bdo guide to doing business in belgium 2013
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BDO GUIDE TO DOING BUSINESS INBELGIUM
2013
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Introduction
The aim of this publication, which has been prepared for the exclusive use of BDO
Member Firms and their clients and prospective clients, is to provide background
information for setting up and running a business in Belgium, in compliance with the
legislation as enacted till 15 June 2013. It is of use to anyone who is thinking of
establishing a business in Belgium as a separate entity, as a branch of a foreign company or
as a subsidiary of an existing foreign company, and to anyone who is considering coming
to work or live permanently in Belgium.
This publication describes the business environment in Belgium and outlines the
financial and legal implications of running, or working for, a Belgian business. The most
important issues are included, but it is not feasible to discuss every subject in detail
within this format. Accordingly, Your Guide to Doing Business in Belgium 2013 is written
in general terms and is not intended to be comprehensive. If you would like to know
more, please contact the BDO team with which you normally deal, who can provide you
with information on any further issues and on the impact of any legislation subsequentto 15 June 2013.
BDO International is a worldwide network of accounting and consulting firms, called BDO
Member Firms, serving international clients. Each BDO Member Firm is an independent
legal entity in its own country. The network is coordinated by BDO International
Limited, incorporated in the United Kingdom. Service provision within the BDO network
is coordinated by Brussels Worldwide Services BVBA, a limited liability company
incorporated in Belgium with its statutory seat in Brussels.
Founded in Europe in 1963, it has grown to be the fifth largest in the world the BDO
network now has more than 1000 offices in 135 countries, with more than 48.000partners and staff providing professional auditing, accounting, tax and consulting
services on every continent.
BDOs special skills lie in applying its local knowledge, experience and understanding of
the international context to provide an integrated global service. In BDO, common
operating and quality control procedures are not a constraint on innovation and
independence of thought, but the starting point. It is a vigorous organisation committed
to total client service.
BDOs reputation derives from consistently offering imaginative and objective advice
within the clients time constraints. BDO Member Firms take pride in their clientssuccess and their relationships with them. It is a personal relationship that combines
the benefits of professional knowledge, integrity and an entrepreneurial approach, with
an understanding of a clients business and an ability to communicate effectively. This
ensures the highest-quality objective professional service, tailored to meet the
individual needs of every client, whether they be governments, multinational
companies, national or local businesses, or private individuals.
BDO Services Burg. Ven. CVBA / Soc. Civ. SCRL, a limited liability company incorporatedin Belgium, is a member of BDO International Limited, a UK company limited by
gu arantee, and forms part of the internat ional BDO netwo rk of independent memberfirms. BD O is the brand name for the BD O net work and for each of the BDO MemberFirms.
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Contents
1 The Business Environment ........................................................................................7
1.1 General information ............................................................................................7
1.1.1 Geography ......................................................................................................7
1.1.2 History.......................................................................................................... 7
1.1.3 Government and politics ................................................................................... 7
1.1.4 Language ........................................................................................................8
1.1.5 Currency ........................................................................................................8
1.1.6 Inflation ........................................................................................................ 8
1.1.7 Time, weights and measures ................................................................................8
1.1.8 Belgium and the European Union ...........................................................................8
1.2 Business entities .................................................................................................9
1.2.1 Main types of business entity............................................................................... 9
1.2.2 Procedures of incorporation................................................................................ 9
1.2.3 Joint-stock company ........................................................................................ 101.2.4 Limited liability company................................................................................. 11
1.2.5 Reporting obligations ...................................................................................... 12
1.2.6 Partnerships ................................................................................................. 13
1.2.7 Branches ..................................................................................................... 13
1.2.8 Associations.................................................................................................. 13
1.2.9 Joint ventures ............................................................................................... 14
1.3 Restructuring .................................................................................................. 14
1.3.1 Mergers and take-overs.................................................................................... 14
1.3.2 Liquidation .................................................................................................. 14
1.3.3 Bankruptcy................................................................................................... 15
1.3.4 Continuity of companies .................................................................................. 151.4 Labour relations and working conditions ................................................................. 15
1.4.1 Collective bargaining ...................................................................................... 15
1.4.2 Employees representation at company level ......................................................... 16
1.4.3 Employers organizations ................................................................................. 17
1.4.4 Working conditions ......................................................................................... 17
1.4.5 Residence and work permits and related formalities ................................................ 19
2 Finance and Investment ......................................................................................... 21
2.1 Banking system ................................................................................................ 21
2.2 Financial institutions ......................................................................................... 21
2.3 Accounting and Audit......................................................................................... 222.3.1 Statutory requirements regarding books and records................................................ 22
2.3.2 Accounting requirements .................................................................................. 22
2.3.3 Accounting records.......................................................................................... 22
2.3.4 Chart of accounts........................................................................................... 23
2.3.5 Contents and form of financial statements ............................................................ 23
2.3.6 Valuation..................................................................................................... 24
2.3.7 Consolidated financial statements ...................................................................... 24
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2.3.8 Audit requirements.......................................................................................... 25
2.4 Exchange and investment controls ......................................................................... 26
2.5 Investment incentives......................................................................................... 27
2.5.1 Non-tax incentives .......................................................................................... 27
2.5.2 Tax incentives................................................................................................ 28
3 The Tax System ................................................................................................... 28
3.1 Taxing authorities ............................................................................................ 28
3.2 Principal taxes.................................................................................................. 28
3.3 Corporate tax structure...................................................................................... 29
3.4 Income tax structure ......................................................................................... 29
3.5 International aspects ......................................................................................... 29
4 Taxes on Business ............................................................................................... 29
4.1 Corporate tax system ......................................................................................... 29
4.1.1 Taxable entities ............................................................................................ 29
4.1.2 Territoriality and scope .................................................................................... 30
4.1.3 Gross income ................................................................................................. 30
4.1.4 Deductions................................................................................................... 31
4.1.5 Losses.......................................................................................................... 35
4.1.6 Groups of companies........................................................................................ 35
4.1.7 Coordination centres....................................................................................... 36
4.1.8 Thin capitalisation ......................................................................................... 36
4.1.9 Transfer pricing............................................................................................. 37
4.1.10 Controlled foreign company (CFC) rules ............................................................... 37
4.1.11 General anti-avoidance rule ............................................................................. 37
4.1.12 Taxation of foreign companies trading in Belgium................................................... 38
4.1.13 Taxation of foreign operations ......................................................................... 38
4.1.14 Partnerships and joint ventures ......................................................................... 38
4.1.15 Rates of corporate tax .................................................................................... 39
4.1.16 Returns and assessment................................................................................... 39
4.2 Value added tax ................................................................................................ 40
4.2.1 Taxable activities........................................................................................... 40
4.2.2 Registration.................................................................................................. 41
4.2.3 Exempt supplies ............................................................................................ 41
4.2.4 Input tax deduction ........................................................................................ 41
4.2.5 Tax rates ..................................................................................................... 42
4.2.6 Tax invoices ................................................................................................. 42
4.2.7 Territoriality ................................................................................................ 42
4.2.8 Returns ....................................................................................................... 43
5 Taxes on Individuals ............................................................................................. 43
5.1 Income tax ...................................................................................................... 43
5.1.1 Territoriality and Residence.............................................................................. 43
5.1.2 Structure of income tax .................................................................................... 43
5.1.3 Tax filing obligations....................................................................................... 44
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5.1.4 Taxation of immovable income ........................................................................... 44
5.1.5 Taxation of investment income........................................................................... 44
5.1.6 Taxation of employment income ......................................................................... 45
5.1.7 Personal allowances and deductions..................................................................... 46
5.1.8 Rates of income tax......................................................................................... 48
5.1.9 Local income taxes......................................................................................... 485.2 Inheritance tax and gift tax.................................................................................. 48
5.2.1 Territoriality and scope .................................................................................... 48
5.2.2 Taxable persons.............................................................................................. 49
5.2.3 Tax rates ...................................................................................................... 49
5.3 Wealth tax ..................................................................................................... 50
6 Other taxes ........................................................................................................ 50
6.1 Registration duties............................................................................................. 50
6.2 Capital duty .................................................................................................... 51
6.3 Real estate tax ................................................................................................. 51
7 Social Security System........................................................................................... 52
7.1 General .......................................................................................................... 52
7.2 Social security scheme for employees ..................................................................... 52
7.3 Social security scheme for self-employed persons ...................................................... 53
7.4 Social security surcharge (for employees subject to Belgian social security) ...................... 54
8 Appendix ........................................................................................................... 55
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1. The Business Environment
1.1 General information
1.1.1 Geography
The Kingdom of Belgium, covering an area of some 30.562 km2, borders the Netherlands
to the north, France to the south, and Germany and Luxembourg to the east. To the
west, it is bounded by the North Sea. Belgium is split into two major regions, the
Flemish (Flanders) and the Walloon (Wallonia). The whole nation is divided into 10
provinces.
