administrative instructions (e.g. commercial buildings 3%; industrial buildings 5%; machinery and equipment 10% or 33%, depending on the type; rolling stock 20%; intangible fixed assets 33.3%, when relating to research and development, 20% in other cases; know-how 10%). The declining-balance depreciation is generally optional (article 64 of the CIR/WIB and articles of the AR CIR/KB WIB). However, intangible fixed assets (except for investments in the audio-visual sector), cars and fixed assets which are depreciated by the owner but whose right to use has been transferred, must be depreciated on a straight-line basis. Self-created goodwill may not be depreciated. Under accounting law, acquired goodwill, in principle, must be depreciated on the basis of the straight-line method in not more than 5 years. Under tax law, however, acquired goodwill must be depreciated in a period longer than 5 years on the basis of the straight-line method (normally 10 years). For accelerated depreciation, see section For the treatment of depreciation in loss-making years, see section In case of a disposal of assets, the difference between disposal proceeds and the net book value (i.e. the purchase price less depreciation) is taxed Reserves and provisions Tax-free reserves and provisions are permitted under certain conditions prescribed by law and administrative instructions (article 185bis(3)(2)(2) of the CIR/WIB). The main conditions are the following: the reserve or provision must relate to a specific cost that is deemed to be deductible for tax purposes; the cost or loss must burden the result; the cost or loss must be probable in light of activities or events that occurred during the financial year and still exist at the end of the financial year; and the formal requirements are fulfilled, e.g. that the costs or losses be booked on separate accounts. 13

16 DOING BUSINESS IN BELGIUM 2018 CORPORATE TAXATION A tax-free provision may be set up by companies that exploit liquid or gaseous hydrocarbons for investment up to one half of the annual profits from the sale of products derived from petroleum or natural gas deposits located in Belgium, provided that the exempt amount is reinvested in immovable property or plant and machinery or in shares of another Belgian company by the end of the following 5 years. Small and medium-sized enterprises (SMEs) may, under certain conditions, until 30 December 2018 set up a tax-exempt investment reserve of up to 50% of the profits with a maximum of EUR 37,500 (article 194quater of the CIR/WIB). The additions to the reserve are reduced by capital gains on shares, cars used for business purposes and gains on debt claims on managers, shareholders and their spouses or children and any decrease of paid-up capital. The investment reserve must be invested within 3 years in depreciable (tangible or intangible) assets, for which the company is entitled to an investment deduction (see section ). If the reserve is not used within 3 years, it must be added to the profits. With effect from 1 January 2015, SMEs may set up a liquidation reserve (article 184quater of the CIR/WIB). This reserve can be formed through a requalification of (part of) the account profits after tax. The reserve is, however, subject to an anticipatory levy of corporate income tax at a rate of 10%. In case the liquidation reserve is distributed before liquidation of the company or within 5 years after creation of the reserve, an additional withholding tax of 15% is due (see section )). In case the distribution takes place after 5 years, a withholding tax of 5% is due. No withholding tax is due if the liquidation reserve is distributed upon liquidation. The programme law of 10 August 2015 extends the current regime retroactively to also encompass profits realized in tax years 2013 and These profits may, under the same conditions, also be converted into a liquidation reserve by paying a corporate income tax of 10%. Upon later distribution of these reserves, the rules described above apply. Taxpayers setting up a liquidation reserve avoid having to pay the standard liquidation distribution withholding tax rate of 30% (see section ) Capital gains Capital gains realized on the disposal of business assets are regarded as business income and, therefore, normally subject to taxation at the ordinary rates (article 24(2) of the CIR/WIB). In the case of immovable property, the capital gain is equal to the difference between the sales price less costs and the purchase price. The purchase price is increased by 25% for deemed costs, or with the actual costs if the company can prove that such costs are higher. Capital gains on shares or participations are exempt if the dividends relating to such shares or participations qualify for the participation exemption (see section 2.2.) at the moment the gains are realized. Note that the minimum participation or holding period requirement for the dividend exemption does not apply to the capital gains exemption, nor is there a requirement of reinvestment. The exemption applies only as far as the gains are higher than previously deducted capital losses on these shares or participations. However, with effect from 1 January 2012, a minimum 1-year holding period applies in order to qualify for the exemption. If this holding period is not met, the gains are taxed at a rate of 25% (25.50% including the 2% austerity surcharge). From tax year 2013 (assessment year 2014), the net amount of fully tax-exempt capital gains derived from shareholdings in other companies was subject to a separate tax of 0.412% (including a % austerity surcharge), irrespective of the size of the shareholding. This separate tax did not apply to SMEs. The tax was due if the shares were held for at 14

