Brussels

Taxation in Brussels, Belgium

What are the tax rates in Brussels, Belgium? How are corporations taxed? Here’s Teleports overview of personal, corporate and other taxation topics in Brussels, Belgium.

Personal taxation in Brussels

Effective personal income tax rate

Annual income$25,000$40,000$80,000$125,000$200,000
Rate34%38%44%46%48%

Teleport city rankings for personal income tax

Personal taxation puts Brussels in position 260 of all Teleport Cities.
WORSTBEST

Basis

Individuals whose domicile or center of vital interests is in Belgium are considered residents and taxed on their worldwide income. Nonresidents pay tax only on Belgian-source income. Executives on a temporary assignment in Belgium may apply for the special expatriate regime.

Residence

An individual is resident in Belgium if his/her domicile is in Belgium. The domicile of a married taxpayer is deemed to be the place where the taxpayer’s family is established. Furthermore, an individual who is listed in the national register (i.e. an individual with a work permit or, for an EEA national, a residence permit) is deemed to have his/her domicile in Belgium, unless otherwise demonstrated.

Filing status

A married couple (or legally cohabitant partners) living together must file a joint statement, but their incomes are not aggregated.

Rates

Rates are progressive up to 50% (increased by communal surcharges ranging from 0% to 9% of the tax bill).

Deductions and allowances

A number of deductions may be taken from gross income, including business expenses, social contributions and 80% of alimony payments. Tax reductions are available for charitable donations, premiums for life insurance policies of the endowment type and contributions to pension plan savings. A personal allowance is granted to the taxpayer and his/her dependents.

Capital gains

Capital gains on assets derived by individuals engaged in business activities generally are taxed in a similar manner to gains derived by corporations. Capital gains on shares qualifying as professional income normally are taxed at the ordinary individual income tax rate. Capital gains derived from fixed tangible assets that have been used for business activities for more than five years are taxed at a 16.5% rate (increased by the communal surcharge). Capital gains derived by individuals not engaged in business activities are not taxable unless the capital gains are related to a speculative transaction, the sale of immovable property within five years (buildings) or eight years (land) from the time of acquisition or the sale of a substantial participation to a non-EEA-based company.

Other taxes on individuals

Stamp duty

No, except for a limited (i.e. capped) stock exchange tax on certain transactions in financial instruments (issuances, transfers) through the stock exchange.

Inheritance/estate tax

For spouses, legal cohabitants and descendants, the inheritance tax ranges from 3% to 30% in the Walloon and Brussels regions and 3% to 27% in the Flemish region. Lower rates apply in some cases. Higher inheritance tax rates (up to 80% in Wallonia and Brussels and 65% in Flanders) apply to more distant relations and unrelated beneficiaries. Similar rates apply for gifts relating to immovable property, while low gift tax rates (between 3% and 7% in the Flemish and Brussels regions and between 3.3% and 7.7% in the Walloon region) apply to movable property.

Capital acquisitions tax

A 12.5% tax is levied on the acquisition of real estate in the Walloon and Brussels regions, and 10% on the acquisition of real estate in the Flemish region. A reduced rate is available in certain cases, in all regions.

Social security

The general employee contribution rate is 13.07% of the gross remuneration.

Capital duty

No, except for a fixed fee of EUR 50.

Real property tax

An annual tax applies to the annual notional rental income of owned land, buildings and industrial equipment. The rate varies depending on the region in which the property is located: the rate is 2.5% of the cadastral income for the Flemish region and 1.25% for the Walloon and the Brussels regions. This tax is not deductible from the personal income tax.

Compliance for individuals

Penalties

Administrative penalties for noncompliance with the tax provisions range from 10% to 200% of the tax due. Criminal sanctions (including incarceration and fines) may apply in cases of tax fraud.

Filing and payment

The annual tax return generally must be filed by 30 June of the year following the tax year. Salaried individuals may prepay estimated income tax. Although taxes normally are withheld at source, individuals on a split payroll may need to pay additional taxes. Self-employed individuals are required to prepay estimated tax under principles similar to those applied to businesses.

Corporate taxation in Brussels

Teleport city rankings for corporate income tax

Corporate taxation puts Brussels in position 228 of all Teleport Cities.
WORSTBEST

Basis

Residents are taxed on their worldwide income. Belgian- source income of nonresident companies is subject to the nonresident income tax. In specific cases, nonresident companies without a taxable permanent establishment may be taxed on certain Belgian-source income if Belgium is allocated taxation rights based on a tax treaty concluded with the nonresident’s state of residence; or, if there is no treaty, if the nonresident cannot demonstrate that the income has been effectively taxed in its residence state. In such a case, the Belgian payer of the income must withhold professional withholding tax at a rate of 16.5% (unless the rate is reduced under a treaty).