The population of Belgium is estimated at about 11,2 million. The largest cities are the
capital city of Brussels (population of 1.151.000), followed by Antwerp (507.000), Ghent(249.000), Charleroi (205.000) and Lige (197.000).
1.1.2 History
The Kingdom of Belgium is a relatively new country by European standards since it was
only founded in 1831. It can nevertheless look back on a very long history, which was
largely determined by the European balance of power.
The earliest historical events go back almost 2000 years and indicate that the region
that is now Belgium was invaded from the north by German tribes, whilst the southern
part of the region was occupied by Latinised Celtic people. These two groups settleddown and caused the establishment of a linguistic boundary and the foundation of the
current multilingual situation in Belgium.
Throughout its early history and until the early 1800s, the Belgian region was governed
by other nations, including Spain, Austria, France and the Netherlands. At the end of
the Napoleonic Wars, Belgium was included in the United Kingdom of the Netherlands
under the Dutch monarchy (House of Orange). Following an uprising in 1830, and with
the backing of the principal European powers, Belgium became a sovereign state in
1831, under Prince Leopold of Saxe-Coburg, who became King Leopold I of the Belgians.
1.1.3 Government and politics
The Belgian constitution of 1831 founded a hereditary monarchy with a bicameral
national parliament and a national government with strong central powers. The current
monarch is His Majesty King Albert II. However, the presence of two different linguistic
and cultural groupings influenced the political evolution of the country in many ways in
subsequent years.
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In 1970, cultural autonomy was granted and four linguistic regions were established:
Flanders, Wallonia, the bilingual region of Brussels, and a small German-speaking part in
the east of the country.
In 1980, the principle of two linguistic communities (Dutch and French-speaking) andthree regional entities (Flanders, Wallonia and Brussels) were defined in the
constitution. The constitutional reforms of 1988-1989, of 1993 and 2012 enlarged the
competencies attributed to the communities and the regions, confirmed the autonomy
of the Brussels region and defined its institutions.
The federal government is presided over by the Prime Minister. Currently, the Prime
Minister is Elio Di Rupo of the Francophone Socialists (PS), who presides over a
government composed of representatives of his own party, the Flemish socialists (SPA)
the Francophone Liberals (MR), the Flemish Liberals (VLD), the Flemish Christian
Democrats (CD&V) and the Francophone Centre Democrats and Humanists (CDH).
1.1.4 Language
Belgium has three official languages: Dutch is spoken by the Flemish people in the
region of Flanders (58% of Belgian population), French is spoken by the Walloons in
Wallonia (31%) and German in a small area situated in the East of Belgium (1% of the
population). The capital region of Brussels is officially bilingual Dutch/French (10%).
1.1.5 Currency
The unit of currency has been the euro (EUR) since 1 January 2002. It replaced the
Belgian franc (BEF) at a parity of BEF 40,3399 = EUR 1.
1.1.6 Inflation
Over the past few years inflation has been under strict governmental control. The
annual rate of inflation in 2011 was 3,53% and in 2012 2,84%. For 2013 it is estimated
to reach 1,5 %.
1.1.7 Time, weights and measures
Belgium is one hour ahead of Greenwich Mean Time (two hours ahead in summer). Like
all other continental European countries, Belgium uses the metric system of
measurement (gramme, metre, litre, degrees Celsius).
1.1.8 Belgium and the European Union
Given their ideal location in the heart of Europe, Belgium and Brussels play an
important role in the extension of the European common market. Long before the
establishment of the European Community, Belgium had already developed privileged
economic ties with the Netherlands and Luxembourg through Benelux. When the Treaty
of Rome was signed in 1957, Belgium was one of the six initial signatories.
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Given its European importance, Belgium has many advantages for foreign investors:
The quality of its labour force enjoys a worldwide reputation. Belgium is the 5th
most productive country in the world (after Japan), as is its multilingualism (tri-
and quadrilingualism are common) Situated in the centre of a market of 332 million European consumers with
excellent transportation links, it is not surprising that Belgium has become the
home base of more than 1.000 major foreign investors
Various international schools
Various international institutions (such as NATO)
1.2 Business entities
1.2.1 Main types of business entity
Most business is conducted via the following entities:
the joint-stock company (naamloze vennootschap NV; socit anonyme SA)
the limited-liability company (besloten vennootschap met beperkte
aansprakelijkheid BVBA; socit prive responsabilit limite SPRL)
the general partnership (vennootschap onder firma VOF; socit en nom
collectif SNC)
the limited partnership (gewone commanditaire vennootschap Comm. V; socit
en commandite simple SCS)
the partnership limited by shares (commanditaire vennootschap op aandelen
Comm. VA; socit en commandite par actions SCA) the cooperative limited-liability company (coperatieve vennootschap met
beperkte aansprakelijkheid CVBA; socit cooperative responsabilit limite
SCRL)
There is no specific law governing or limiting the formation or purchase of a Belgian
company by foreign investors, nor are there any rules requiring Belgian participation in
the entitys capital or management, or limiting its right to acquire or construct
industrial or commercial buildings.
Belgian company law recognizes the commercial company in various forms. A foreign
company wishing to engage in trade or manufacture in Belgium may decide to create asubsidiary or a branch. No prior authorization is required except for specific types of
business (e.g. banking, insurance and transport).
1.2.2 Procedures of incorporation
A company can be incorporated by direct creation or by public subscription. In both
cases a Belgian notary will be required and a financial plan must be submitted prior to
incorporation.
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Founders can, under certain conditions, be held liable in case of bankruptcy within
three years of incorporation.
Partnerships can be incorporated by agreement between the parties, without the
intervention of a notary.
