The Leading Edge - Fall 2008 - (Page 12)

global top 10 misconceptions about doing business in … belgium By Stefanie defrancq and anneleen Wydooghe, Vandelanotte Belgium b elgium has a very open economy and offers a reliable environment for direct inbound investment. Because the country has a federal structure and is subject to European regulations, decisions affecting the investment climate are made at a variety of levels. belgian corporate income tax rates are high. In reality, there is a low effective tax rate. The standard corporate income tax rate is 33.99 percent (including an austerity surcharge of 3 percent). Small and medium-size companies benefit from a reduced progressive tax rate, provided certain conditions are met (e.g. taxable income does not exceed EUR 322,500 ($446,305) and no more than 50 percent of the shares in the Belgian company are held by another company). This rate amounts to: • 24.25 percent on income up to EUR 25,000 ($34,600) • 31 percent on income between EUR 25,000 ($34,600) and EUR 90,000 ($124,550) • 34.50 percent on income between EUR 90,000 ($124,550) and EUR 322,500 ($446,305) These percentages still have to be increased by the 3 percent austerity surcharge. In general, the tax base for corporate income tax purposes is determined on an accrual basis and consists of worldwide income less allowed deductions. In this frame, changes in corporate tax are making Belgium an increasingly interesting place. Recent appealing measures include notional interest deduction, Value Added Tax grouping and patent income relief. These measures can lower the effective tax rate to plus or minus 27 percent, or in some cases, even to zero. realized capital gains on shares are taxed. Net capital gains on shares are exempt on the condition that the dividends relating to such shares qualify for the dividends-received deduction at the time the 1 gains are realized. Contrary to the dividends-received deduction, this exemption is granted regardless of the percentage or value of the holding, the period for which it is held or its classification for Belgian GAAP accounting purposes. In certain cases, capital gains on shares are only exempt to the extent they exceed previously deducted capital losses on those shares (since 1991 capital losses on shares have not been tax deductible). dividend withholding tax is high. As of Jan. 1, 2007, the Belgian government abolished its domestic dividend withholding tax for dividend payments made to corporate shareholders resident in a treaty country. This means that, under the new rules, the domestic dividend withholding tax exemption is available under the same conditions as those of the EU Parent-Subsidiary Directive. The latter is available to corporate shareholders resident in the European Union (or Switzerland) and holding at least a 15 percent participation (i.e., new participation threshold from Jan. 1, 2007; 10 percent beginning Jan. 1, 2009). This means that a corporate shareholder resident in any treaty country (e.g. United States, Canada, Japan, China, South Korea, Russia, etc.), which has a shareholding of at least 15 percent in its Belgian subsidiary for an uninterrupted 12 months, will benefit from this dividend withholding tax exemption. Currently, Belgium has concluded tax treaties with more than 80 countries. This domestic law exemption is even more beneficial than the exemption under the aforementioned treaties, since no limitation on benefits applies under the Belgian domestic exemption. Besides, the domestic exemption only requires a 15 percent participation threshold to benefit from this exemption, which is in many cases more favorable than the thresholds provided in the new treaties. This initiative makes the withholding tax exemption accessible for all qualifying U.S. and other treaty country corporate investors. Using Belgium as their holding location for investments into Europe will allow them to repatriate European profits exempt from dividend withholding taxes, without a limitation on benefits. driving a car owned by your company is expensive. If you own a company in Belgium, then this does offer you quite a number of advantages. If you drive a car owned by your company, you are taxed as a private individual on a benefit of 5,000 kilometers (3,107 miles) multiplied by a certain CC factor. In most cases, this will come down to an amount of EUR 1,000 ($1,384) on which you are taxed as a private individual. This is regardless of which car you drive and how much non-company driving you do. acquiring and selling real estate is highly taxed. With a Belgian company, you can always acquire as much real estate as you like. The registration duties and notary costs become immediately taxdeductible in the year of purchase, and you naturally write-off the building itself. If you live in a building that is owned by the company, you are taxed on a very small benefit as a private individual because this private benefit is calculated on the so-called “land registry or cadastral income.” If you know that this “land registry or cadastral income” is the fictional rent value from the year, this explains a lot. Buildings are often constructed where the company buys the structure or right of use for 20 years, for example, and the director, the bare real estate. For these 20 years, the company pays all the expenditures (interest, alterations, etc.). After 20 years, the premises VOLUME 9 n 3 4 5 2 12 ISSUE 1 n faLL 2008

Table of Contents Feed for the Digital Edition of The Leading Edge - Fall 2008

The Leading Edge - Fall 2008 Contents Sculpt Your Business to Survive and Thrive Protect Intellectual Property Outside the United States Complaints about Meetings? The Leading Edge Alliance Top 10 Misconceptions of Doing Business in Belgium In a Nutshell: Q&A

The Leading Edge - Fall 2008

For optimal viewing of this digital publication, please enable JavaScript and then refresh the page. If you would like to try to load the digital publication without using Flash Player detection, please click here.