Advantage Belgium
Invest in Belgium and get the benefit of its unique tax features
Take the full benefit of Belgium’s notional interest deduction
Capital intensive companies, equity funded headquarters and treasury centres can take the full benefit of Belgium’s notional interest deduction.
What is it?
The so-called «notional interest deduction» is a new, innovative and powerful measure in international tax law enabling all companies subject to Belgian corporate tax to deduct from their taxable income a fictitious interest calculated on the basis of their shareholder’s equity (net assets). The measure is valid as of tax year 2007.
At the same time, the 0.5 percent registration duty on capital contributions has been abolished.
Advantages
The notional interest deduction is a valuable tool to maintain or even locate in Belgium activities which were previously allowed under the special tax regime of Belgian co-ordination centres;
It creates a considerable tax benefit for companies that have good solvency ratios, reducing the taxable base and generating a higher return after tax;
It provides flexibility, because it is possible to carry forward any unused amount of the deduction;
It is a permanent incentive and not just a one-shot advantage;
It strengthens the financial position of Belgian companies and branches by encouraging them to increase their equity;
It is an incentive to retain earnings in the Belgian entity and to use these to finance new investments;
For international groups, it opens possibilities for allocating new activities to a Belgian entity such as intra-group financing, central procurement or factoring; and
It complies with EU regulations and offers companies legal certainty.
It creates a considerable tax benefit for companies that have good solvency ratios, reducing the taxable base and generating a higher return after tax;
It provides flexibility, because it is possible to carry forward any unused amount of the deduction;
It is a permanent incentive and not just a one-shot advantage;
It strengthens the financial position of Belgian companies and branches by encouraging them to increase their equity;
It is an incentive to retain earnings in the Belgian entity and to use these to finance new investments;
For international groups, it opens possibilities for allocating new activities to a Belgian entity such as intra-group financing, central procurement or factoring; and
It complies with EU regulations and offers companies legal certainty.
Get upfront legal certainty through the administrative ruling practice
The general administrative ruling practice is an investor’s friendly tool to benefit from upfront legal certainty and to avoid surprises in the tax field.
How does it work in practice?
The investor introduces a ruling request in which he describes the facts before their realisation, allowing the Ruling Commission to determine, in advance, how the tax laws are to be applied to well-defined operations or situations previously to the consequences they may have at the tax level.
In order to obtain a ruling it is not required to be already a Belgian tax payer which means that a potential investors, even if not yet present on the Belgian territory, can introduce a ruling request.
Before introducing an official request an investor can always make an appointment for a pre-filing meeting. Pre-filing discussions offer companies the opportunity to explore aspects of their planned operation before committing themselves fully to the time and expense involved in compiling their case. It enables them to test the waters with the Ruling Commission on the feasibility of what they have in mind.
What is the scope of application?
The scope of application covers the fiscal implications of all taxes making it possible to clear in advance “any” potential tax ramification relating to new investments. It covers amongst others income tax for individuals and corporations, value added tax, import duties, transaction taxes called registration duties and so on.
One of the main issues on which a multinational group of enterprises seeks coverage is the setting of its cross border transfer prices between group members. The Belgian Ruling Commission has a large experience in offering unilateral advance pricing agreements, e.g:
Cost plus ruling for European Distribution Centers and Central Warehouses covering also customs and VAT issues
Cost plus ruling for Shared Service Centers
Excess profit ruling for Central Entrepreneur Companies determining the amount of “excess” profit that can be excluded from the Belgian taxable profit
Cost plus ruling for Shared Service Centers
Excess profit ruling for Central Entrepreneur Companies determining the amount of “excess” profit that can be excluded from the Belgian taxable profit
Locate your R&D centre in Belgium in order to benefit from the large scope of R&D incentives
For the employment of researchers:
Partial exemption on the salary withholding tax for employment of researchers with a master degree (exemption from 25 percent up till 50 percent in case of partnership agreement with collective research institutions or for companies qualifying as “Young Innovative Company”);
Special taxation scheme applicable to foreign researchers temporarily employed in Belgium.
For the cost of investment:
Investment deduction for investments in an in-house R&D centre or in new patents (additional 14.5 percent deductibility of investment cost or 21.5 percent on annual depreciation thereof).
For R&D income out of patents:
Belgian companies and branches engaged in patent development - in a research centre in Belgium or abroad - will benefit from a special 80 percent deduction against taxable patent income. It sums up to an effective taxation of the patent income of maximum 6.8 percent. Combined with the benefits of the notional interest deduction and other tax incentives, the effective tax rate can even be substantially lower.