Once the company is incorporated:
the company has to be registered in the Crossroads Bank of Enterprises
(Kruispuntbank van Ondernemingen KBO; Banque Carrefour des Entreprises
BCE)
the company number (which is given by the Crossroads Bank) has to be activated
as a VAT-number (if applicable)
the company has to join a social security fund.
1.2.3 Joint- stock company
Shareholders
There must be at least two shareholders who may be individuals or companies, residents
or non-residents. The shareholders are liable only for the capital that they contribute.
If the company has a sole shareholder, this shareholder will be held fully liable for the
debts of the company from the moment he has become the sole shareholder until there
is a second shareholder or the company is dissolved or transformed into a limited
liability company. The company has one year time to regulate this situation.
Share capital
The minimum share capital is EUR 61.500.
The capital must be fully subscribed. If part of the capital has not been
subscribed, liability will pass to the founders who are then considered subscribers
of the unsubscribed capital.
Each issued share must be at least 25% paid-up upon incorporation, amounting in
aggregate to no less than EUR 61.500.
Shares may be in the form of registered shares or dematerialized shares.
Contributions-in-cash require a statement of a Belgian bank that the amount was
deposited on a blocked Belgian account.
Contributions-in-kind are permissible but require a report drafted by a company
auditor and describing the contribution and the methods of evaluation used. Also
a special report of the founders is required.
Increases in capital must be approved by the general meeting of shareholders, or
in some cases, by the executive board.
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Essential characteristics
The shareholders liability is limited to their contribution. The capital is
represented by equivalent shares with or without nominal value. The shares,
either with or without voting rights, can either be registered and entered in theshare register of the company, or be issued under intangible form
(dematerialized shares). The transfer of registered shares is effected by entries
made and signed in the share register.
A dematerialized share is represented by an inscription on account of the owner
by an approved institution responsible for keeping the records and can be
transferred from one account to another. The transfer of shares can be restricted
by the articles of incorporation or in a shareholders agreement. Till 31 December
2007 bearer shares could also be issued, but since that date this is not longer
possible. All the existing bearer shares must be converted into either registered
shares or dematerialized shares before 1 January 2014.
A shareholders meeting must be held at least once a year to approve thefinancial statements and to determine the distributable profit.
The annual accounts must be deposited with the Belgian National Bank within 30
days following their approval by the general shareholders meeting. A statement
concerning the balance sheet must also be published in the annexes of the
Belgian Official Gazette (Belgisch Staatsblad/ Moniteur belge)
The duration of its legal existence is unlimited, unless otherwise specified in the
articles of association or charter of incorporation.
In principle all the powers of the company belong to the General Meeting of
Shareholders. This body delegates power to the executive board of directors and
appoints if legally required one or more statutory auditors. There must be at
least three directors who are not subject to any residence or nationalityrequirements. The number of directors can, however, be limited to two in the
case of two shareholders. The directors must not be appointed for a term
exceeding six years. Daily management may be delegated to a committee or to a
managing director.
1.2.4 Limited liability company
Shareholders
A limited liability company must have one or more shareholders, who may be individuals
or companies. If a company becomes sole shareholder of a limited-liability company itwill be held fully liable for the debts of the company from the moment it has become
the sole shareholder until there is a second shareholder or the company is dissolved.
The company has one year time to regulate this situation.
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Share capital
The minimum amount of capital required is EUR 18.550.
The capital must be fully subscribed. If part of the capital has not been
subscribed, liability will pass to the founders who are then considered subscribersof the unsubscribed capital.
At least EUR 6.200 must be paid in. Shares representing contributions-in-kind
must always be fully paid up. Shares in cash must be paid up to at least 20%.
Shares should be in the form of registered shares.
Contributions-in-cash require a statement of a Belgian bank that the amount was
deposited on a blocked Belgian account.
Contributions-in-kind are permissible but require a report drafted by a company
auditor and describing the contribution and the methods of evaluation used. Also
a special report of the founders is required.
Essential characteristics
The limited-liability company is a company in which the shareholders liability is
limited to their contribution. Its capital is represented by equivalent shares.
All shares, whether with or without voting rights, are registered and are entered
in the share register of the company. The shares can only be transferred by an
entry in the companys share register. This transfer is normally subject to the
shareholders approval. An approval is not required when the shares are
transferred to other shareholders, to their spouses or to their next of kin (unless
otherwise stipulated in the articles of association).
A shareholders meeting must be held at least once a year to approve the
financial statements and to determine the distributable profit. If there is onlyone shareholder, that shareholders decisions are to be registered at the
registered office (zetel; sige) of the company.
The annual accounts must be deposited with the Belgian National Bank within 30
days following their approval by the shareholders general meeting. A statement
concerning the balance sheet must also be published in the annexes of the
Belgian Official Gazette (Belgisch Staatsblad / Moniteur belge).
The duration of the companys legal existence is unlimited, unless otherwise
specified in the articles of association or charter of incorporation.
In principle all the powers of the company belong to the General Meeting of
Shareholders. This body delegates power to one or more managing directors and
appoints if legally required one or more statutory auditors. There must be atleast one managing director who is not subject to any residence or nationality
requirements. The managing directors can be appointed for a definite or
indefinite term.
1.2.5 Reporting obligations
Besides the preparation of an annual inventory and annual accounts, the administrative
body of the company should also, if legally required, prepare a management report.
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These documents are to be submitted to the General Meeting.
For listed companies additional reporting obligations apply with respect to corporate
governance (implemented by the law of 6 April 2010 amending the Company Code).
The contents and presentation of annual financial statements are governed by theCompanies Code.
Profits may, in principle, be fully distributed. However, 5% must be deducted from the
profits and deposited into a legal reserve fund until the legal reserve amounts up to
one-tenth of the share capital.
1.2.6 Partnerships
Partnerships are less commonly used in Belgium than in AngloSaxon countries. They
generally do not require a minimum capital but are required to have one or more
(general) partners with unlimited liability.
1.2.7 Branches
A foreign company may freely set up a branch in Belgium. Branches are governed by the
same regulations as Belgian companies as regards management and operations in
Belgium. Foreign companies wishing to establish a Belgian branch must comply with the
following formalities:
File a certified true copy of the parent companys articles of incorporation at the
Clerks office of the competent Commercial Court, an extract of its commercial
register, the nomination of its directors and a statement by the parent companys
executive board authorizing the establishment of the branch and the delegation
of powers of the branch management, indicating the name and address of its
official representative in Belgium. All documents need to be translated into the
language of the competent Commercial Court and if legally required apostilled
or legalized.
Publish certain data of the parent company and of the Belgian branch office in
the Belgian Official Gazette.
Register in the Crossroads Bank of Enterprises, obtain a company number (that
can be activated as a VAT-number if applicable), join a social security fund, and
keep appropriate legal and accounting records.
Deposit the annual accounts of the parent company at the National Bank of
Belgium.
1.2.8 Associations
Forms of associations can be general or limited. In general associations, all associates
are jointly and severally liable for all debts and liabilities of the association. In a
particular type of association, one or more of the partners (but not all) may limit their
liability to the amount of their investment.
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Association agreements need not be authenticated by a notary, nor are there any
requirements for the publication of association agreements or financial statements.
