Belgium Investment Incentives and Tax Advantages

Transcription

1 Belgium Investment Incentives and Tax Advantages

2 Agenda Belgium: your gateway to Europe Belgium s tax scene Specific tax incentives for corporates Incentives for expatriates Conclusions Belgium Investment Incentives and Tax Advantages Slide 2

3 Belgium: your gateway to Europe Belgium Investment Incentives and Tax Advantages Slide 3

4 Belgium at the heart of Europe Over 60% of the European purchasing power is situated within a tight 500 kilometer radius around Belgium. Belgium offers logistics operations access to the largest one-day-market in Europe: main markets can be served within 24 hours. Brussels is home to the NATO and European Union headquarters as well as for many European politicians, international lobbyists. Important logistics centre and hub for goods distribution: Seaport of Antwerp is the 2nd largest port in Europe and the 4th largest in the world. Slide 4

5 Servicing the European market Moscow Lisbon Madrid London Stockholm Oslo Frankfurt Warsaw Prague Daily high speed connections from Brussels to major western European cities (London, Paris, Amsterdam, Frankfurt, Koln) Helsinki Road distance Drive time Flight time Berlin 774 7:05 1:20 Warsaw :52 2:00 London 309 4:45 1:05 Leeds 636 7:23 1:40 Madrid :45 2:30 Lisbon :19 2:50 Frankfurt 398 3:43 1:05 Oslo :23 1:55 Stockholm :59 2:10 Helsinki :27 2:40 Moscow :48 3:20 Prague 918 8:50 1:25 Slide 5

6 Belgium s tax scene Slide 6

7 Belgium s Corporate Tax Scene Key Belgian Tax Features Corporate tax rate: 33,99% (but notional interest deduction see infra) Attractive holding regime - 100% exemption of capital gains (conditions) - 95% deduction of dividends (conditions) - Numerous withholding tax exemptions - Interest deduction (if arm s length) Thin capitalization rule of 5/1 (but exceptions do exist, e.g. cash-pooling) No CFC rules No proportional capital duties on capital increases Wide tax treaty coverage (incl. Treaty with India, US, Hong Kong, China) Access to EU Direct Tax Directives Indefinite carry-forward of tax losses No tax consolidation (but: debt push-down planning) Slide 7

8 Specific tax incentives for corporates Slide 8

9 1. Finance Company Notional Interest Deduction (NID) Equity Return on Equity / Financial return BELGIUM FinCo ParentCo ST / LT loans cash pooling (Normal yield) Affiliates 3.0% 4.0% 5.0% 6.0% NID rate for FY12/31/2012 (3%) (3%) (3%) (3%) Taxable return on equity 0.0% 1% 2% 3% Nominal tax rate (rounded) 34% 34% 34% 34% Effective Tax Rate 0.0% 8.5% 13,6% 17.0% Applies to all companies Deemed interest deduction for invested equity (no cash outlay) NID base: Belgian GAAP equity some adjustments to be made (e.g. investments in shares) NID rate: annually fixed, by reference to 10-years Belgian Government bond rate FY : capped at 3% NID benefits are automatic No need for a tax ruling Alternatives available for high-yield financing (eg Profit Participation Loan) resulting in stable 4% ETR Slide 9

10 1. Finance Company Example Balance sheet - Accounting Intra-group receivables (Interest rate: 3,5%) 1 bio Equity 1 bio P&L - Accounting Operating costs 0.5 mio Interest income (interest rate 3.5%) 35.0 mio Net Profit Before Tax 34.5 mio Taxable Profit Accounting profit Min: Notional Interest Deduction (FY 12/31/2013: 3%) 34.5 mio (30.0) mio Taxable Profit 4.5 mio (*) Hypothetical example, for illustration purposes only - Based on NID rate for FY12/31/2012; and - interest rate of 3.5% Corporate Tax (@34%) 1.53 mio Effective Tax rate 4.43 % Slide 10