17 CORPORATE TAXATION DOING BUSINESS IN BELGIUM 2018 least 1 year. Furthermore, it was not possible to reduce the amount of qualifying gains with capital losses or prior tax losses. With effect from 2018, this separate tax is abolished and capital gains are tax exempt if the conditions of the participation exemption are met (see section 2.2.). Rollover relief is granted for gains on tangible and intangible fixed assets held for business purposes for more than 5 years and for gains realized in respect of damages, expropriations and similar events. In such cases, the gains are subject to corporate income tax over the period of depreciation of the reinvested assets if the proceeds are reinvested adequately in depreciable non-financial fixed assets located in Belgium within 3 years (or 5 years for buildings, ships and aircraft). The amount of depreciation taken on the new assets and corresponding to the amount of the capital gain is taxed as income in the same year the depreciation is taken. The untaxed part of the capital gain only remains exempt if it remains recorded as a liability in a separate account and is not used as a basis for distribution of profits. From assessment year 2012, this tax deferral also applies to reinvestments made in assets located in EEA Member States. If no reinvestment is made within the reinvestment period, the capital gain is taxed during the year in which the reinvestment period ends. In addition, the taxpayer is liable for interest on the related corporate income tax. In case of emigration of a company, all capital gains are immediately subject to tax. However, the gains on assets which can be attributed to a Belgian establishment of the emigrated company are tax exempt. From 2019, the transfer of assets from a Belgian head office to a PE situated in another Member State or in a third state is subject to tax. A step-up in value of the assets applies if the assets or tax residence of a company or PE is transferred abroad Losses Ordinary losses Carry-forward of losses is unlimited in time (article 78 of the CIR/WIB). However, losses may not be carried forward if there is a change in ownership which does not meet justified financial and economic needs. Carry-back of losses is not allowed. Special rules limit the deduction of losses where the company is involved in certain tax-exempt reorganizations, such as mergers and divisions. In order to counteract transactions whereby a company shifts its profits to a related company (including reorganizations), the law provides that losses are not deductible from the profits to the extent of abnormal or gratuitous advantages received. Companies with activities abroad may set off foreign losses according to a well-defined scheme (see section ). A recapture rule allows the tax authorities to add foreign losses that were previously deducted from the current Belgian profits if these foreign losses were set off against previous foreign profits under the application of a foreign loss carry-back rule. Depreciation is also obligatory in a loss-making year. However, if the accelerated depreciation regime applies (see section ), deprecation may be deferred. Transfer of losses within a group is not possible because Belgium has no group taxation regime, see section

18 DOING BUSINESS IN BELGIUM 2018 CORPORATE TAXATION Capital losses In general, capital losses are deductible for corporate income tax purposes (article 24(2) of the CIR/WIB). Capital losses on motor vehicles are partly deductible in relation to their emission level. Capital losses on shares or other participations are generally not deductible Rates Income and capital gains Basic rates From 1 January 2018, the basic corporate income tax rate is 29% (article 215(1) of the CIR/WIB), increased to 29.58% by the 2% austerity surcharge (article 463 of the CIR/WIB) (see section ). Previously, the basic corporate income tax was 33%. Including also the 3% austerity surcharge, the rate was 33.99%. From 2020 the basic corporate income tax will be further reduced to 25% and the austerity surcharge will be abolished. From 1 January 2018 the corporate income tax rate applicable to SMEs is 20% increased to 20.4% by the 2% austerity surcharge for profits up to EUR 100,000 (article 215(2) of the CIR/WIB): The rates mentioned above also apply to foreign companies with a PE in Belgium (see section 6.2.1). The rate of 29.58% (including the 2% austerity surcharge) and the reduced rate for SMEs also apply to non-resident companies without a PE in Belgium (see section 6.2.1). The reduced rate is not applicable to (article 215(3) of the CIR/WIB): companies owning participations exceeding certain limits (financial companies); companies whose shares are at least 50% owned by one or more companies; companies whose dividend distributions exceed 13% of the paid-up capital at the beginning of the financial year; and collective investment companies. Companies must pay a minimum fee of EUR 45,000 or at least the