1.2.9 Joint ventures
A joint venture generally involves a contract-based co-operation on a project between
two or more parties. No preliminary authorisation is required. A separate chart of
accounts for its operations must be kept and the joint venture must register with the
VAT authorities. The profits or losses realised by a joint venture are dealt with in the
taxable results of the participants and not by the joint venture itself.
1.3 Restructuring
1.3.1 Mergers and take-overs
For mergers no preliminary authorisation is required. Procedure for take-over bids ofquoted companies is handled by the Financial Services and Market Authority (FSMA) and
it is advisable to inform this Authority from the start of any such project, so that it may
indicate the suitable procedure.
The Law of 2 May 2007 requires quoted companies to inform the FSMA and the firm
involved if they purchase 5% or more of the firms shares, or when they increase their
shareholding by 5% or more.
1.3.2 Liquidation
The dissolution of a company may be decided at any time by a special meeting of theshareholders held in the presence of a notary, deliberating in the form prescribed for
amendments to the articles of association.
When, as a result of losses, the net worth of the company is reduced by an amount
below half of the companys capital, the directors must submit to a General Meeting of
Shareholders the question whether the company should carry on its activities.
In both cases the executive board of directors should make a special report supporting
its proposals.
The same rules apply when the net worth is (as a consequence of trading losses)
reduced below one-quarter of the companys capital. In this case, the dissolution may
be pronounced by shareholders owning one-quarter of the voting shares. If the
executive board decides on dissolution of the company, a liquidator must be appointed
to proceed with the realisation of all assets and liabilities.
The dissolution of a public or private limited company can also be pronounced by the
Commercial Court at the request of any interested party when the net worth is reduced
below the minimum amount required by law.
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1.3.3 Bankruptcy
A company (or individual trader) that has been forced to stop payments to its creditors
will incur criminal penalties if this fact is not reported within one month to the
Commercial Court, which may declare it bankrupt and subject to compulsoryliquidation. Bankruptcy may also be declared upon the legal suit of a creditor.
In the case of bankruptcy within three years of establishment, the founders could be
held personally liable if the initial capital seemed insufficient. Where bankruptcy is
declared, transactions made during a period of six months or more prior to the time of
such a declaration are considered suspect, and such items as transfers without proper
consideration and transfer of merchandise in payment for a debt may be declared void.
1.3.4 Continuity of companies
A Belgian company which has problems of liquidity and solvability can ask the
Commercial Court to grant it suspension of payment of its debts for a certain period, in
which the company tries to reach an agreement with all of its creditors or some of
them. During this procedure, it is also possible to transfer the company (or a part of it)
under supervision of the Court.
1.4 Labour relations and working conditions
1.4.1 Collective bargaining
Collective bargaining in Belgium is highly structured with a central level at the topcovering the whole of the private sector (the National Labour Council), an industrial
level beneath, covering specific industrial sectors, and company level negotiations at
the bottom. In each case the lower level can only agree improvements on what has been
negotiated at the level above and the agreements are generally binding for collective
bargaining agreements at national and industrial level once they are published in the
Official Gazette with a Royal Decree.
The National Labour Council is composed of an equal number of employees
representatives (five members of the trade unions) and employers representatives (five
members of the employers federations).
At industrial level negotiations are carried on by the trade unions and the employers
federations meeting in labour management committees. The agreements reached in
these labour management committees are binding on all employers in the industries
they cover.
At company level, the trade union delegations (together with the local union
organisations) negotiate with individual employers.
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The normal cycle of negotiations is two-yearly with the national level negotiations being
followed by industry level negotiations and then company-level negotiations.
1.4.2 Employees representation at company level
Workplace representation in Belgium runs through two separate channels:
the works council represents all personnel, although it is only elected in larger
workplaces (in companies with an average of 100 employees or more);
the trade union delegation.
Trade-union representation is regulated by a collective bargaining agreement.
Representation at company level is not set-up automatically but has to be requested by
one or more trade union organizations. The trade union representatives are employees
of the company who are either elected or appointed to represent the affiliated
employees. By joining a union which is not obliged in Belgium, workers can influence
issues relating to their work, such as salaries, working hours, benefits, occupationalhealth and safety, among many other things.
Belgium has a high percentage of working people who are members of a union but
knows a quite calm social climate due to the fact that employers and employees very
regularly meet at different levels, and social negotiations form part of the social
structure.
The main tasks of the trade unions are the following:
To negotiate with the employer on salaries, hours, benefits and working
conditions; To monitor whether the employees rights in the workplace are being respected;
To reinforce and improve standards regarding health and safety, economic issues
and other issues with respect to the industry and functions;
To deal with disputes with respect to the application of labour law and collective
bargaining agreements.
There are also separate bodies for health and safety (Health and Safety Committee
Comit voor Preventie en Bescherming op het Werk Comit pour la Prvention et la
Protection au Travail) elected by all personnel, provided there are at least an average
of 50 employees.
These health and safety committees also have information and consultation rights on
economic and social issues, where there are between 50 and 100 employees.
Both employees representatives of the Work Council and the Health and Safety
Committee are elected once every four years.
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1.4.3 Employers organizations
The Federation of Belgian Enterprises (VBO-FEB), the principal Belgian employers'
association, is made up of some forty industry-level federations. Each of these
federations appoints an authorized representative to sit on the VBO-FEB CentralCouncil.
Other employers' organizations include the National Christian Federation of Small Firms
and Traders, Regional Flemish and Walloon associations (the Vlaams Economisch
Verbond and the Union Wallonne des Entreprises), and the Federation of Christian
Employers. The regional organizations are likely to become increasingly important
because more employment related issues are dealt with at regional level.
1.4.4 Working conditions
General
The working conditions of employees are not only determined by collective bargaining
agreements but also in employment contracts concluded between the employer and
employee as well as in the work regulations of the company.
According to the present legislation the difference between white collar workers
(employees mainly performing intellectual activities) and blue collar workers
(employees mainly performing manual work) still exists but is considered to be an
unlawful discrimination according to the Constitutional Court.
Employment contracts
An employment contract is a contract under which a person, the employee, undertakes
to work, in exchange for payment, for another person, the employer, and to do so under
his authority. The four essential elements in an employment contract are therefore: the
contract, the nature of the work, the remuneration and the employers authority (a
relationship of subordination).
Remuneration
In Belgium, the level of gross salaries are not fixed by law. They are in principle
determined by collective bargaining agreements, which are concluded between trade
union representatives and employers, either at industrial level or at company level,
except for the monthly guaranteed minimum wage determined at national level by the
National Labour Council.
The gross guaranteed minimum wage for employees of at least 21 years old and working
full-time amounts to EUR 1.501 as from 1 December 2012. Young people under the age
of 21 years are entitled only to a lower amount.
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Some employers grant their employees additional or non-statutory fringe benefits.
These vary widely and are often laid down in the provision of collective bargaining
agreements. Some examples are luncheon vouchers, payment of a thirteenth month,
premiums for group insurance, etc.
Every wage discrimination particularly on gender grounds, is not allowed.
Working time
In Belgium, working hours may not exceed 8 hours per day or 38 hours per week. It is in
principle not allowed to work more than these legal working hours, outside the
applicable working schedules, but exemptions are possible under certain conditions.
