Taxation in Belgium

In Belgium, there are many taxes connected with business such as corporate income tax (more specified in the Income Tax Code), payroll taxes on remuneration paid to employees and directors, VAT, transfer tax, insurance premium tax. Occasionally, certain regional or local taxes might appear, depending on the area where the firm operates.^[8]

Taxes also differ depending on the fact whether a certain company is resident or nonresident. In the case of resident company, corporate income tax is levied on company's capital gains, worldwide profits and income. Non-resident companies have to pay tax on Belgian-sourced income.

The standard corporate tax rate is 25%. Small companies meeting stringent conditions are sometimes eligible for a reduced 20% rate on up to 100000€ in taxable revenue.^[9]

According to Deloitte study Taxation and Investment in Belgium 2017, taxable income can be defined this way: “The taxable income of resident company comprises its annual worldwide income, less allowable deductions. Income derived by a resident company from foreign real estate or branches located in countries with which Belgium has concluded a tax treaty is exempt. Although subsidies are, in principle, part of taxable income, certain job creation subsidies, capital grants and interest rate subsidies are exempt for corporate income tax purposes.”^[8] However, during the process of calculating taxable income, companies can deduct all business expenses that can be considered as legitimate and arm's length. Expenses that can be taken as deductions are for example royalties, fees, investments, employer-funded pension contributions, some of the employee benefits and in some cases also interest paid on loans.

By selling tangible and intangible fixed assets company generates capital gains that are usually taxed at the standard 25% corporate tax rate. "However, taxation of capital gains on such assets can be deferred if the assets were held for more than five years before the disposal and the entire sale reinvestment, the tax due will be spread over the life of the asset in which the sale proceeds have been reinvested."^[8] And further: "Capital gains from fixed income securities are taxed as profits. However, gains derived from shareholdings in other companies are exempt if: (i) the shares meet the „subject to tax“ requirement for application of the dividends received deduction; and (ii) the shares have been held in full ownership for an uninterrupted period o fat least one year."^[8]

Value added tax (VAT) is a consumption tax “placed on a product whenever value is added at each stage of the supply chain, from production to the point of sale. The amount of VAT that the user pays is on the cost of the product, less any of the costs of materials used in the product that have already been taxed.”^[10] VAT is not levied on exports and the standard VAT rate is 21%. But for certain cases, the rates might be a bit different – 0% rate in case of daily and weekly publications and certain recycled goods, 6% rate applies to most basic goods (water, food,...), 12% rate is associated with social housing and restaurant services.^[11] A value added tax return is obliged to be filed monthly or quarterly. As regards the payments, typically, tax due must be paid at the time VAT return is being filed and sometimes advance payments may be required. The Belgian VAT is part of the European Union value added tax system. Most smaller businesses with a turnover lower than €25000 can request an exemption as of 01/01/2016.

There is transfer tax in Belgium.

In case of capital tax, there is only a fixed fee 50 EUR.

In Belgium, there are also some environmental taxes associated mainly with energy usage.