amount of taxable profits to at least one of the directors. Otherwise, a 5% tax will be due for 2018 and 2019 and 10% for For taxation of capital gains on shares that do not qualify for the participation exemption, see section 1.4. A 4.43% rate applies to income from innovation activities (see section ) Austerity surcharge An austerity surcharge is levied on income taxes due from both resident and non-resident taxpayers. The surcharge is calculated at a rate of 2% on the income tax actually due as computed before the deduction of withholding taxes, advance payments and foreign tax credits and before the application of the increases for insufficient advance payments (article 463bis of the CIR/WIB). The surcharge is subject to the same rules as the tax upon which it is levied. From 2020, the surcharge will be abolished. 16

19 CORPORATE TAXATION DOING BUSINESS IN BELGIUM Withholding taxes on domestic payments Although corporate income tax is levied on a company s total income by assessment, the tax is levied on certain items in a provisional form by way of a withholding tax which can be credited with the corporate income tax in domestic situations. For withholding tax applicable to payments made to non-residents, see section Dividends With effect from 1 January 2017, domestic dividends are generally subject to a 30% (previously 27%) withholding tax (article 269(1)(1) of the CIR/WIB). The withholding tax on dividends resulting from a (partial) redemption of shares is 30% from 1 January 2017 (previously 27%). Distribution of a liquidation reserve (see section ) before liquidation of the company and within 5 years after creation of the reserve is subject to a withholding tax of 20% (previously 17%). In the case of distribution after 5 years after the creation of the reserve, a withholding tax of 5% is due. Distribution of the liquidation reserve on occasion of liquidation of the company is exempt from withholding tax. Furthermore, with effect from 1 January 2017, in case of a contribution of shares to a company, the difference between the fair market value and the purchase price of the shares is treated as a taxable reserve. Any subsequent capital reduction will be treated as a dividend paid out of the taxable reserve and be subject to a 30% withholding tax. In addition, with effect from 1 January 2017, the rate for income derived from a share buy-back is increased from 27% to 30%. The withholding tax is creditable against the recipient s corporate income tax liability and refundable if it exceeds the corporate tax due, provided that the recipient had the full ownership of the shares at the moment of attribution of dividends. However, the withholding tax is not creditable if the dividend distribution gives rise to a write-down of the value of the shares or a capital loss, unless the shares are held for a continuous period of at least 1 year before the dividend attribution. There is no withholding tax on dividends paid by resident subsidiaries to resident parent companies if (article 106(6) of the AR CIR/KB WIB): both the subsidiary and the parent company are subject to Belgian corporate income tax; the parent company holds at least 10% of the capital in the subsidiary, or the acquisition value of the participation is at least EUR 2.5 million; and the parent s minimum shareholding has been held for an uninterrupted period of 1 year. If shares have not been held for a period of at least 1 year when dividends are distributed, the exemption from withholding tax applies provisionally provided the parent company undertakes to maintain its holding until the expiry of the 1-year period. In this case, the subsidiary must still withhold tax, but need not remit it to the tax authorities unless the parent company fails to maintain the holding period. Reduced rates apply to dividend distributions in respect of new shares issued from 1 July 2013 by SMEs (article 269(2) of the CIR/WIB). For such dividends the following withholding tax rates apply: 30% for distributions in the first 2 years after the shares are issued; 20% for distributions in the 3rd year; and 17

20 DOING BUSINESS IN BELGIUM 2018 CORPORATE TAXATION 15% for distributions in the 4th (and subsequent) years. For the above reduced rates to apply, certain conditions must be fulfilled, including: the shares must be held continuously and in full ownership by the same shareholder for 3 or 4 years, respectively; the shares must be issued against cash contributions and the statutory minimum amount must be paid up; and if the SME s capital was reduced after 1 May 2013, the reduced rates do not apply to a later capital increase up to the amount of the previous capital reduction. Capitalization of taxable reserves is taxed at a rate of 30% (27% before 1 January 2017). Such reserves may be distributed tax free distributed after 8 years (5 years for SMEs). If the capitalized reserves are distributed earlier, withholding tax is due at the following rates: 17% during the first 4 years (2 years for SMEs); 10% in the 5th and 6th year (3rd year for SMEs); and 5% in the 7th and 8th year (4th year for SMEs). With effect from 1 January 2017, a 15% withholding tax rate applies to dividends distributed by closed-end real estate investment funds which invest at least 60% in residential units specially adapted to health care Interest In principle, interest is