In most cases where working beyond the statutory working hours is authorized, either in
the context of regular work arrangements or in the context of overtime (except in case
of flexible working hours), compensation leave must in principle be granted.
Working on Sundays or on public holidays is forbidden by law, but exemptions exist, for
example work in certain undertakings (hotels, catering establishments, and health care
establishments and services).
Night work is prohibited between 8 p.m. and 6 a.m. but exemptions may be obtained
under certain conditions, for instance due to the nature of the work (hotels,
entertainment, newspaper firms, health care, factories, etc. ).
Termination of the employment
An employment contract can end as follows:
upon expiry of the term for fixed-term contracts or upon the completion of the
work if the contract was concluded for a specific work;
by mutual (written) agreement between the employee and employer;
in case of force majeure having a long term impact or upon the death of the
employee or the employer under certain conditions;
immediate termination because of a serious cause; each party can terminate the
contract without notice or compensation in lieu of notice because of a serious
cause following a strict procedure.
When the contract has been concluded for an indefinite period, each party can
terminate the contract by giving notice, in writing mentioning the starting date of
notice and the duration of the notice period.
Termination of a contract concluded for an indefinite period is also possible with
immediate effect and the payment of a compensation in lieu of notice.
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In some cases and with respect to certain categories of employees, the law determines
limitations on the right to dismiss an employee (for instance, the employee is protected
against dismissal once the employer has been informed of her pregnancy).
Specific rules apply in case of dismissal during the trial period.
For employment contracts concluded as from 1 January 2012, new rules regarding
dismissal apply for both white and blue collar workers. These rules include a first step
to unify the regulations of white and blue collar workers but currently different rules
still apply.
1.4.5 Residence and work permits and related formalities
Residence permits
All foreign nationals intending to stay in Belgium for more than 90 days within a 6
months period should apply for a VISA D with the Belgian Embassy or Belgian Consulate
General in the home country. In general, when a person comes to Belgium to perform
professional activities, the Belgian work permit or professional card should be obtained
first before the VISA D is applied for.
After arrival in Belgium, the foreign national should present himself to the municipality
of the Belgian place of residence within 8 days. A proof of registration is delivered. The
necessary documents need to be provided and after a police visit at the Belgian place of
residence and a positive evaluation, the residence permit is delivered.
Nationals of the European Economic Area (EEA) and Switzerland can enter Belgium and
start up the registration procedure based upon their ID-card or passport.
Work permits
Every company that employs a non-EEA national or non-Swiss national on the Belgian
territory needs to apply for an authorization to employ the individual and a work permit
B on behalf of that individual. Only after delivery, the employee can start the
employment activities in Belgium.
The Belgian law is by principle very strict to grant work permits as they are in general
only delivered if one can prove that there is a shortage on the Belgian labour market
(bottleneck occupations) and a bilateral agreement is concluded between Belgium and
the country of the foreign national. In practice, there are several categories for whom
these obligations do not apply based upon the nature of the activities (e.g. highly
qualified employees, managerial functions, specialized technicians ) or the residence
status (e.g. family member of an EU-national) of the employees.
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Note that due to the enlargement of the European Union, transitional measures are still
in force for Romanian and Bulgarian nationals. They require work permits, in principle
till 31 December 2013, but a simplified application procedure applies for bottleneck
occupations. They can on the other hand enter Belgium based upon the free movement
of services within the EU and perform activities as a self-employed person.
Professional cards
Generally speaking, all foreign persons not having the EEA or Swiss nationality wishing
to exercise a self-employed professional activity in Belgium are required to hold a
Belgian professional card.
Self-employed activities are all activities not covered by the regulations on the
employment of foreign employees. Also persons appointed as directors of a Belgian
company require a professional card. Even non-remunerated directors, who might not
have to affiliate with a social security fund for self-employed persons in Belgium, do
require a professional card.
There are limited exemptions available such as the one for business trips to Belgium
upon the condition that the stay of the foreign national, residing abroad, in Belgium
does not exceed 3 consecutive months.
The application for the professional card must be made at the Belgian Consulate or
Embassy covering the applicants residential area in his home country.
Limosa
Employees, self-employed persons and trainees who come to work in Belgium
temporarily must be reported to the Belgian social security authority. This declaration
is called the Limosa declaration and can be done electronically (www.limosa.be ).It should be done prior to the start of the activities in Belgium. There are certain
exemptions from this obligation, mainly depending on the duration and the nature of
the activities in Belgium.
The Limosa tracking system entered into force as of January 1, 2007 and aims to
monitor foreign business presence in Belgium. It also allows the Social Inspectorate to
easily trace foreign nationals in Belgium and verify their compliance with other
obligations such as the work permit.
Recently, the European Court of Justice declared the Limosa declaration for self-
employed persons not compatible with the freedom to provide services due to the
burdensome administrative procedure and detailed information to be provided.
Consequently, the notification for self-employed persons is temporarily no longer
compulsory but the system will be adapted in order to be compliant.
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2. Finance and Investment
2.1 Banking system
The banking system consists on the one hand of the bodies responsible for the
regulation of the money markets and for the implementation of monetary policy, and
on the other hand, of the basic financial institutions: deposit banks, public credit
institutions and private saving banks. The basic legislation that governs the banking
system is the Banking Act of 1935.
Although the authorities instituted under the legislation are not concentrated into a
single organisation, there is a close cooperation and prior consultation is even
required by law between the Minister of Finance, the Banking Commission, the
National Bank of Belgium and, within the National Bank, the Belgium-Luxembourg
Exchange Institute.
The National Bank implements monetary policy, acts as state banker and intervenes as
lender of last resort in credit operations.
The role of the Financial Services and Markets Authority (FSMA) is to supervise the
individual financial institutions: banks, mutual funds, finance companies, holding
companies and saving banks. Furthermore, it supervises new issues and public tenders
of stocks, shares and other securities, in order to protect the potential investor from
any misleading information.
Regulation of exchange operations is a constituent of the fiscal policy conducted by the
National Bank. Since 1922, Belgium has been linked to the Grand Duchy of Luxembourgin an economic union, and for this reason, exchange control has been handled by a
separate organisation and has been transferred to a body competent to handle
exchange control for both countries. The Belgo-Luxemburg Exchange Institute is
responsible for actions affecting the movement of capital across borders.
2.2 Financial institutions
It is important to specify the various financial institutions:
Credit institutions are financial companies whose activities consist of receiving
deposits and other refundable moneys from the public, to issue loans for their
own clients.
Financial establishments are companies whose main activity consists of taking up
shares, or exercising one or more activities that result in mutual benefit.
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Nevertheless, most of the large banks established in Belgium cover all the activities in
the financial sector, either directly or indirectly.
Faced with the financial crisis, the Belgian banking landscape has been overhauled.
Banks were recapitalized and reorganized to build strong financial institutions.
Private institutions account for the largest part of the financial sector, both in number
and in volume. Basically, the private institutions and the largest banks in particular
offer all the financial products and services required by Belgian and foreign clients.
2.3 Accounting and Audit
2.3.1 Statutory requirements regarding books and records
Accounting principles, based on the EC Fourth Directive, are laid down in the law of 17
July 1975, the Royal Decree of 8 October 1976 and subsequent Royal Decrees.
