TAX GUIDE BELGIUM. Professional advice should be obtained before acting on any information contained herein.

Transcription

1 TAX GUIDE BELGIUM DISCLAIMER This document is for guidance only. Professional advice should be obtained before acting on any information contained herein. Last up date : December

2 1. INDIVIDUAL INCOME TAX - A resident of Belgium is taxed on his total worldwide income (earned income, real estate income, moveable income (dividends and interest) and miscellaneous). - Income (except moveable income which is taxed at flat rates) is subject to the following progressive tax rate ( by scale) Annual income 2010 ( ) Tax Rate 0 to % to % to % to % Over % - Moveable income (dividends, interests, royalties) is taxed at a fixed rate: 15% or 25% - Local taxes are due on top of those rates. Those taxes vary from commune to commune with an average of 7%. The local tax is computed on the federal rates. - A special tax regime is granted to foreign employees who have been temporally transferred to Belgium. Under this regime, the reimbursement of cost of living, housing and Tax equalisation is not taxable. Furthermore income deemed to be earned during business trips outside of Belgium is tax-free. 2

3 2. CORPORATE TAX 2.1. Determination of Taxable Income Principle For a resident Company, the taxable income is the reflection of the financial statements of that Company adjusted for disallowed expenditures, exempt profits, special deductions and losses carried forward. For a non-resident Company the taxable income is basically the Belgian source income Depreciation All assets, tangible and intangible, new or used, those are owned by the company to realise its business, and which value diminishes with time, are depreciable. The following methods are allowed: straight line and double declining. The double declining method is subject to the following limits: - It cannot exceed twice the straight line rate - It cannot exceed 40% - It does not apply to cars - It does not apply to assets rented to third parties. Depreciation is computed pro rata temporis. However, this does not apply to small and medium sized companies (see definition below). Common depreciations rates (although not defined by law) are: - 3% for buildings - 10% for furniture - 20% for equipment - 33% for computers. 3

4 Inventories - Inventories and work in progress are valued at the lower of cost or market value (at year end). - Accepted methods are cost, FIFO, LIFO or average, to be applied consistently Capital gain or losses - Capital gain or loss is the difference between the purchase price (or acquisition cost) and the sales price. - Capital gain is usually taxed at normal tax rate. Capital losses are deductible from taxable income. - Under specific conditions tax on capital gain can be deferred (gain realized on fixed asset - other than cars held for more than 5 years and if the sales proceed is reinvested in depreciable assets in a certain period of time). - Capital gains on shares are normally tax-free. - Capital losses on shares are not deductible Dividends 95% of dividend income is deducted from the corporate taxable income provided: - That the subsidiary has been subject to normal income tax and - That the participation equals 10% or amounts to minimum and - That the shares held in full ownership during an interrupted period of at least a year are booked as a financial asset Interest Deduction Interest expense incurred for business purpose is usually deductible as incurred (except if in excess of normal market rates). Under certain circumstances, interest could be requalified into dividends (and therefore included in the taxable income). Interest paid to a lender established in counties with special tax regimes, will not be deductible if the loan exceeds 7 times the retained earnings of the borrower. 4

5 Interest paid to foreign lender may involve Belgian withholding tax. (See below) Notional Interest Deduction Belgium grants to resident and non-resident companies a tax deduction for risk capital, the purpose of which is to narrow the discrimination between funding with equity and funding with loans, since the interest paid is deductible for the borrowing company while dividends are not. The notional interest deduction equals for accounting period 2010 and 2011 to 3,8 % (increased to 4,3 % for SME) and the unused deduction is transferable for seven years. This deduction is computed based on the company s equity including retained earnings at the end of the previous taxable period, however reduced by : - The net fiscal value of the taxpayer s own shares, shares and participations that are part of the financial fixed assets, and shares in collective investment companies of which the dividends qualify for the participation exemption; - The net assets of foreign permanent establishments and/or foreign real estate; - The net accounting value of tangible fixed assets, or parts thereof, to the extent that the related costs unreasonably exceed the business needs; - The accounting value of parts that are held as an investment and that do not generate periodic income, e.g. art, jewellery, - The accounting value of real estate, or other rights thereon, used by an individual who is a director, or his or her spouse or dependent children; - Tax-exempt revaluation gains (including those incorporated into capital), capital investment subsidies and the tax credit for research and development; Variations in the equity and the aforementioned excluded investments impact the notional interest deduction on a pro-rata base. Such variations are deemed to take place on the first day of the month following the month in which they have occurred. This way, a capital increase on 22 January 2011 will only count for 11/12 th Carry forward losses - Business losses can be carried forward indefinitely. Following a change in the control of the company, not justified by financial or economic reasons, the pre-existing losses will disappear. - There is no carry back Foreign Source Income Belgian companies are taxed on their worldwide income except on that income which is exempted in accordance with a double tax treaty. 5

6 2.2. Tax Rates Corporate income tax The basic corporation tax rate is 33,99% (including 3% surtax) Reduced corporate tax rates apply to small and medium sized companies that have a taxable basis of less or equal to : Taxable basis Nominal Rate +3% surtax Up to % 24.98% From to % 31.93% From to % 35.54% In order to qualify to a small and medium sized company, the following criteria s have to be met: - The distributed dividend may not exceed 13% of paid in capital. - The profits should not exceed or more in salary must be paid to at least one director. - Excluding participations that reach a 75% threshold, the company cannot invest 50% or more of its retained earnings in shares Capital Gain Tax There is no separate capital gains tax for companies. However some capital gain can benefit of a deferred corporate tax (see above) Branch Profit Tax There is no separate branch profits tax. Foreign income may be exempt of taxes based on the double tax treaty. 6

