Accountancy in Belgium

>> Taxation in Belgium

The Belgian tax system includes direct taxes, (individual income taxes and corporate income taxes), and indirect taxes (value-added tax, inheritance and gift taxes, registration fees and excise duties).

Regions and local authorities levy  local taxes.

Administration

The Federal tax office (Ministry of Finance), which is divided in different departments in accordance with the various taxes, administers the Belgian tax laws.

The assessment and collection of income taxes and VAT are controlled by the “administration of business and income taxes” (A.O.I.F.). In addition, there is a specialized department (BBl) with an overall competence in all tax matters, which deals with the more substantive and difficult cases. Within the administration of direct taxes there are specific units which control, for instance, non-resident taxpayers, the financial and insurance industry and the real estate sector.

Taxation of individuals

Belgian residents

An individual whose “place of living” or “seat of wealth” is located in Belgium is regarded as a Belgian resident. A Belgian resident is subject to Belgian income tax on their worldwide income. Exemptions with “progression – reserve” for certain types of income do exist, based on the Belgian double tax treaties.

The standard Belgian income tax rates are:

Rate Tax Year 2016 (AJ) Income 2015 Tax Year 2017 (AJ) Income 2016
25% Up to 8710 EUR Up to 10.860 EUR
30% from 8.710 EUR up to 12.400 EUR from 10.860 EUR up to 12.470 EUR
40% from 12.400 EUR up to 20.660 EUR from 12.470 EUR up to 20.780 EUR
45% from 20.660 EUR up to 37.870 EUR from 20.780 EUR up to 38.080 EUR
50% from 37.870 EUR from 38.080 EUR

Each taxpayer is entitled to some personal deductions and allowances, for instance:

  • Tax-free lump sum of 7090 EUR per person
  • Additional tax-free lump sum for children (2016 = 1.520 EUR / 1 child – 3880 EUR /2 children – 8700 EUR / 3 children)

The taxable basis consists mainly of immovable income, professional income, movable income, and miscellaneous income.

  • Worldwide immovable income (rental income, leasing income, …) is taxable in Belgium at the progressive tax rates mentioned above, as far as it is not exempted in virtue of a double tax treaty. The taxable amount is often determined on a (quite favourable) fixed basis.
  • Worldwide professional income (wages, salaries, profits of an unincorporated business, …) is taxable in Belgium at the progressive tax rates mentioned above, as far as it is not exempted by a double tax treaty. The taxable amount is determined as the gross income less social contributions and proven costs. For certain types of income, a fixed amount of costs can be deducted if the real amount cannot be proven.
  • Worldwide movable income (interest, dividends, royalties) is taxable in Belgium in most cases at a rate of 25%, as far as there is no reduction in virtue of a double tax treaty. In general, costs cannot be deducted.
  • Certain types of miscellaneous income (e.g. capital gains on certain types of immovable property) specifically mentioned in the Belgian Tax Code, are taxed at the progressive tax rates mentioned above, or at special tax rates.

Belgian non-residents

Belgian non-residents are only taxed on their Belgian-sourced income. The tax rates are the same as those applicable  for Belgian residents.

The taxable basis is determined in the same manner as for Belgian residents. Though, not all non-residents are entitled to all personal deductions. Only nonresidents whose worldwide professional income is at least 75% taxed in Belgium, are entitled to almost all of them.

Taxation of companies

A resident company (one with its centre of activities or management in Belgium) is liable to corporation tax on its worldwide profits, including capital gains, and subject to exemptions in double tax treaties.

The 33% tax rate applies whether profits are retained or distributed, and is increased by a 3% crisis contribution (33,99%). Small companies meeting certain conditions are entitled to reduced rates.

24,98% < 25.000 EURO
31,93% 25.000 – 90.000 EURO
33,54% 90.000 – 322.500 EURO
33,99% > 322.500 EURO

Taxable income is based on the results as reported in the companies’ annual financial statements, including all profits and losses, capital gains and losses, dividends, interests, and royalties. Taxable profits are profits disclosed in the financial statements, but adjusted for disallowable expenditures, exempt profits, special deductions and losses carried forward.  The most important adjustments are:

1) A deduction from gross income of 95% of inter-corporate dividends paid by resident and non-resident subsidiary companies to a qualifying Belgian company or branch may be applied, provided that:

  • the subsidiary has been subject to a corporate income tax similar to Belgian corporation tax;
  • the parent company owns a

participation of at least 10% of the subsidiary’s capital or a participation whose acquisition value is at least  EUR 2.500.000;

  • there is a minimum holding period condition of 1 year (to be extended to 2 years).

