Purchase of shares in a Belgian resident company
The transfer of shares in a Belgian company is not subject to registration or stamp duty.
Belgium tax residence
Under Belgian law, a company is treated as a Belgian tax resident if it has its principal place of business or its seat of management in Belgium.
A company having its registered office in Belgium is presumed, subject to proof to the contrary, to have its principal place of business or its seat of management in Belgium. Evidence to the contrary will only be accepted if, in addition, it is shown that the company's tax domicile is in a state other than Belgium under the tax laws of that other state.
Corporate income tax rate
The current corporation tax rate in Belgium is 25%. For companies that qualify as small and medium-sized enterprises (SMEs), a reduced rate of 20% may apply to the first EUR 100,000 profit.
Equity financing from Chinese resident parent company to a Belgian resident subsidiary
The contribution of equity into a Belgian company’s capital is subject to fixed EUR 50 duty, regardless of the amount or value of the contribution.
Withholding tax on dividend payments to Chinese parent company
Under Belgian domestic law, dividends and liquidation distributions are generally subject to withholding tax (WHT) at a rate of 30%. Domestic law however also provides for an exemption if the Chinese parent company meets the following conditions:
- it holds (or commits to hold) a participation of at least 10% of the share capital of the Belgian distributing company for an uninterrupted period of at least one year;
- it is a tax resident of China (as a tax treaty country) under Chinese domestic tax law and under the tax treaties concluded by China with third countries;
- it is incorporated in a legal form that is similar to the ones listed in the annex to the EU Parent-Subsidiary Directive; and
- it is subject to corporate income tax or a similar tax in China, without benefiting from a regime that deviates from the normal tax regime.
If these conditions are not all met, the Belgium-China double taxation treaty (DTT) may allow a reduction in the WHT rate to 5% if, prior to the time of payment of the dividends, the Chinese parent company (not a partnership) has been holding directly at least 25% of the capital of the Belgian distributing company for an uninterrupted period of at least twelve months. If these conditions are not met, the WHT may still be reduced to 10% under the DTT.
Some documentation requirements will have to be complied with in order to benefit from the exemption under domestic law or from the reduced rates under the DTT.
Debt financing from Chinese resident parent company to a Belgian resident subsidiary – tax deductibility of interest payments
The Belgian resident subsidiary should in principle be entitled to corporate tax deductions for interest that it pays in respect of a loan from the Chinese resident parent company.
That said, such deduction may be reduced under specific rules (thin capitalisation, hybrid mismatch, etc.) or if the conditions of the loan are not at arm’s length (i.e. under transfer pricing rules).
Debt financing from Chinese resident parent company to a Belgian resident subsidiary – withholding tax on interest payments
Payments of Belgian-source interest are generally subject to WHT at 30%. Domestic law provides for a number of specific exemptions depending on the status of the creditor and the type of debt instrument.
Under the Belgium-China DTT, WHT on interest shall not exceed 10% of the gross amount of the interest paid to the beneficial owner.
Some documentation requirements will have to be complied with in order to benefit from the exemption under domestic law or from the reduced rate under the DTT.
Intellectual property – withholding tax on royalties paid to a Chinese parent company
Belgian-sourced payments in respect of intellectual property are subject to a 30% WHT.
The rate may be reduced to 7% under the Belgium-China DTT, provided documentation requirements are complied with in Belgium.
Intellectual property – tax treatment of licence granted by Chinese parent company to a Belgian resident company
Belgian-sourced payments in respect of intellectual property are subject to a 30% WHT.
The rate may be reduced to 7% under the Belgium-China DTT, provided documentation requirements are complied with in Belgium.
Intellectual property – tax incentives
Belgian tax incentives for the development of intellectual property include:
- tax credits for research and development (R&D) activities or an investment deduction for R&D;
- reduced wage WHT for qualifying R&D; and
- a so-called patent box in the form of the innovation investment deduction, which grants an optional lower effective tax rate of 3.75% for profits attributable to patents and similar intellectual property.
Intra-group transactions – anti-avoidance rules including transfer pricing
Various domestic anti-avoidance rules may be relevant to intra-group transactions (in addition to the anti-avoidance rules mentioned above in relation to the tax deductibility of interest payments). These include:
- the general anti-abuse rule (GAAR);
- the disclosure of tax avoidance schemes (DOTAS) rules; and
- a Controlled Foreign Company (CFC) regime.
Sales tax/VAT
Belgian VAT may apply to goods and services provided and received by a Belgium-established business, depending on the type of supply.
Typically, a business can offset the VAT it pays on received supplies (input tax) against the VAT it charges on its own supplies (output tax), paying or reclaiming the difference.
Certain supplies, such as some financial services and some supplies of real property, are exempt from VAT. Input tax is not deductible if the relevant supplies are used by the business to make exempt supplies.
The current standard rate of VAT in Belgium is 21%. Depending on the nature of the supply, lower rates of 12%, 6% and a 0% rate (which allow input tax recovery) may apply instead.