7 VAT VAT is due on sales of goods and services in Belgium. The basic rate is 21% Certain supplies benefit of a rate of 6% or 12% Local Taxes Depending on the communes, local taxes could be due on machinery and equipment as well as on computers, employed personnel or offices rented Payroll Taxes A tax is withheld at source by the payer of wages, salaries, director s fees, bonuses, pensions and life annuities. Such withholding is based on a Royal decree and is a (refundable) prepayment of the final tax due by the beneficiaries Social Security taxes On wages and salaries, social security is due. Depending on the number of persons employed, the employer s contribution varies between and 34.46% and this contribution is paid on top of the salary paid out to the employee. The employee s contributions amount to 13.07% of the received salary. Remark : For blue-collar workers, employer s and employee s contributions are levied to the aforementioned rates but calculated on 108% of the salary Other Taxes - Registration tax is due on the sale of real estate: 12.5% in Brussels and the Walloon Region and 10% in the Flanders region. - An annual real estate property tax is levied. This tax is assessed per premise. The average real estate tax is about 40% of a theoretical rental value of the building; this value is determined by the tax authorities. 7

8 2.3. Foreign tax relief Dividends received by a Belgian company from its foreign subsidiaries benefits of the 95% exemption under certain conditions. Foreign interest and royalties on which foreign tax has been levied, benefit of a foreign tax credit (max of 15/85 in the case of interest limited in case of leverage). Such foreign tax credit is non refundable Corporate Groups Belgium has no special provisions for corporate groups. Every company is considered as an individual unit and taxed accordingly Inter-company Relations The basic principle is that the transactions with related parties must occur on arm s length basis. If abnormal or gratuitous advantages are granted by a Belgian company to a related party, such advantages will be added to the taxable income of the grantor of the advantage except if the advantages are directly or indirectly included in the Belgian taxable income of the beneficiary. If abnormal or gratuitous advantages are received by a Belgian company from a related party, any deduction (losses, dividend exemption, notional interest deduction ) will be allowed up to the value of the advantage received. The disallowed deduction may be carried forward when the applicable Belgian law foresees so. Upon request to the Belgian Advance Ruling Commission, an agreement on tax adjustments may be obtained for a Company belonging to an international group when it appears that its accounting profits have to be corrected to be at arm s length Withholding Taxes The Belgian withholding tax on dividends is normally 25% or 15%. This rate is reduced to 0% if the dividends benefit of the EU Parent-Subsidiary Directive (participation of at least 10% in another EU company). 8

9 The withholding tax on interests is 15% (but for interest on loans stemming before March 1990 the rate is 25 %). This rate is reduced to 0% if the dividends benefit of the EU Interest and Royalty Directive (participation of at least 25% in another EU company). No withholding tax on royalties paid to residents of Belgium. For non-residents the withholding tax is 25%. This rate is reduced to 0% if the dividends benefit of the EU Parent- Subsidiary Directive (participation of at least 25% in another EU company). Lower treaty rates can apply for dividends, interest and royalties that are not exempted based on EU regulations. (from 0 to 15 % depending on the treaty). 3. VARIOUS 3.1. Exchange Control There is none in Belgium Inheritance and gifts taxes Inheritance taxes are due if the deceased was resident in Belgium at the time of his or her death and are calculated on the worldwide net property, after deduction of debts. In case of a non-resident, duties will be levied on the value of immovable property but without deduction of any debt. The rates are progressive and determined on the proximity of the relationship between the deceased and the beneficiary(ies) and on the amount of the beneficiary s share in the estate. Special rules can however apply upon the transmission of a family owned business. The rates, which are applicable in the Brussels region, vary between 3 and 30% for close relatives (spouse and relatives in the direct line of ascent or descent of the deceased), between 20 and 65% for brothers and sisters, between 30 and 70% for uncles, aunts, cousins, nieces and nephews, and between 40 and 80% in all other cases. The rates, which are applicable in the Walloon region, vary between 3 and 30% for close relatives (spouse and relatives in the direct line of ascent or descent of the deceased), between 9

10 20 and 65% for brothers and sisters, between 25 and 70% for uncles, aunts, cousins, nieces and nephews, and between 30 and 80% in all other cases. In the Flemish region, the inheritance is split up into an immovable and a movable part which are taxed separately. The rates vary from 3 to 27% for close relatives. For brothers and sisters the rates vary between 30 and 65%. In all other cases they vary between 45 and 65%. Tax free allowances are granted to close relatives. Treaties, to avoid double taxation of estates, have been concluded with France and Sweden only. Gifts are subject to the same rates as the one applicable on inheritance. However, lowered flat tax rates can apply. (3% or 7%, depending on the relationship between donator and beneficiary) 10

11 INDEX 1. INDIVIDUAL INCOME TAX CORPORATE TAX Determination of Taxable Income Principle Depreciation Inventories Capital gain or losses Dividends Interest Deduction Notional Interest Deduction Carry forward losses Foreign Source Income Tax Rates Corporate income tax Capital Gain Tax Branch Profit Tax VAT Local Taxes Payroll Taxes Social Security taxes Other Taxes Foreign tax relief Corporate Groups Inter-company Relations Withholding Taxes VARIOUS Exchange Control Inheritance and gifts taxes