11 2. Holding Company Basic Structure ParentCo India Equity / Loan No dividend WHT Loan HoldCo / Opco Belgium No capital duty Capital gain = 100% exempt Dividends = 95% exempt Interest on loans fully tax deductible against 5% taxable dividends and operating income No dividend WHT (EU P/S Directive / EU-Swiss Agreement / BE-HK Treaty) FinanceCo - Belgium - European Opco European Opco Swiss Opco Hong Kong Opco Slide 11

12 2. Holding Company Planning opportunity Mixed holding company* Balance sheet Accounting Share Investments (dividend return: 9%) 800 mio Equity 200 mio Operating assets (ROA: 10% ROA) 200 mio Debt (interest rate: 4.0%) 800 mio P&L - Accounting Interest cost (interest rate 4%) 32.0 mio Net Operating Income (ROA : 10%) 20 mio Dividends (9% return) 72 mio Net Profit Before Tax 60 mio Taxable Profit Accounting profit Min: Dividends Received Deduction (95% deduction) Min: Notional Interest Deduction (FY 12/31/2013: 3%) 60.0 mio (68.4) mio (6) mio Taxable Profit 0.0 mio * Hypothetical example, for illustration purposes only Corporate Tax (@34%) 0.0 mio Effective Tax rate 0.0 % Slide 12

13 3. Patent Company Basic Structure Initial developer ParentCo License / Sale / Contribution Treaty HoldCo Patent Company - Belgium - Patent license income or Sale of patent-based products Affiliates OpCos Service (cost-plus) Supply of goods or Tolling 80% of patent income tax exempt OpCos 3rd parties Contract developer Contract manufacturer Slide 13

14 3. Patent Company Summary of Belgian R&D Incentives Eligibility Subject Type Description R&D center owning the IP rights* Contract R&D center** Corporate Tax Incentives R&D investment deduction R&D Tax credit 15.5% one-shot / 22.5% spread tax credit for new R&D Center environment-friendly investments in addition to normal tax depreciation Patent Income Deduction 80% tax exemption of patent income for patents and supplementary protection certificates developed or further improved by a Belgian company or branch via a R&D center Notional Interest Deduction Notional Interest Deduction for equity (Belgian GAAP share capital and retained earnings) invested in the Belgian company or branch (FY12/13 : 3%) Other tax benefits - Advance Tax Ruling - Foreign Tax Credit - Dividend withholding tax exemption - Exemption from capital duty Employment -related incentives Partial Withholding Tax exemption 75% payroll withholding tax remittance exemption for qualifying researchers Expatriate tax Status Special tax treatment for foreign executives and researchers temporarily assigned to Belgium (non-resident tax status, business travel exclusion, taxfree allowances) Home country social security Possibility for foreign individuals temporarily assigned to Belgium to remain under the home country social security system by virtue of Totalization Agreements or the EC Regulation (1408/71) Slide 14

15 4. Principal Central Entrepreneur Excess Profit Potential to exempt profits that the company could not have realized if it had not been party to relatedparty dealings (fact dependent): Transfer of new activities to Belgium Belco as part of a group Free access to group intangible assets (e.g. marketing, product, manufacturing or other intangible assets) BelCo on standalone basis Excess profit (Abroad) (Belgium) Tax exempt Group integration synergies Taxation limited to arm s length profits Advance ruling required Stand-alone profit Stand-alone profit Taxable profit To be supported by economic & financial analyses Ruling for 5 years renewable ETR of 9% achievable Slide 15

16 5. Headquarters and Service Centres Broad Spectrum of Services Regional Headquarters Strategic Management VP Functions A broad range of services can be organized in the Center Management Services Marketing Finance / Accounting / Tax Legal / HR / Admin Supply Chain Procurement Customer Services Call Center Marketing Order taking Information Technology Software development Data Centers IT Support Center IT Call Center Research & Development Contract R&D Contract design Testing & Inspection Allowed to house other (commercial) activities in the same legal entity provided they are set up as a separate branch of activity. In case of multiple activities, an Activity Based Accounting system is required Slide 16