Pillar Two
Belgium has introduced an income inclusion rule (IIR) and domestic minimum top-up tax (DMTT) for financial years starting on or after 31 December 2023. An undertaxed profits rule (UTPR) applies for financial years starting on or after 31 December 2024.
The regime applies to multinational enterprise (MNE) groups with consolidated group revenue of at least EUR 750 million in the preceding fiscal year. It also applies to large domestic groups that meet that threshold.
The IIR imposes a top-up tax on the income of low-taxed subsidiaries of Belgian parent entities. The timing of when this tax is due is aligned with the country’s existing corporate tax regime and follows the general corporate income tax timeline.
The DMTT is designed to ensure that Belgian entities of large MNEs are subject to a minimum effective tax rate of 15% on their domestic income. The DMTT is aligned with the country’s general corporate tax framework.
The UTPR acts as a backstop to the IIR, applying when low-taxed income is not fully captured by the IIR (e.g. if a parent entity is located in a jurisdiction that does not apply the IIR or there is insufficient top-up tax collected under the IIR due to the group’s structure or jurisdictional issues). The allocation of the UTPR liability is based on a proportional formula that considers the MNE group’s payroll and tangible assets located in Belgium relative to the group’s global presence. UTPR adjustments are made as part of the regular corporate tax return process in Belgium.
Use of trading losses
Belgian income tax law follows accounting law, save for when it expressly diverges from it. Trading losses incurred by a Belgian resident company during a given accounting period may therefore translate into tax losses for that same given year, provided that deductible items for accounting purposes are accepted for tax purposes.
Tax losses may be carried forward indefinitely. They may however be forfeited or lost in very specific circumstances, such as a change of control (unless the company can demonstrate that the change is justified by legitimate financial or economic needs) or a (de-)merger.
The use of carried forward losses in any given tax year is capped at a tax base of EUR 1 million plus 70% of the tax base exceeding that 1 million EUR. The remainder of the carried forward tax losses can be carried forward indefinitely.
Example: In year X, company A has a taxable base of 2 million EUR and 3 million EUR in carried forward tax losses. Only 1.7 million EUR of carried forward tax losses can be used to offset the 2 million EUR profit, i.e. corporate income tax will be due on 0.3 million EUR. The remaining carried forward tax losses (1.3 million EUR) can be carried forward indefinitely.
Surrendering losses within group
Belgium has a group contribution regime that applies to Belgian resident companies and Belgian permanent establishments of foreign companies that are part of a qualifying group. To qualify, companies must be linked by a direct participation of at least 90% or by a common parent holding at least 90% in both companies. The relevant participation must be held for an uninterrupted period of at least five years.
This regime allows for a company to reduce its tax base by contributing profits to the other company within the same group. The contributing company can deduct the amount of the group contribution from its taxable income.
The receiving company must include that same amount as taxable income to offset its tax losses.
Payroll taxes relating to employing staff in Belgium
In general, the employees of a Belgian resident company who work in Belgium will be subject to Belgian income tax and social security contributions (SSC) on their employment income and benefits.
The Belgian resident company is responsible for deducting payroll tax from the remuneration paid to its employees and for remitting these amounts to the Belgian Treasury.
The Belgian resident company will also be liable to pay employer SSC in respect of its employees at a rate of, in principle, 28% of the gross income. The employer will also have to deduct employee SSC from the gross remuneration paid at a rate of 13.07%.
Tax issues relating to secondees sent from China to Belgian resident company
In general, remuneration paid to a Chinese resident individual in respect of an employment exercised in Belgium will be taxable in Belgium. However, the remuneration is instead generally taxable only in China if the following conditions are cumulatively met:
- the secondee is not present in Belgium for a period or periods exceeding in the aggregate 183 days in any twelve month period commencing or ending in the fiscal year concerned;
- the remuneration is paid by, or on behalf of, an employer which is not a Belgian resident; and
- the remuneration is not borne by a permanent establishment which the Chinese employer has in Belgium.
Belgium has no reciprocal social security agreement with China. This means the secondee’s earnings in Belgium will be subject to Belgian SSC (13.07% withholding for the employee and 28% employer contribution over the gross salary).
Employees are exempted from SSC if they attend meetings in Belgium on a limited basis. To enjoy the exemption, they must not attend such meetings in Belgium for more than 60 days in total per year. Moreover, each meeting may not exceed 20 consecutive calendar days.
Other exemptions exist for a different but limited extent for specific cases, such as urgent repairs (5 days) and initial assembly and/or first installation (8 days).
Tax on disposal of shares in Belgian resident company
Under the Belgium-China DTT, a capital gain, realized upon the disposal of shares in a Belgian resident company by a Chinese parent company, will only be taxable in China. Belgium would have no taxing authority. Belgium will however have the taxing authority if the Belgian company derives more than 50% of its value directly or indirectly from immovable property situated in Belgium.
Generally, if Belgium has the taxing authority over a capital gain on shares realized by a resident or non-resident company, an exemption would apply if the selling company held a participation of at least 10% or EUR 2.5 million for an uninterrupted period of at least one year. The company sold would also have to meet a subject-to-tax test, which should in principle be met in the case of the sale of a Belgian resident company.
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