subject to a withholding tax of 30% (27% before 1 January 2017) (article 269(1) of the CIR/WIB). The withholding tax is creditable against the corporate income tax, but only if the company has the full ownership of the capital giving rise to the interest. However, various types of interest are exempt from withholding tax if paid to a resident company that is subject to Belgian corporate income tax, including interest on government bonds, registered bonds, mortgage loans on Belgian immovable property and bond interest paid by non-residents (article 107 of the AR CIR/KB WIB). The 15% rate will remain applicable for government bonds issued between 24 November 2011 and 2 December Royalties Royalties paid to resident companies are not subject to withholding tax but only to corporate income tax on their net amount (i.e. gross amount less expenses) (article 185 of the CIR/WIB and article 11 of the AR CIR/KB WIB). However, a 15% withholding tax applies to income received from authors and neighbouring rights and from legal and compulsory licences up to a maximum amount of EUR 59, Incentives Belgium grants various tax incentives, of which only the most important are mentioned here. 18

21 CORPORATE TAXATION DOING BUSINESS IN BELGIUM Accelerated depreciation Accelerated depreciation is available under law or administrative rulings (articles 63/1 and 64bis of the CIR/WIB). Qualifying assets include: newly launched sea ships (depreciation in 8 years: 20% in the first year, 15% in the 2 following years and 10% in the remaining years) and other ships (10% per year); plant and machinery, with the exception of buildings used for scientific research (depreciation in 3 years, i.e % per year); qualifying new assets acquired by companies in economic sectors of major importance to the Belgian economy (depreciation in 3 years, i.e % per year); and costs of establishment, including costs related to the creation of a company (immediate depreciation) Investment deduction Under an investment deduction regime, either a normal or special investment deduction may be taken at the option of the taxpayer. The normal investment deduction is equal to a percentage of the cost price of certain investments. For investments made on or after 1 January 2016, the normal investment deduction is 8% (3.5% for such investments made before that date). The normal investment deduction of 8% is temporarily increased to 20% for fixed assets purchased or manufactured between 1 January 2018 and 31 December 2019 by SMEs. The following deductions apply (article 69 of the CIR/WIB): a deduction of 13.5% (for tax year 2018) may be taken by any company for investments in patents and in research and development of new technology beneficial to the environment as well as for energy-saving investments; a deduction of 3% may be taken for investments to encourage the recycling of packaging materials for drinks and industrial products; a deduction of 30% may be taken for investments in seagoing vessels; and a deduction of 8% for other investments. The special investment deduction is a deduction based on the depreciation taken on the asset in which the investment is made. The following deductions apply (article 70 of the CIR/WIB): companies with fewer than 20 employees on the first day of the financial year may take a deduction of 10.5% (for tax year 2015) computed on the annual depreciation taken on the asset in which the investment is made; and for environmentally friendly investments in research and development, any company (regardless of the number of employees) may take a deduction of 25% (for tax year 2016) computed on the depreciation taken on the asset in which the investment is made. SMEs and the self-employed may deduct 20.5% (for tax year 2018) of an investment in safety measures either in the year of the investment or the following year. The deduction is available in addition to the depreciation on the investment, which is already allowed under the existing legislation. The safety investment deduction applies to all investment which is in accordance with the recommendations of the local police district regarding preventative measures. For SMEs established as corporations, the deduction is applied together with the tax-exempt investment reserve (see section ). 19

22 DOING BUSINESS IN BELGIUM 2018 CORPORATE TAXATION The investment deduction for patents and research and development of new technology beneficial to the environment and spread investment deduction for research and development of new technology beneficial to the environment may not be used by companies opting for a tax credit for research and development (see section ). From tax year 2016, a spread investment deduction of 20.5% is introduced for investment in fixed assets for the production of high-tech products. Unused investment deductions due to insufficient income may be carried forward and are deductible in subsequent years up to certain limits. Specific limitations apply for or companies that opt to replace the application of the investment deduction by the research and development credit. Furthermore, the programme law of 10 August 2015 introduced a 13.5% deduction for investments relating to digital payment, invoicing systems and cyber-security Incentives for research and development Companies investing in research and development may opt to apply a tax credit of 