Taxation in Belgium, Belgium Business Income and Rates - Allo' Expat Belgium
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Taxation in Belgium
 
 
 
 
 

Corporate Taxation

Branch vs Subsidiary

A Belgian branch of a foreign company is subject to non-resident income tax on the profits attributable to the Belgian branch. Taxable income of a branch is determined in almost the same way as for a subsidiary.

All expenses incurred by the Belgian branch are deductible, including the general and administrative expenses regardless of whether they are incurred in Belgium or abroad. The same principles apply to subsidiaries.

After Belgian taxation, the profits of the branch are repatriated without any further tax burden, whilst profits of a Belgian subsidiary (after taxation) are repatriated as dividends, subject to withholding taxes. A Belgian branch will, in principle, not be able to invoke the double tax treaties concluded by Belgium. However, it will, in principle, be able to invoke the double tax treaty concluded by the country where its head-office is located and the other.

Business Tax Rates

The normal rate of corporate income tax on resident companies amounts to 40,17% (i.e. 39% tax rate plus a 3% crisis surcharge), but will, as from tax year 2004, be decreased to 33,99% (33% tax rate plus a 3% crisis surcharge).

Progressive lower rates apply for resident companies and branches that meet a number of conditions.

The same tax rates apply to distributed and undistributed profits.

Determination of Taxable Profit

Taxable income is based on the profit disclosed in the financial statements, which is then adjusted for tax purposes. Gross income therefore includes all business profits, capital gains, dividends, interests, royalties, rent, etc.

Tax Adjustments

To be tax deductible, business expenses must have been actually paid or borne by the tax payer in order to obtain business income.

Some expenses are however not or only partly tax deductible, for instance car costs, restaurant expenses, gifts, penalties, etc.

Accruals are tax deductible provided they cover charges that are clearly described and have become likely during the accounting year.

Tax losses

Tax losses can be carried forward indefinitely, but can not be carried back. No tax losses carried forward can be offset against profits derived from abnormal or benevolent advantages received from another affiliated company.

No tax losses carried forward can be offset against the profit of the accounting year in which the company has been taken over or in which there was a substantial change of control of the company, nor against the profits of subsequent years, unless the transaction is justified by financial or economic needs.

In the framework of a merger or division, tax losses carried forward can, in principle, not be transferred from one company to another. An exception is made in case of a tax-free merger or division. In that case, the tax losses carried forward of the disappearing company prior to the merger or division will be reduced in proportion to the net fiscal value of the disappearing company prior to the merger or division over the sum of this net fiscal value and the net fiscal value of the absorbing company or the company receiving the contribution. The same reduction applies to the tax losses carried forward of the absorbing company or the company receiving the contribution.

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