Belgium - Company Tax

Corporate income tax in Belgium is applied on worldwide income.

Foreign companies are taxed at a 33.99% nominal ordinary tax rate. For small and medium sized companies with a taxable profit not exceeding €322,500, the tax rate falls to 24.98% at the lower end of the tax scale.

Aware of the importance of increasing up front legal certainty for potential and existing investors, the Belgium tax legislation provides economic players with a general advance ruling practice . Moreover, the advance ruling possibilities have been enlarged recently and the procedure has been re-organised in order to make it smoother, more rapid and more efficient. The ruling is, in principle, issued within a reasonable term. A ruling decision will be legally binding for a maximum of five years.

Depreciation of assets

Depreciation is spread over the estimated economic lifetime and is only allowed on the original acquisition cost. Generally, the straight-line method or the declining depreciation method is used. The declining depreciation method is used until the amount of the annual depreciation has become equal or less than the amount computed under the straight-line method. The taxpayer may then change to the straight-line method.

Ancillary costs may either be deducted as expenses in the year of acquisition or be depreciated over a period of time at the taxpayer's choice. For investments in industrial buildings, plant and equipment that were granted regional investment incentives, the straight-line depreciation method can be applied at double normal rates for three consecutive years in development areas.

Intercorporate dividends

Participation exemption applies both to Belgium resident and non-resident companies with respect to dividends attributable to Belgium permanent establishment. Under the exemption 95% of the dividends are deducted from the profits if existing. The deduction cannot give rise to a negative tax base. If the Belgium company is in a loss position, the qualifying dividends cannot be deducted. Effective from the 1993 income year, the participation exemption applies only if both a minimum participation test and a taxation test are satisfied. Belgium does not impose holding period condition to qualify for the participation exemption. Under the minimum participation test, companies are required to own a minimum participation of 5% or 1.25 million EUR. To satisfy the taxation test, dividends must be received from companies that are subject to Belgium corporate tax or from non-resident companies subject to a similar foreign corporate tax. The participation exemption does not apply to dividends received from:

  • A company located in a country whose general tax regime is substantially more advantageous than the regime in Belgium.
  • A holding or finance company benefiting from a tax regime which deviates from the general regime in the country of establishment.
  • An investment company.
  • A company established abroad to the extent it distributes income which itself would not have been exempt under the participation exemption.

Withholding taxes

Resident companies must withhold a 25.75% tax on the dividends distributed to resident and non-resident shareholders. Most tax treaties reduce this withholding tax either to 15% or to 5% in the case of a subsidiary-parent relationship (at least 25% shareholding). Moreover, the Royal Decree of 14 October 1991 deals with the withholding tax applicable to dividend distributions to parent companies established in an EU Member State (incl. Belgium resident companies). Under certain conditions withholding tax is fully exempted. In order to obtain the exemption a foreign parent company should deliver a statement to the Belgium subsidiary in which the parent declares that all these conditions are met.

Capital gains and losses

Under the participation exemption, capital gains realised by a Belgium resident company on shares in a Belgium or foreign company are fully exempt from corporate income tax, provided that the dividends on the shares qualify for the participation exemption.

Unrealised capital gains on shares that are recognised in the financial statements (which recognition is not mandatory) are taxable. But a roll-over relief is granted if, and as long as, the gain is booked in a separate reserve account on the balance sheet and is not used for distribution or allocation of any kind. As a counterpart to the new exemption of realised capital gains, capital losses on shares, both realised and unrealised, are no longer tax deductible. However, the loss incurred in connection with the liquidation of a subsidiary company remains deductible up to the amount of the paid-up share capital. Other capital gains are taxed at the ordinary rate. If the total amount of sales is used for the purchase of depreciable fixed assets within three years, the taxation of the capital gains will be spread over the depreciable period of these assets.