Tax benefits – Belgian system
Belgium offers many tax benefits, including:
For individuals (private life)
1) Exoneration of capital gains from a private estate
Capital gains on shares of private individuals earned as part of operations resulting from the normal management of a private estate are exonerated from tax (unless these are assigned to a non-European company and if the participation is over 25 % of the shares).
Capital gains earned on the sell of the home of a tax-payer are never taxed.
Capital gains earned on other buildings owned by the tax-payer are not taxable, if they are sold 5 years or more after their acquisition.
2) Donations
A “manual gift” is the most simple and advantageous way to donate an estate. It only applies to things that are transferable by hand, such as sums of money, furniture and jewels.
The advantage of a manual gift is that no donation rights are levied if the donator lives 3 years after the donation.
Survival beyond 3 years is no longer a condition, however, if the donations of movable goods are presented for the formality of registration at 3% to 7% maximum rate.
3) Authors rights
Revenue from authors rights are taxable at a rate of 15% for sums up to €51,920 net.
To determine the net taxable amount, a lump sum for expenses can be deducted from the gross; 50% on the 1st bracket of €13,840 and 25% on the 2nd bracket between €13,840 and €27,690.
This therefore means that a gross revenue of €62,300 in authors rights can be considered as a revenue whose effective tax rate is 12.5%.
Beyond this amount, these revenues are taxable at the standard rate, which is the marginal rate of 50%.
These figures, valid for revenues of 2009, are indexed every year.
Lastly, it is worth bearing in mind that authors’ rights are not necessarily subject to national insurance contributions.
4) Tax on fortunes
There are none.
5) Ongoing tax regularisation
Belgian tax law foresees an official system for regularising taxable income that might not have been previously declared.
There is also a less formal regularisation system that must be negotiated with the local tax services.
For individuals (professional life)
1) Alternative remunerations: fringe benefits
The tax code on revenues contains rules that determine and evaluate the taxable fiscal benefit of the private use of professional goods.
these rules are of interest to the beneficiary inasmuch as the fiscal evaluation is sometimes below their actual cost. In other words, the cost of using them would be notably higher if the beneficiary would have to pay for the benefit at market rates.
For companies
1) Notional interest deduction (risk capital)
Belgium introduced a particularly attractive rule in 2006 that allows a deduction for “notional interest” or deduction for risk capital in favour of companies and other entities subject to company tax and foreign companies that have a Belgian establishment or that receive real income taxable in Belgium.
The taxable base of the companies is lowered to an amount of fictional interest calculated on a rate determined annually on the corrected funds. For the fiscal year 2011, the rate is fixed at 3.8 % for large companies and 4.3 for small ones.
2) Non-taxable gains on shares
Usually, the net capital gains generated by companies on shares are entirely free of taxation.
3) Tax deduction for revenue from patents
A new fiscal measure that is favourable for all companies active in the field of research & development enables companies subject to company tax and the Belgian branches of foreign companies to deduct 80% of their revenue from patents from their tax base.
This new measure is limited to revenue coming from Belgian and European patents and complementary certificates of protection that are either developed totally or partially by the company in research centres that make up a branch of activity or are acquired by the company.
The new tax deduction for revenue from patents is applicable only to patents that were not used by the company, a licensor or entreprises connected with the sale of goods or services to third parties before 01/01/2007.
4) VAT unit
It is possible to opt for a VAT unit system in Belgium.
This concept enables persons or entities subject to VAT in Belgium that are not connected from a legal viewpoint but are closely tied financially, economically or from an organisation point of view, to be considered as a single entity for VAT purposes.
This framework considerably simplifies VAT formalities: a single VAT return for the entire group, VAT neutrality for intra-group services, no invoice or VAT on inter-group operations. The members each keep their VAT numbers for operations with third parties.
The VAT unit does not have a distinct legal status, but has one VAT identification number. So it will substitute and represent all its members, who will no longer exist virtually for VAT purposes.
It will fulfil the obligations concerning VAT returns and payments and can receive reimbursements owed by the state.
This fiscal entity is, for example, highly useful when buildings are located in property companies and used for operational activities.
The disadvantage of the VAT unit is to create solidarity between members for VAT payments.
5) Exemption of certain subsidies
Bonuses for getting people back to work and those for professional transition granted by relevant regional institutions, as well as capital and interest subsidies attributed by the regions as part of legislation in favour of economic expansion and used for the acquisition or the constitution of tangible or intangible assets, are exempted.
The relevant assets cannot be sold within three years of the investment. Otherwise, the amount of profit previously exempted becomes taxable in the year of sale.
6) Tax shelter
The “tax shelter” is a tax incentive destined to encourage the production of Belgian audiovisual and cinema works. The system enables the company that wants to invest in audiovisual production to benefit from an exemption of its taxable profits for up to 150% of the sums effectively transferred.
All resident companies and the Belgian branches of non-resident companies can benefit from the system.
7) An important network of conventions signed by Belgium that prevent double taxation
Similar to the system applicable to private individuals.
8) Prior tax agreements
Similar to the system applicable to private individuals.
9) Management companies
Similar to the system applicable to private individuals.
10) The system for holdings
Goods, shares and valuables brought as capital are subject to no capital duties.
Under certain conditions, dividends benefit from an exemption of up to 95% of their amount.
The capital gains realised on shares, as well as in participations are not taxable.
No tax exists on assets.