2) Capital gains on shares are  exempted if:

  • the income of the gains is entitled to the deduction of 95% of intercorporate dividends (the condition of the minimum participation and the minimum holding period need not

be fulfilled);

  • the gains are realized (exception: shares sold within one year are taxed at 25% of the capital gain)

Losses

Losses can be carried forward indefinitely. Losses cannot be carried back.

Notional interest deduction

Every company is entitled to decrease its taxable profits with a percentage of its equity capital. This percentage amounts are:

  • for tax year 2016 (income year 2015) to 1,63% and for some companies 2,13%.
  • for tax year 2017 (income year 2016) to 1,131% and for some companies 1,631%.

Belgian ‘equity capital’ includes capital, share premiums, reserves and carryforward of profits. To discourage any abuse, the company’s equity will be adjusted by eliminating, among others,  the following items:
As of income year 2012, any notional interest deduction built up in 2012 can  be used until tax year 2019.

  • The net fiscal value of the shares the company holds in its own share capital;
  • The net fiscal value of shareholding recorded as financial fixed assets.

Patent income deduction

Since the tax year 2008, there has been a tax deduction for new patent income. The tax deduction amounts to 80% resulting in an effective taxation of the income at the rate of 6,798%.

Investment deduction

For certain investments in patents, environmentally friendly investments in research and development, energy-saving investments, and security equipment, a deduction from the taxable profits  is allowed.

Tax exemptions personnel

Certain tax exemptions can be applied for under certain conditions for engaging additional personnel, for example for the “head of the export”, head of the department “Quality Care”, trainees  and low wage employees for small  and medium enterprises.

Capital gains tax

Individuals

For individual’s capital gains not related to self-employment activities are only taxed if they are derived from sales of land and buildings (other than one’s primary home) and from sales of a Belgian corporation’s shares to non-EER companies, if the taxpayer owns more than a 25% participation in the corporation (“miscellaneous income”). However, there are many exceptions.

Capital gains realized from fixed assets invested in an individual’s occupation or business are taxed at the normal progressive income tax rates (“professional income”). If these assets are held for more than 5 years before disposal, the capital gains are separately taxed at the favourable rate of 16,5%, and tax may  be waived when re-invested, subject  to certain conditions.

Companies

For companies, capital gains are normally regarded as ordinary business income, which is taxable at the normal corporation tax rates (33,99% or the reduced corporation tax rate where applicable). Nevertheless, there are exceptions:

  • Realized gains on shares are exempted

(see above);

  • Deferred taxation for capital gains on certain fixed assets under certain conditions.

Value-added tax, customs  and excise duties

Value-added tax (VAT) is a sales tax, charged on the supply of goods and services provided in the course of business. A person who makes taxable supplies or delivers goods is liable to register for VAT if their yearly taxable turnover exceeds EUR 25.000 (as from April 1, 2016). Taxable persons must file a monthly or quarterly tax return reporting all taxable transactions made.

VAT is also charged on the importation of goods from non-EU countries into Belgium, the acquisition of goods from other EU member states, and the receipt of some international services in Belgium.

In general, the rate is 21%. For certain supplies, the rate is 6% (goods classified  as necessities such as food) or 12% (services of a social nature).

Inheritance tax and gift duties

The inheritance tax system in Belgium differs for individuals resident in Brussels, Flanders and Wallonia. For deceased Belgian residents, worldwide assets are brought into account. The rates will depend on the region and the relation  to the deceased.

A gift tax is imposed on gifts of:

  • immovable property located in Belgium;
  • immovable property located outside of Belgium if the deed is registered in Belgium; and
  • movable property if the gift is conveyed through a legal registered document.

Registration fees

Registration fees are due in, amongst others, the following circumstances:

  • Transfer of immovable property located in Belgium: 12,5% (Brussels and Wallonia) or 10% (Flanders).  Actual changes are announced  for the near future;
  • Registration of renting and leasing contracts: 0,2%;
  • No registration fees are due on the formation or increase of a company’s share capital.

Latest version updated 20th December 2017

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