Taxation of dividends

Under the dividends received deduction, 95% of dividends received by a Belgian company, whether from a domestic or foreign company, is exempt from tax. The remaining 5% is subject to tax at the normal rate. The following requirements must be me to qualify for the dividends received deduction: (1) the shareholder must hold at least 10% of the share capital of the payer company or the participation must have an acquisition value of at least EUR 2.5 million; (2) the company distributing the dividends must be subject to corporate income tax on the profits out of which the distribution is made (“subject to tax” requirement); and (3) the shareholder must continuously have (or have had) full ownership of the qualifying shares for an uninterrupted period of at least one year.

Residence

A corporation is resident if its principal establishment, registered office or place of management is in Belgium.

Losses

Losses may be carried forward indefinitely for corporate tax purposes, but may not be carried back. Restrictions apply in the case of a tax-free reorganization (e.g. merger, demerger or contribution) or a change in control that is not justified by legitimate financial and economic needs. The concept of control (i.e. legal control, factual control or joint control) is defined under Belgian company law. Not all items are available for offset (e.g. abnormal or gratuitous advantages received, the 0.412% capital gains tax on shares, the fairness tax and the secret commissions’ tax).

Incentives

Various investment deductions and R&D tax credits exist for R&D-related activities.

Rate

The general rate of corporate income tax is 33%. Small and medium-sized companies (SMEs) with income of less than EUR 322,500 are subject to a reduced rate if certain conditions are satisfied.

Alternative minimum tax

Although, strictly speaking, there is no alternative minimum tax in Belgium, a “fairness tax” at a rate of 5.15% (including the surtax) may be due by large companies that distribute dividends and, during the same taxable period, offset losses carried forward or a current year notional interest deduction against their taxable income. The fairness tax will be due only to the extent the dividend distribution exceeds the company’s taxable base that is subject to corporate tax at the rate of 33.99%. Distributions of grandfathered reserves are excluded from the fairness tax.

Surtax

A 3% surcharge is imposed on the adjusted corporate income tax liability, bringing the effective tax rate to 33.99%.

Foreign tax credit

A tax credit is available for foreign withholding tax levied on foreign-source interest and royalties. For foreign-source interest, the foreign tax credit may be reduced based on a debt- funding ratio.

Taxable income

The taxable income of a resident company consists of annual worldwide income, less allowable deductions. Income from foreign real estate or branches located in countries with which Belgium has concluded a tax treaty is exempt.

Holding company regime

All Belgian companies and Belgian branches of foreign companies can benefit from the participation exemption, without having to satisfy any additional conditions.

Capital gains

Capital gains derived by a corporation on the disposal of tangible and intangible assets are subject to tax at the ordinary corporate tax rate. Tax deferral is possible, subject to certain conditions. Net gains derived from the disposal of shareholdings in

Participation exemption

See under "Taxation of dividends."

Other taxes on corporations

Stamp duty

No, subject to certain exceptions, such as the stock exchange tax on transactions in public securities and other financial instruments.

Social security

Employer contributions equal approximately 40.58% of the gross salary for blue-collar employees and approximately 34.58% of the gross salary of white-collar employees. Companies with fewer than 20 employees pay slightly less. Under the 2015 “tax shift agreement,” the maximum effective contribution rate will be lowered to 30% on 1 April 2016 and to 25% on 1 January 2018. The social contributions are due on the gross salary. Certain elements of the salary are subject to a special contribution (e.g. a CO2 solidarity contribution for the private use of a company car, a contribution of 8.86% due on the employer's contribution for group insurance and a 1.5% contribution on extra-legal pension premiums exceeding certain thresholds). Social security contributions are deductible business expenses for corporate income tax purposes.

Other

A secret commissions tax at a rate of 50% or 100% (increased by the 3% surcharge to 51.5% or 103%, respectively), applies to certain remuneration, fees and commissions that are not properly documented and that have not been taxed in the hands of the beneficiary.

Transfer tax

Transfer taxes apply to the transfer and leasing of real estate located in Belgium, at rates ranging from 0.2% to 12.5% (depending on the type of transaction and the region in which the property is located).

Capital duty

No, except for a fixed fee of EUR 50. An exception may apply in the case of “mixed” contributions.

Real property tax

A tax is levied on income from immovable property located in Belgium and is computed as a percentage of the notional annual rental value of the property. The rate varies depending on the region in which the property is located: the rate is 2.5% of the cadastral income for the Flemish region and 1.25% for the Walloon and Brussels regions. Local surcharges apply, depending on the municipality where the property is located.