2.3.2 Accounting requirements
All businesses are required to keep books and records complying with accounting
principles, and to draw up financial statements including a balance sheet and a profit
and loss account. Books, records and financial statements must be drawn up in French,
Dutch or German, depending on the region where the business is located, and expressed
in euros. The financial year of a company is normally twelve months. This period may be
either extended or shortened, as frequently occurs during the first financial period. The
closing date is determined by the articles of association.
2.3.3 Accounting records
Generally, the following books and records must be kept and retained for at least seven
years:
Auxiliary books recording the daily operations (bank journal, purchase journal,
sales journal)
A legal journal in which the monthly movements of the auxiliary books are
summarised
An inventory book for the annual registration of the inventory of assets,
liabilities, contingent assets, and commitments and contingent liabilities. Thisinventory is prepared and recorded following the layout of the chart of accounts
of the enterprise.
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2.3.4 Chart of accounts
The system for filing Belgian financial statements is governed by the law of 17 July 1975
on accounting procedures and the Royal Decree of 30 January 2001 (the Belgian
Accounting Act). It applies a system of accounting based on a minimum standard chartof accounts (minimum algemeen rekeningstelsel) laid down by article 2 of the Royal
Decree of 12 September 1983.
Whilst every company is required to maintain an accounting system appropriate to its
size and activity, its chart of accounts must comply with the form and presentation laid
down in the minimum standard chart of accounts (MSCA). The MSCA is relatively
comprehensive and covers the majority of transaction types to be found in most
businesses. Should certain transaction types not be covered or should more detail
separation of transactions be necessary, then a company can always create new
accounts, but they must remain within the structure laid out by the MSCA.
2.3.5 Contents and form of financial statements
Financial statements must be prepared in a predetermined format, which is in line with
the EC Fourth directive. The financial statements that must be filed are the following:
Balance sheet after profit appropriation
Income statement
Explanatory notes.
The annual general meeting to approve the accounts should be held within six months of
the close of the financial year. Within one month of the date of the annual GeneralMeeting, the approved financial statements must be deposited with the National Bank of
Belgium, which forwards a copy to the Commercial Court and to any other interested
party.
The balance sheet
The balance sheet includes, on the asset side, a summary of:
Fixed assets
Stock
Receivables
Cash in hand/bank
Other assets.
On the liability side, there is a summary of:
Shareholders equity
Provisions for risks and charges
Borrowings
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Payables and other liabilities.
The information must be given in the same terms for both the most recent and
preceding years.
The income statement
The income statement should be fully detailed as set out in Exhibit 2 of the Royal
Decree of 8 October 1976. The main headings are as follows:
Operating revenue
Operating costs and expenses
Financial results
Extraordinary results
Income taxes
Profit appropriation.
2.3.6 Valuation
The board of directors principally determines the valuation principles to be used. In
Belgium, companies are allowed to prepare only one set of annual accounts for both
commercial and taxation purposes. Therefore, the accounting rules included in the tax
legislation have tended to become standard practice. Consequently, conservative
valuation principles prevail and companies adopt the historical cost convention.
Certain fixed assets may be revaluated to market values. Any surplus must be
transferred to a separate non-distributable reserve. Valuation principles must be
consistently applied. Changes must be explained and justified in the notes to the
financial statements.
2.3.7 Consolidated financial statements
Consolidated accounts were introduced in Belgium by the Royal Decree of 6 March 1990,
which is based on the EC Seventh Directive. All commercial enterprises in Belgium are
subject to this Royal Decree if they have one or more subsidiaries.
An enterprise may be exempt from preparing consolidated accounts if the enterprise
itself is a subsidiary of a parent company that prepares and publishes audited
consolidated accounts and a consolidated directors report.
An enterprise is also exempt from the obligation to prepare consolidated accounts if the
enterprise and its subsidiaries do not, on a consolidated basis, exceed more than one of
the following limits:
Turnover, excluding VAT, of EUR 29.200.000
Balance sheet total of EUR 14.600.000
Average number of 250 employees during the year.
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The exemptions referred to above do not apply where all or part of the shares issued by
one of the enterprises to be consolidated have been admitted to an official listing on a
stock exchange established in a member state of the European Union.
The consolidated accounts must be audited by the statutory auditor of the consolidatingenterprise, or by one or more auditors appointed by the general meeting of the
enterprise.
The consolidated accounts and reports must be made available to the shareholders of
the consolidating enterprise, submitted to the general meeting and published under the
same conditions and within the same time limits as the annual accounts.
2.3.8 Audit requirements
Enterprises meeting more than one of the following three criteria must appoint one or
more statutory auditors (commissaires) for a renewable period of three years:
An average of 50 employees during the year
An annual turnover, excluding value-added tax, of EUR 7.300.000
A balance-sheet total of EUR 3.650.000
Enterprises in which the average number of employees during the period exceeds 100, if
the company concerned is part of a company group that is obliged to issue consolidated
accounts or companies whose shares are quoted on a stock exchange and exceeds the
aforementioned criteria on a consolidated basis, one or more statutory auditors must be
appointed. These conditions apply to the individual company or to the group to which it
belongs.
The statutory auditor is appointed by the General Meeting of Shareholders.
A statutory auditor has an unlimited right of oversight and inspection of all the
operations of the company and must report to the shareholders on the annual accounts
of the company and on the board of directors report.
The statutory auditors report must be made available to the shareholders at least 15
days before the annual shareholders meeting. A copy of the report must be made
available to the public as an exhibit with the annual accounts.
The statutory auditor must also report specifically to the works council. This reporting
involves giving an opinion on the statutory annual accounts and certifying the economic
and financial information given to the council.
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All statutory auditors must be selected from the list of members of the Institute of
Chartered Accountants (Institut des Reviseurs dEntreprises/Instituut der
Bedrijfsrevisoren). The Institut des Reviseurs dEntreprises has issued auditing
standards to be followed by all its members. Although not as numerous these auditing
standards are similar to the standards applied in the other northern European countries.
The Institut requires its members to make an assessment of the adequacy of internal
control procedures, and comment in their opinion on the extent to which they have
relied on an administrative organisation that includes a system of internal control
appropriate to the nature and the extent of the enterprises activities.
The Company Code emphasises the importance of the independence of auditors. The
Law of 2 August 2002 (Corporate Governance Act) amending article 133 of the Company
Code affects the manner in which external audits are carried out. An auditor, one of his
employees, affiliates or a partner with whom he has a professional relationship cannot
during his mandate or within a period of two years prior to his mandate perform otherservices such as drafting of financial statements, IT consulting, outsourcing internal
audit, representation in fiscal litigation, acting as company directors, decision-making.
In quoted companies and companies required to draft consolidated accounts, total fees
for allowed non-auditing services (e.g. tax advice) cannot exceed the total statutory
auditors fee. This rule is applied at group level and not per separate company. This
rule does not apply if:
the company receives a prior consent of the audit committee, as established
within the company by the articles of association
the advice and control commission (providing advice on compatibility of specific
services with the auditors independence) granted a positive advice
a committee of mutually independent auditors was set up within the company
A company auditor is not allowed for a period of two years after the termination of his
mandate to accept a position in a company belonging to a group whose accounts he has
audited.
