when taxpayers comply with transparency and CbC reporting rules for several years in a row, they should earn a “compliant taxpayer” label and enjoy less cumbersome and time-consuming tax audits in return. The Corporate Tax Rate in Belgium stands at 29 percent. The average rate being 7%. The main conditions for the dividends-received deduction to apply are that the participation must be at least 10% in the share capital of the subsidiary, or must have an historic acquisition value of at least EUR2.5 million, and that such participation must have been maintained for an uninterrupted period of at least one year (not necessarily prior to the distribution of the dividend). Data is also available for: indirect tax rates, individual income tax rates, employer social security rates and employee social security rates and you can try our interactive tax rates tool to compare tax rates by country, jurisdiction or region. Main Allowable Deductions and Tax Credits Corporate Tax in Belgium Updated on Friday 08th May 2020 . The draft proposals should normally be available as from October. Then there is a 5:1 thin cap rule, whereby interest paid or owed, directly or indirectly, to related parties and/or lenders based in tax havens is deductible only to the extent that the tainted loans do not exceed five times the taxpayer’s equity. For civil law purposes, Belgian law will apply if the entity is governed by the relevant Belgian laws, provided the Belgian conflict-of-law rules do not make any other jurisdiction competent as governing law. However, certain tax deductions, including NOLs carried forward from previous tax years, go into a basket and current-year profits over EUR1 million can be reduced by no more than 70% of the basket, leading to a minimum taxable income of 30% of the basket on income over EUR1 million. The following are subject to corporate income tax: companies, associations, bodies and establishments that: are a legal entity have their registered office, their main establishment, their head office or administration office in Belgium engage in (a) profit-making operation(s) Companies that are subject to corporate income tax need to complete a tax return once a year. The past Belgian coalition government was in favour of a multilateral approach towards digital taxation, rather than individual domestic initiatives. This regime is currently under revision, with a view to making it less vulnerable for state aid or other threats. The tax team also advises (and litigates) in matters that are directly linked to corporate tax work, such as transfer pricing, employee incentive plans, tax planning for company executives, etc. The present Belgian coalition (caretaker) government aims to transpose – or has already transposed – the BEPS and ATAD measures without much “gold plating”, to create a level playing field with other jurisdictions that offer similar non-tax benefits to potential or existing inward investors. Corporate taxation: Rates Corporate income tax rate 25% Branch tax rate 25% Capital gains tax rate 0%/25% The effective corporate tax rate of an undertaking located in Luxembourg city is 24.94%, including the unemployment contribution (see below) and the municipal business tax. The standard corporate tax rate of 33,99% will be lowered to 29% in 2018 and will be reduced to 25% as from 2020. YA 2018. With the exception of capital losses on shares, capital losses are deductible from current income, as capital gains (again, with the exception of capital gains on qualifying shares) are taxable as ordinary income (albeit that the taxation of capital gains on fixed assets can be deferred, under strict conditions). Marketing cookies may be set by our advertising partners to collect information about your browsing habits. 2020 Corporate Income Tax Rates. In the past, most limited risk distribution arrangements (eg, commissionaire structures) were commonly used and not aggressively scrutinised by the Belgian tax authorities, but this is rapidly changing, especially since Belgium decided in 2017 to opt in to the MLI provision on commissionaire structures (Article 12). Most new measures were copied from last year’s memorandum, although several proposals did not make it in the end. Belgium has already implemented rules to deal with hybrid instruments, most of which will apply for financial years ending on or after 31 December 2019. Belgium does not have any change of control provisions that would apply to the disposal of an indirect holding in a Belgian corporation higher up the non-resident group or parent company. Note that, due to the announced reduction of the corporate tax rate, the effective penalty will eventually be less (€19,000 × 34% = €6,640 due compared to €40 000 × 25% = €10,000 tax payable). Under the Belgian CFC rules, non-distributed profits of a foreign company or establishment are added to the taxable income of a Belgian company/head office if and to the extent that such profits arise from artificial constructions that have been put in place for the essential purpose of obtaining a tax advantage. April 2018. Tax Rates 2019-2020 Year (Residents) The 2019-20 tax rates remain unchanged from the preceding year, and for the following two years. The “Excess Profit Rulings” are not to be considered as prohibited state aid. Belgium wants to stay competitive for attracting inward investments from the most significant trading partners, such as the USA, Japan, Canada, Germany, France, etc. We use cookies to enhance your site experience, analyze site performance and customize content and advertisements. The measure sets the Corporation Tax main rate at 19% for the financial year beginning 1 April 2020. Performance cookies help us understand how visitors interact with our website, by collecting and reporting information that doesn't identify you personally. VAT Rates in European Union Member States, as of January 2020; Note: When one of the major EU VAT directives was adopted in 1991, some EU countries were applying reduced, super-reduced or zero rates to goods and services that were not specified by the new regulations as falling within the zero-rate or reduced rate categories. Neither the EU ATAD nor the Belgian implementation thereof determines how double taxation is prevented if Belgium and another Member State simultaneously apply their respective CFC legislation. However, on 17 October 2019 the Belgian Constitutional Court ruled that this securities account tax violated the constitutional principle of equality and non-discrimination. Only 20% of the normal wage withholding tax has to be effectively transferred to the Revenue Service, while the employees are entitled to credit 100% against their personal income tax liability. De Langhe Attorneys For example, the sale of real estate triggers a real estate transfer tax of 10% in Flanders and 12.5% in Brussels and Wallonia. The Belgian tax authorities will scrutinise these structures and refuse the zero rate in any case of clear treaty shopping. In addition, f… The current tax scale is the result of a number of tax scale adjustments set forth in the Budgets of 2018 and 2019. Finally, a number of specific tax attributes and tax incentives are deducted, such as dividends that are deductible by virtue of the participation exemption, net profits of permanent establishments that are exempt in Belgium by virtue of bilateral tax treaties, the Notional Interest Deduction, etc. Also, the transfer of a locally developed intangible to a foreign affiliate will be required to be made on arm’s length terms, and a (taxable) gain may have to be recognised and will be taxed in Belgium accordingly. Most Belgian practitioners are not opposed to transparency or CbC reporting, with the following stipulations: No statutory changes have yet been made, but Belgium supports the OECD’s initiatives to consider certain “light” forms of presence in the country as a permanent establishment to which profit has to be allocated (and taxed). Last but not least, a well-functioning Ruling Commission allows for reliable advance tax rulings on all kinds of anticipated investments and other transactions (including unilateral and multilateral transfer pricing issues), creating advance legal certainty in areas of law where there would otherwise be a relatively large degree of uncertainty and “litigation risk”. As a result, only the consolidated tax base would then be subject to corporate income tax. On the one hand, there is an exhaustive list of non-deductible items, which are added back to the accounting profits (eg, most fines, most local taxes, the corporate income tax itself, the non-deductible part of automobile costs, etc). Of 2017, the OECD standards are by and large adopted % is due use of cookies. Against profits of another Belgian affiliated company rate to 20 % corporate income tax even see decrease... ( at least € 45,000 per year to ( at least one ) company manager positive impulse to international. 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