BELGIAN HOLDING COMPANIES
A holding is a company whose aim is to acquire, hold in a portfolio and manage financial participations in other companies and so control and manage them through these participations.
It can, in addition, carry out any other activity such as commercial, industrial or property transactions.
Holdings are also used to structure and rationalise the organisation and financing of a group of companies.
Lastly, many holdings are created to provide stability for the shareholders, control and transmissibility.
The following lines provide a quick overview of the system.
Legal form
Open
Approval and particular controls
None
Capital duty
None
Tax on the estate or fortune
None
System of dividends : Incoming dividends: dividends paid to the Belgian holding
Withholding tax
In Belgium: none
In Europe : none if the participation held by the Belgian holding is at least 10% and held for 1 year (EU directive)
Outside Europe: the large number of international agreements signed by Belgium that prevent double taxation enables foreign withholding tax to be limited.
Belgian tax on the dividends
In principle, the taxable base is limited to 5% of the incoming dividend, the equivalent of a maximum taxation of 1.77%.
To benefit from this system, a certain number of conditions must be respected. The shares held in the company must be at least 10% or reach an investment value of 2,500,000. Furthermore, the share must be held for a year and the dividends must not come from tax heavens or companies subject to significantly more favourable tax regimes (e.g., a rate of less than 15%).
Outgoing System of dividends : paid by the Belgian holding: withheld at source
To a company
None, if the subsidiary is established in Europe (UE directive) or a country with which Belgium has an international agreement that prevents double taxation, as long as the shares held by the Belgian holding are at least 10% and held for 1 year.
To an individual resident in Belgium
Withholding tax of 21% (and in some cases 25%)
To a non-resident individual
Withholding tax of 21% (and in some cases 25%) with possible reductions for conventions that prevent double taxation (to be determined on a case-by-case basis).
Taxs on the assignment of shares or participations (gains in capital)
Made by the holding
None, unless the shares are taken in companies established in tax heavens or are subject to significantly more favourable tax regimes.
made by shareh olders of the holding
None, except for specific situations.
Deduction of interest paid by the Belgian holding company
Unlimited (unless the interest is paid to a beneficiary in a tax heavens and the amount of the loan is over 7 X the stockholder's equity of the Belgian lending company)
Deduction for losses
Unlimited
Deduction of notional interest
See above under "tax benefits of the Belgian system"
Please note: calculating the deduction of notional interest is not favourable to holdings as the shares held are deducted from the basis for calculation, so reducing the deduction. Nonetheless, the holding is often used as a way to optimise the deduction of notional interest in other companies, such as financing companies capitalized by the holding
Licence fees and royalties
It is possible to limit the taxable base to 20% of the fees from patents, which works out at a maximum taxation of 5.88% of the fee.
In some cases, it is possible to deduct some or all of the foreign taxes from those due in Belgium (the QFIE system).