2.4 Exchange and investment controls
In practice, freedom of exchange exists for all purposes. There are no restrictions onforeign ownership and no registration requirements for capital, loans, technology
agreements, and the like. All foreign investments, including earnings, can be freely
repatriated. There are also no restrictions of foreign business investments or ownership
in Belgium.
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2.5 Investment incentives
Both tax and non-tax incentives are available to encourage investment.
2.5.1 Non-tax incentives
With the federalization of Belgium and the harmonization of investment incentives and
subsidies under European Union legislation, investment incentives are regionally
organized. A discussion of all available initiatives is not within the scope of this
publ ication. The following incentives may be ava il able .
Interest rebates
Interest rebates may be given on investment loans granted by some financial
institutions.
Capital grants
Under certain conditions, the regional governments may grant capital grants to
companies (which often benefit of a special tax regime).
State guarantee
The regional governments may guarantee the reimbursement of investment loans. An
important system in Flemish region is the Gigarant guaranties, which involve a state
guarantee of the Flemish government for capital needs over EUR 1.500.000.
Investment companies
National and regional investment companies may participate in corporations. An
important and successful example is the Flemish Archimedes investment fund.
More information
For more information reference is made to the following contactpoints:
For investments in Brussels-Capital Region:
Brussels Agentschap voor de Onderneming/Agence Bruxelloise pour lEntreprise
Avenue du Port 86 C, bte 211, B-1000 Brussels
info@abe.irisnet.be
www.abe.irisnet.be
www.ecosubsibru.be
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For investment in Flanders
Enterprise Flanders
Koning Albert II-laan, 35, bus 12 B-1030 Brussels
info@agentschapondernemen.bewww.agentschapondernemen.beAn investment officer can be found via www.investmentinflanders.com which can
provide assistance for foreign investors.
For investment in the Walloon Region
Public incentives in de Walloon Region (Midas)
www.aides-entreprises.be
2.5.2 Tax incentives
For tax incentives, see under Chapter 4.
3. The Tax System
3.1 Taxing authorities
Taxes are levied by the federal government, the three regions, the provinces and thecommunes. Federal taxes are codified in the Income Tax Code ( Code des impts sur les
revenus / Wetboek van de Inkomstenbelastingen), the Inheritance Tax Code (Code des
droits de succession / Wetboek der Successierechten), the VAT Code (Code de la taxe
sur la valeur ajoute / Wetboek van de Belasting over de Toegevoegde Waarde ), the
Stamp Duties Code (Code des droits denregistrement, dhypothque et de greffe/
Wetboek der registratie-,hypotheek- en greffierechten) and the Sundry Taxes and
Duties Code (Code des droits et taxes divers / Wetboek diverse rechten en taksen ).
Customs and excise duties have their own separate statutes.
3.2 Principal taxes
Direct taxes:
Corporate income tax
Individual income tax
Indirect taxes:
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Value added tax (VAT)
Registration duties
Inheritance and gift taxes
Customs and excise duty
Miscellaneous taxes:
Stamp duty
3.3 Corporate tax structure
For companies no distinction is made according to the nature of the income. All kinds of
income earned are considered as business income and taxed in that way.
3.4 Income tax structure
There are four categories of income that have to be distinguished:
Earned income
Income from movable property
Income from immovable property
Miscellaneous income
3.5 International aspects
Non-residents (companies or individuals) are subject to Belgian tax on the income
derived from Belgian sources. Belgian double tax treaties generally provide that the
foreign entity subject to tax in Belgium benefits from a tax credit or tax exemption in
its country of residence, thus avoiding double taxation.
4. Taxes on Business
4.1 Corporate tax system
4.1.1 Taxable entities
Corporate tax is payable by companies, associations, partnerships, co-operative
societies, establishments and organisations that are engaged in profit-making activities
or in the operation of a business. Only entities with legal personality are subject to
corporate income tax.
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4.1.2 Territoriality and scope
Companies resident in Belgium are taxable on their worldwide income and gains,
whereas non-resident companies are liable to Belgian corporate tax on their Belgian-
source income only.
A legal entity is a resident of Belgium if it has its registered office, main establishment
or place of management in Belgium.
4.1.3 Gross income
Accounting period
The tax accounting period refers to the financial accounting period.
Tax assessment year
If the financial year coincides with the calendar year, the assessment year is the
following calendar year. If the financial year does not coincide with the calendar year,
the assessment year is the calendar year during which the financial year ends.
Accounting methods and business prof its
The companys profits are determined in accordance with generally accepted accounting
principles (GAAP).
The bookkeeping result is, however, adjusted for tax purposes. Non-allowable expensesor excess depreciation are added back, while some other items are deducted.
Inventory valuation
Belgian tax law does not contain specific provisions regarding methods of valuation of
stock. Therefore, the rules of accounting law apply for tax purposes. According to
accounting law, stock must be valued at cost or replacement value, whichever is lower.
As to the methods of valuation, the FIFO and LIFO methods, the unit method and the
average weighted price method are allowed. The base-stock method is not allowed.
Capital gains/losses
Capital gains realised on the disposal of business assets are regarded as business income
and, therefore, normally subject to taxation at the ordinary rates. Non-realised capital
gains are exempt. Capital gains on shares or participations are subject to different
regimes:
Capital gains realized on shares held for a continuous period of at least 1 year in
a company subject to a normal tax regime are exempt when realized by small
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and medium-sized enterprises (definition see under Depreciation below);
Capital gains satisfying the above-mentioned conditions realized by other
companies are subject to a separate tax rate of 0,412 % (against which no tax
credits can be offset)
Capital gains satisfying the taxation requirement, but held for less than 1 year
are subject to a 25,75% tax rate.
Capital gains not satisfying the taxation requirement are subject to tax at the
ordinary corporate tax rates.
Tax on some other capital gains can be deferred. Capital gains realised on fixed assets
held for business purposes for more than five years prior to the disposal and gains
realised in respect of damages, expropriations or similar events, may be subject to
corporate income tax over the period of depreciation of the reinvested assets if the
sales price is reinvested adequately in depreciable non-financial fixed assets within
three years (or five years for buildings, ships and aircrafts).
Capital losses are normally tax-deductible, except for capital losses on shares orparticipations. Capital losses on shares or participations are non-deductible, unless the
capital loss would have been derived by liquidation. In this case, the amount of loss of
paid-in capital can be deducted.
4.1.4 Deductions
To be deductible, business expenses must meet the following conditions:
They must be incurred or borne by the taxpayer during the accounting year
The expenses must be made with the intent of obtaining business income
Their amount and authenticity must be proved.
The most important deductible expenses are:
Salaries, bonuses and fringe benefits
Social security payments
Travel, repair, maintenance, publicity, insurance
Car expenses (deduction of most car related costs is limited in function of the CO2-
emission of the car)
Expenses for public relations and representation (deduction limited to 50%)
Restaurant expenses (limited to 69%)
Rental expenses
Research and development expenses
Various taxes, such as registration and property tax, and customs duties.
Non-deductible expenses
All business-related expenses are deductible insofar the general conditions for
deduction as mentioned above are fulfilled. The following expenses, however, are not
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deductible:
Personal expenses
Corporate tax
Penalties
Interest and gifts exceeding certain limits
Excess depreciation
Excessive profit transfers to foreign related parties
Gifts
Gifts are deductible if they are made to certain organisations and if their value does not
exceed the smaller of EUR 500.000 and 5% of taxable income.