17 5. Headquarters and Service Centres Basic structure ParentCo European Principal The tax treatment of a HQ or Service Center can be ruled in advance with the Belgian Ruling Office. HQ / SSC Services (cost-plus) - Belgium Subcontract Services Subcontractors (Internal Contractors or external) Services (cost-plus) Local affiliate Local affiliate Local affiliate Local affiliate An advance tax ruling allows the HQ or Service Center to operate in a safe, low-tax, environment: Limited taxable profit: Cost-Plus method generally accepted - Competitive mark-up % (often 3% - 6%), to be supported by a TP study Tax position of foreign service recipients: No Belgian PE - No Belgian tax residence (no seat of effective management in Belgium) Ruling for 5 years - renewable Slide 17

18 5. Headquarters & Service Centres Belgium ranks 7 in terms of Logistics Performance Source: World Bank Logistics Performance Index 2012 Slide 18

19 6. Ruling (APA) Practice A very broad scope including transfer pricing, M&A, PE issues, VAT treatment, personal income tax, customs and excise, etc. Possibility to rule on global business cases Cooperative and constructive mindset of the ruling office A positive decision binds the Belgian tax authorities A processing time of 3 months (indicative timeframe) Valid for 5 years or more Pre-filing meetings on a no-name basis possible, without obligation to file a ruling request afterwards Commercial opportunities Avoid adverse tax consequences of business decisions Powerful insurance instrument Slide 19

20 Incentives for expatriates Slide 20

21 Expatriates in Belgium Special Expatriate Tax Regime Summary of its main features: Non-resident taxation Tax free allowances - Limited allowances - Unlimited allowances Foreign business travel exclusion Scope of applications: Non-Belgian national Who exercises activities which are those of an executive or which require a special knowledge and responsibility And who works temporarily in Belgium Application expat regime Belgian resident Gross salary (A) , ,00 Less: Belgian social security Less: tax free allowances (B) , , ,13 N/A Subtotal , ,29 Less: travel exclusion (10%) ,97 N/A Taxable income , ,29 Belgian income taxes (C) , ,08 Net remuneration (A-B-C) , ,21 Slide 21

22 Expatriates in Belgium Work permit formalities Principle Type B work permit Non-EEA employee work permit is needed prior to commencement of work exemptions (e.g for meetings in a closed circle up to 20 consecutive calendar days with a maximum of60 days per calendar year) For Indian employees, most of the work permits are applied for and obtained based upon the following categories: Highly qualified employees (Degrees, experience + Gross yearly salary (excl tax free allowances) of EUR (2012) EUR (2013)) Managerial employees (Leading position + Gross yearly salary (excl tax free allowances) of EUR (2012) EUR (2013) Visa and residence permit formalities Principle Indian employee coming to Belgium entrance visa needed to be applied for at Belgian Embassy/Consulate type of visa depends on length and purpose of stay in Belgium. In case stay exceeds 90 days within 6 months Belgian residence permit needed to be applied for at local Town Hall of place of residence Slide 22

23 Expatriates in Belgium Labour law and social security formalities Belgian legislation aimed at avoidance of social dumping: Act of 5 March 2002 imperative minimum rules (minimum wages, indexation of salaries, working hours, holiday pay and year-end premium, etc ) Declaration of employment needed upfront (Dimona for those subject to Belgian social security, Limosa for those on temporary even partial - assignment from abroad) Belgian pay slips / individual account as well as drafting and keeping a set of other social documents (staff register, working regulations, specific contracts,...) is required (except for a work less than 12 months and provided it is notified in advance to the social security authorities via Limosa) Social security treaty is concluded between Belgium and India (1 September 2009): work state principle applies exception: secondment up to 5 years (prior subjection to the Indian Employee Provident Fund EPF) certificate of coverage to be applied for at the Indian EPF (can take up to 3 months) Slide 23