Payroll tax

A payroll tax is withheld on remuneration and pensions paid to resident or nonresident employees and directors for whom such payments constitute taxable professional income. Partial professional withholding tax exemptions are available for certain types of employees (e.g. researchers) or employment (e.g. overtime work, night work and shift work, work in aid zones).

Compliance for corporations

Consolidated returns

Consolidated returns are not permitted; each company must file its own return.

Penalties

Penalties apply for failure to comply or failure to make advance payments based on estimated annual income. A 1.125% surcharge applies to underpayments of tax for tax year 2016. Administrative penalties for noncompliance with the tax provisions range from 10% to 200% of the tax due; criminal sanctions may apply in cases of tax fraud.

Rulings

A taxpayer may submit a written request for an advance ruling with respect to any federal tax (income tax, VAT, transfer tax, etc.) consequences of a proposed transaction.

Tax year

The tax year is the accounting year, which may be the calendar year or any other 12-month period.

Filing requirements

The tax return must be filed at least one month after the date the financial statements are approved by the annual general meeting of the shareholders, but no later than six months after the end of the financial year. The tax authorities can grant an extension of the filing date at the request of the taxpayer.

Other taxation in Brussels

Value added tax

Filing and payment

The VAT return must be filed monthly or quarterly and any tax due must be paid at that time. Advance payments may be required.

Rates

The standard VAT rate is 21%; reduced rates of 12%, 6% and 0% apply in certain cases.

Taxable transactions

VAT is levied on the provision of most goods and services.

Registration

There is no de minimis threshold applicable in Belgium, except for distance sales by a non-Belgian foreign mail order company to Belgian individuals, in which case a threshold of EUR 35,000 applies.

Anti-avoidance rules

Thin capitalization

No thin capitalization rules exist, except in the following cases: (1) loans from certain direct shareholders or individuals or from directors, managers and liquidators (individuals or legal entities) of the company (including loans from spouses and children), where a 1:1 debt-to-equity ratio applies; or (2) intragroup loans and loans from entities not subject to tax or subject to a tax regime that is significantly more advantageous in respect of interest than the Belgian tax regime, where a 5:1 debt-to-equity ratio applies (with some exceptions).

Disclosure requirements

As noted above, payments related to transactions with entities resident in tax haven countries (including low-tax jurisdictions and jurisdictions that have not substantially implemented the internationally agreed tax standard on exchange of information, as determined by the OECD) must be disclosed in an annex to the corporate tax return.

Transfer pricing

Transactions between related companies and between a head office or other branches of a foreign company and the Belgian branch must be at arm’s length. A deemed profit can be imputed in non-arm’s length transactions. There are no statutory documentation requirements.

Other

In limited circumstances, certain purely tax-driven transactions may be recharacterized under the general anti-abuse provision or under specific anti-abuse provisions.

Investment basics

Accounting principles/financial statements

Belgian GAAP. IFRS is mandatory for consolidated accounts of listed companies and optional for consolidated accounts of other companies. Financial statements must be submitted annually.

Principal business entities

These are the corporation (SA/NV), limited liability company (SPRL/BVBA) and branch of a foreign company.

Withholding tax

Dividends

Under Belgium’s implementation of the EU parent- subsidiary directive, no tax is withheld on dividends paid to a company established in Belgium or another EU member state that holds at least 10% of the company paying the dividends, provided the participation is held for an uninterrupted period of at least one year. The same rule applies to dividends paid to shareholders resident in a country that has concluded a tax treaty with Belgium where the treaty contains an exchange of information clause.

Technical service fees

No, but a 16.5% professional withholding tax may apply in certain cases (see under “Basis,” above).

Interest

Interest paid to a nonresident generally is subject to a 27% withholding tax (increased from 25%) as from 1 January 2016 (or 15% for interest from certain specific government bonds and interest from regulated savings deposits exceeding certain thresholds), unless the rate is reduced under a tax treaty or exempt under the EU interest and royalties directive or domestic law. Interest paid by finance companies and holding companies, interest paid to financial institutions in treaty countries and certain other forms of interest are not subject to withholding tax under Belgian domestic law under certain conditions.

Royalties

The withholding tax on royalties is 27% (increased from 25%) as from 1 January 2016 (or 15% for income from author’s and “neighboring rights” and from legal and compulsory licenses), reduced by a standard expense deduction of 15%. The rate may be reduced or eliminated under a tax treaty. No withholding tax is levied on royalty payments made to qualifying associated EU companies under the EU interest and royalties directive.