33.99% of the invested amount (equal to the general corporate income tax rate increased by the austerity surcharge) (articles 289quater, 289novies and 292bis of the CIR/WIB and of the AR CIR/KB WIB). For SMEs the tax credit is 20.4% for taxable income up to EUR 100,000. The credit is calculated on the purchase or investment value of newly purchased or manufactured tangible or intangible assets, which are used for business activities in Belgium. Finally, innovative companies and companies involved in research and development activities only have to remit to the tax authorities 20% (60% for bachelors) of the wage tax that they have withheld from the wages paid to the employees involved in relevant activities (they may keep the remainder) Notional interest deduction (NID) Resident companies whose financial year equals the calendar year may deduct a notional interest expense from their taxable profits (articles 205bis-205octies of the CIR/WIB). The deduction is correspondingly granted to non-resident companies that are subject to the income tax on non-residents (see section 6.2.) in respect of their Belgian permanent establishment or immovable property (or rights thereon) located in Belgium. The deduction is based on the company s equity i.e. its share capital, subject to certain adjustments (e.g. the exclusion of foreign immovable property, the net value of fixed financial assets consisting of participations and other shares in (related) companies, and of unreasonable assets ) and retained earnings at the end of the preceding financial year. In addition, the base for the NID calculation also includes assets assigned to a foreign PE. For countries with which Belgium has concluded a tax treaty, the amount of the NID is, however, reduced proportionally with that part of the deduction that relates to a foreign PE asset. In case the PE is situated in a non-treaty country, the proportionality rule does not apply because Belgium retains the full taxing right over the (assets of) the PE. 20

23 CORPORATE TAXATION DOING BUSINESS IN BELGIUM 2018 From 2018, the deduction is calculated on the incremental equity over a period of 5 years. The incremental equity is equal to one fifth of the positive difference between the net equity at the end of the tax year concerned less the equity at the end of the fifth preceding year. For the assessment year 2019, the rate is capped at 0.746% (1.246% for SMEs). Before, 2018, the deduction is calculated by multiplying the equity by a fixed percentage, determined by the government on the basis of the average of the monthly reference indices of the interest rate on 10-year linear government bonds in the second year preceding the assessment year. For assessment year 2017, the rate was capped at 1.131% and for assessment year 2018 at 0.237%. The rate for SMEs was capped at 1.631% for assessment year 2017 and for assessment year 2018 at 0.737%. From tax year 2013 (assessment year 2014), it is no longer possible to carry forward the unused part of the notional interest deduction. Previously, a 7-year carry-forward was allowed. A transitional carry-forward regime applies for any unused notional interest deduction available as of 31 December 2011 (or a taxable period ending in assessment year 2012). The amount of the deduction for each taxable period is, however, limited. Up to a taxable income of EUR 1 million, the amounts carried forward may be set off without restriction. If, however, taxable income exceeds EUR 1 million, only 60% of the excess may be set off. From tax year 2014, the NID no longer applies to shares which qualify for the participation exemption (see section 2.2.), but which are held as a mere investment Tonnage tax regime Upon request, companies (and private entrepreneurs) may elect to report taxable income for corporate income tax as a certain percentage of the volume transported if they operate sea vessels sailing under the flag of Belgium or another EU Member State for the transport of goods or persons (i) on international sea routes or (ii) on routes from and to installations at sea used for the exploration for, or the exploitation of, natural resources and certain related activities (articles of the LP 2 août 2002/PW 2 augustus 2002). The regime is granted for an initial period of 10 years, with an automatic renewal every 10 years. After the request has been approved, taxable income is determined by applying daily coefficients with reference to the tonnage of the relevant vessel. The notional profits so computed are subject to corporate income tax at the normal rates. A reduced rate is applied in respect of certain vessels. To qualify for the regime, a company must generally own the sea vessel or charter it under a bareboat agreement. Losses from other activities may not be set off against the notional profits of the shipping division. They may, however, be set off against profits of the company taxed outside the tonnage tax regime. Losses from sea vessel transport made before an election to apply the tonnage tax regime may only be carried over to years in which the regime is not applied. The following other tax benefits apply in relation to sea vessel transport activities, regardless of whether the tonnage tax regime applies: a special declining-balance depreciation for newly acquired sea vessels exclusively used for sea transport (see section ); 21