Royalties and management fees
Royalties and management fees are generally deductible.
Interest expense
Interest is only deductible to the extent that it does not exceed the market rate.
Interest paid to directors and shareholders may in some circumstances be considered as
dividends.
Interest paid to related companies or to foreign recipients that are subject to a
favourable tax regime constitute a non-deductible expense to the extent that a 5 to1
debt equity ratio is exceeded (an exception applies for centralised treasury
management).
Depreciation
Depreciation of business assets is calculated on the basis of cost price and the useful
life of the assets. It is allowed as of the financial year in which the assets are acquired
or produced, and must be taken every year. However, in the year of acquisition or
bringing into use, depreciation is allowed on a pro rata temporis basis. This restriction
does not apply to small and medium sized enterprises.
For this purpose, a small and medium-sized enterprise (SME) is one that conforms to at
least two of the following measures:
An average of no more than 50 employees during the year
An annual turnover, excluding value-added tax, of no more than EUR 7.300.000
A balance-sheet total of no more than EUR 3.650.000
An enterprise that has an average number of employees of more than 100 over the year
is considered not to be a SME, even if it falls within the turnover and balance-sheet
limits.
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For companies forming part of a group these measures should be calculated on a
consolidated basis.
Deferred depreciation is not permitted.
The law provides for two methods of depreciation: the straight-line method and the
declining-balance method. Straight-line depreciation is the normal method.
Depreciation periods and rates are normally fixed by agreement between the taxpayer
and the tax authorities, although for certain assets rates are set by administrative
instructions (e.g. commercial buildings 3%; industrial buildings 5%; machinery and
equipment 10% or 33%, depending on the type; and rolling stock 20%).
Declining-balance depreciation is generally optional.
Accelerated depreciation is available under law or administrative rulings. Qualifying
assets include:
Newly launched seagoing ships (depreciation in eight years: 20% in the first year, 15% in
the following two years and 10% in the remaining years) and other ships (10% per year)
Plant and machinery, with the exception of buildings, used for scientific research
(depreciation in three years, i.e. 33.33% per year)
Qualifying new assets acquired by companies in economic sectors of major importance to
the Belgian economy (depreciation in three years, i.e. 33.33% per year)
Costs related to the acquisition of a depreciable asset (immediate depreciation, or at a
rate fixed by the taxpayer only applicable to SMEs) Costs of establishment, including costs related to the creation of a company (immediate
depreciation).
Provisions
Under certain conditions prescribed in law or administrative rulings, the following tax-
free provisions can be created:
Provision for bad debts. A tax-free provision for probable losses on debt claims may be
created if certain requirements are satisfied, including a clear description of the losses
and their deductibility as business losses when actually incurred. The risk of losses mustbe justified by special circumstances that have occurred during the tax year. The
provision remains tax-free as long as the taxpayer can show the likelihood of the losses.
Provisions for probable charges. A tax-free provision for specific charges that the
taxpayer expects to arise may be created, without limits, if certain conditions are met.
The conditions include the eventual deductibility of the charge as a business expense,
and the recording of the claim as a liability in a separate account. The provision remains
tax-free as long as the taxpayer can show the likelihood of the charges.
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Investment reserve for SMEs
Small and medium-sized enterprises (SMEs) may make a deductible provision to aninvestment reserve.
The maximum size of the investment reserve is 50% of the retained profits before any
provision to the reserve, but is subject to an absolute limit of EUR 37.500. The
investment reserve must be invested within three years in depreciable (tangible or
intangible) assets, for which the company is entitled to an investment deduction. If the
reserve is not fully used within three years, the remaining balance must be added back
to taxable profits.
Notional interest deduction
As from assessment year 2007, all Belgian companies and Belgian branches of foreign
companies subject to (non-resident) corporate income tax in Belgium, regardless of
their size and activities, are able to apply a so-called notional interest deduction.
The notional interest deduction consists in a deduction for risk capital equal to a
certain percentage of the companys net equity (capital and reserves) in Belgium, of the
preceding financial year, subject to certain adjustments designed to avoid abuses. The
rationale of this system is to restore the imbalance in tax treatment in Belgium between
debt financing and equity financing.
The deduction is calculated by multiplying the equity by a fixed percentage determinedby the government on the basis of the interest rate on 10-year linear government bonds
(OLOs) of the previous year, with a maximum of 3% (3,5 % for SMEs). For assessment
year 2014 the rate is 2,742 % (3,242 % for SMEs).
No advance tax ruling is required for claiming the notional interest deduction.
If a company has no or insufficient profits, the unused notional interest deduction can
as form assessment year 2013 no longer be carried forward. The unused stock of
notional interest deduction available at the end of assessment year 2012 can still be
carried forward for a maximum of seven years under certain limitations.
If a company sets up an investment reserve in a tax year, the notional interest
deduction cannot be used in that tax year and the two following tax years.
Patent income deduction
Resident companies and Belgian permanent establishments of non-resident companies
may deduct 80 % of the income derived from patents licensed to a related or unrelated
party insofar as the payments are consistent with the arms length principle.
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Conversely, only 20 % of such income is taxable, resulting in an effective tax rate of
6,8% (20% of 33,99%). The deduction only applies to newpatents that have not led to
the sale of patented goods or services by the company or a licence-holder beforeJanuary 2007. The patent must be developed or improved by a research centre that
constitutes a business department or branch of activities of the company. The latter
condition will probably be abolished as from assessment year 2014 for SMEs.
With respect to patents used by a resident company or a Belgian permanent
establishment to produce patented products itself, the deduction of 80 % applies to the
embedded royalties, i.e. the part of the turnover of the produced products,
corresponding to the licence fee that would have been received if the patents would
have been licensed to an unrelated party.
The deduction does not apply to income form research and development performedunder a development contract or a cost-sharing agreement. Specific anti-abuse
provisions apply.
If there is insufficient taxable income to offset the patent income deduction, the
unused part of the deduction is lost and cannot be transferred to a subsequent
assessment year.
4.1.5 Losses
Carry-forward of losses is unlimited in time. Losses may not be carried forward if there
is a change in ownership that cannot be justified by financial and economic reasons.Carry-back of losses is not allowed.
Special rules limit the deduction of losses where the company is involved in certain tax-
exempt reorganisations, such as mergers and splits. If profits are shifted to a related
company, losses are not deductible from these profits.
4.1.6 Groups of companies
Group treatment
There are no general provisions in Belgian law regarding group taxation.
Inter-company dividends (participation exemption)
Dividends received from a participation in a resident or non-resident company that is
subject to tax are 95% exempt from corporate income tax.
For the 95% exemption to apply, the following conditions should be met:
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A minimum participation in the share capital of the dividend-distributing company of 10%
or a minimum investment of EUR 2.500.000.
The shares must be held in complete ownership for an uninterrupted period of at least
one year.
The distributing company must be subject to a corporate income tax similar to Belgian
corporation tax (for non EU companies the minimum nominal tax rate or effective tax
burden must be 15 %).
Mergers
Belgian law provides a favourable tax regime for mergers. The regime applies equally to
divisions and partial mergers. Companies are exempt from co
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