BELGIUM: ATTRACTIVE FOR HOLDING COMPANIES

As one of the major gateways to Europe, Belgium offers foreign investors a wide range of favorable tax measures. Please find below a high-level overview of the most important tax features for Belgian holding companies:

• 95 % participation exemption on dividends received– certain conditions to be fulfilled (e.g. minimum shareholding for one uninterrupted year in full ownership).
   
• Exemption of withholding tax on dividends paid to companies within the EU or to companies located in a country that has signed a double tax treaty with Belgium  that provide for an exchange of information– certain conditions to be fulfilled (e.g. minimum shareholding for one uninterrupted year).
   
• Exemption of withholding tax on interest paid to Belgian companies, European banks, banks located in a country that has signed a double taxation treaty with Belgium.
   
• Exemption of withholding tax on interest and royalties paid to related European companies provided certain conditions are fulfilled(e.g. minimum shareholding for one uninterrupted year).
   
• In general, an unlimited interest deduction on acquisition debt. However certain terms and conditions need to be fulfilled, e.g. cause of the debt should be to create or maintain taxable income, etc. A 5 to 1 debt/ equity ratio is applicable for loans of affiliated companies and tax havens.
   
• Realized capital gains on shares are tax free if these shares were kept for at least an uninterrupted year in full ownership and provided the company qualifies as small company as defined by article 15 of the Belgian Company Code for the assessment year in which the capital gain is realized:
  1. 25,75 % taxation in case the 1 year term is not fulfilled (The taxable base can be sheltered with previous losses，(excess) notional interest deduction, (excess) dividend received deduction or any other tax deductions).
      
  2. 0,412% taxation in case the company does not qualify as a small company (no deductions can be applied).
• Fairness tax on distributed dividends provided the distributed dividend exceeds the taxable basis of the company while making use of notional interest deduction (see below) and carried forward tax losses.  Ina nutshell, a separate assessment of 5% (to be increased with 3% crisis surcharge) will potentially be due on that part of the dividend that exceeds the taxable basis of the company. Exceptions are made for that part of the dividend that consists out of prior reserves of the company. In the next newsletter a separate article will be dedicated to this new tax measure.
   
• Capital losses on shares are in principle not tax deductible (except upon liquidationwithincertainlimits).
   
• Possibilitytoask an advancedecision in ordertoget legal certainty.
   
• All companies subject to the Belgian corporate income tax can under certain conditions deduct a notional interest from their taxable income (for assessment year 2015: 2,630% for largecompanies and 3,130% for small companies). The calculation is based on the company’s adjusted equity computed according to Belgian GAAP (“notional interest”).
   
• Capital decrease is tax free if it relates to repayment of paid up capital and share premium (certain conditions need to be fulfilled).
   
• Belgium has signed double tax treaties with a large network of countries.
   
• No CFC-regulation is applied.
   
• Favorable expat regime for foreign executives and partial exemption of withholdingtax on wages for qualified researchers.
   
• The Treaty between China and Belgium against Double Taxation and Tax Evasion and protocol were signed in Brussels on October 7, 2009 and entered into force on December 29, 2013. It is applicable to income earned since January 1, 2014. Taxes in China covered by the Treaty include individual income tax and enterprise income tax, while taxes in Belgium covered by the Treaty include individual income tax, enterprise income tax, legal entity tax, non-residents’ tax, and social security charges.

If you have any questions, please feel free to contact us.

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