24 Belgium s Credentials MNCs that centralized key European functions in Belgium Toyota Motor Corp: European HQ, Holding, Finance, Distribution, R&D, Logistics Mazda Motor Corp: European HQ, Holding, Finance, Distribution, Logistics Honda: European SSC, Distribution, Logistics Volvo Cars: European SSC, Finance, Manufacturing Volvo AB: European SSC, Finance, Manufacturing, Logistics Hyundai Motor: European SSC, Logistics Procter & Gamble: European SSC, Finance, R&D, Distribution, Manufacturing Coca Cola: European SSC, R&D, Logistics Campbell Soup: European SSC, Manufacturing Levi Strauss: European HQ, Holding, Principal, Finance Samsonite: European HQ, Holding, Distribution, Manufacturing Nike: European Logistics VF: European principal, Distribution Bose: European HQ, Finance, Marketing, Logistics Hewlett Packard: European Finance, SSC Google: European Datacenter Agilent: European Finance American Standard: European HQ, Holding, Principal, Distribution Johnson &Johnson: European R&D, manufacturing GlaxoSmithKline: European R&D Pfizer: European Logistics, Distribution, R&D DHL: European HQ, Finance UPS: European HQ, Finance Fedex: European HQ, Finance Masco: European HQ, Finance, Holding, Principal A. Schulman: European HQ, Holding, Finance, Manufacturing, Distribution Lubrizol: European HQ, Principal, R&D, manufacturing Air Liquide: European Finance, SSC Dupont: European Finance McCain: European Finance Exxon-Mobil: European Finance, SSC BP: European Finance Statoil: European Finance, SSC BASF: European Finance, SSC Bayer: European Finance, SSC Arcelor Mittal: European SSC Solutia: European HQ, Holding, Finance, Principal Cytec: European HQ, Holding, Principal Avery Dennison: European SSC, Finance Georgia-Pacific: European SSC, Finance British American Tobacco: European SSC, Finance, Manufacturing Beckton Dickinson: European SSC Ineos: European HQ Goodyear: European SSC Bridgestone: European SSC, Holding, Distribution Barry Callebaut: European SSC, Finance, principal, Distribution Basell Lyondell: European SSC Fiskars: European HQ, European SSC Caterpillar: European SSC Staples: European SSC, Principal Avnet: European SSC, Principal Electrolux: European SSC, Principal, Distribution Neways: European HQ Toyoda Gosei: European HQ, Holding Sato: European HQ, Holding, Distribution Toyota Tsusho: European HQ, Holding, Distribution Panasonic Batteries: European HQ, Distribution Alcon: European Finance Adecco: European Finance, SSC SWIFT: Global HQ, Global operating center Slide 24

25 Conclusions Slide 25

26 Belgium has very strong internationally orientated profile focus on investors Especially good business environment (i.e. tax incentives) for: - Knowledge-intensive companies - Green-field investments - Companies with high export performance - Intra-group financing and holding - HQ/SSC/Maritime transportation and logistics Various incentives for expatriates working in Belgium Belgium is an excellent hub to operate from in Europe! Slide 26

27 Contact Details Pascal Janssens Partner Direct: Mobile: Fax: pascal.janssens@pwc.be 2012 PricewaterhouseCoopers. All rights reserved. PricewaterhouseCoopers refers to the network of member firms of PricewaterhouseCoopers International Limited, each of which is a separate and independent legal entity. This document should not be made available to any third party without prior consent from PricewaterhouseCoopers. Except where we have expressly agreed the contrary in writing, PricewaterhouseCoopers will not accept any liability or responsibility to any third party to whom our document is shown or into whose hands it may come. Furthermore, we wish to stress that implementation of any of the content of this presentation can not be done without obtaining prior formal advice. Therefore, this presentation serves for general guidance purposes only.