Taxes

Foreign-owned businesses operating in the Belgian market may be subject to one or more of three types of taxation: Value Added Tax (VAT), Corporate Income Tax and Personal Income Tax.

TVA

Goods and services that are provided by an enterprise are subject to VAT, in principle.

VAT is a tax on consumption borne by the final consumer. VAT is collected in successive steps, i.e. every transaction of a production and distribution process. The normal rate is 21%. However, the lower rates of 6% and 12% are applied to certain categories of goods and services. More information on rates (in French).

Parties who are subject to VAT need to meet a certain number of obligations:

  • filing a declaration about the start-up, modification or cessation of an activity
  • keeping accounts of invoices and revenue (the obligations vary according to the VAT regimes)
  • a periodic VAT statement (quarterly or monthly, depending on the case)
  • a special VAT statement for taxable persons subject to certain special regimes that do not conform to the “classic” periodic declaration
  • an annual listing of clients who are taxable persons
  • a list of intra-community operations (with other EU countries)

You can also find more information in the VAT section of the FPS Finances website (in French).

Value Added Tax (VAT)

Value Added Tax is a tax on goods and services which is paid by the consumer and which is levied in successive stages, namely on each transaction throughout the process of production and distribution. At each stage of this process, the tax paid on the inputs can be deducted. Hence only the added value is taxed at each stage.

Taxable transactions

The following transactions are subject to VAT:

  • The supply of goods and services.
  • The import of goods into Belgium (coming from a country outside the European Union).
  • The purchase in Belgium of goods that originate from another European Union country.

VAT filing

Persons liable for VAT must file a monthly VAT return. Small enterprises may opt for a quarterly return. VAT returns can be filed by internet on the INTERVAT website.

VAT rates

The EU member states apply the VAT system according to the same basic principles but are free within certain limits to fix the applicable rates. As a result, rates vary from one country to another.

But this is of no importance from a competitive point of view within the Single Market. For example, a product manufactured in Germany and sold in Germany will be subject to VAT at the German rate, while the same product manufactured in Belgium and sold in Germany will not be subject to VAT in Belgium but will incur the tax in Germany at the German rate.

The standard VAT rate in Belgium is 21%. A reduced VAT rate of 12% applies to supplies of goods and services such as pay television or low-income housing. A reduced VAT rate of 6% applies to goods and services considered basic necessities (food and pharmaceuticals), as well as books, transport, concerts and hotels.

VAT exemptions

Goods imported into Belgium from a country outside the EU are subject to VAT except when they are:

  • In transit.
  • Imported temporarily.
  • Consigned to a customs warehouse.

If goods are consigned to a private customs warehouse, neither customs duties, excise duties nor VAT are charged. Such warehouses may be set up in any Belgian locality, for any type of goods irrespective of their value, origin or final destination.

Tax shelters

Tax shelter for start-ups

A tax shelter for start-ups encourages individuals to invest in equity in “start-ups” which are basically defined as small companies of less than four years old.

In return of such direct investment, the investor is granted with a tax relief (reduction and not deduction) on his personal income tax which equals 30% or 45% of his investment. The applicable rate depends on the size of a start-up, 30% for SME’s and 45% for “very small enterprises”.

The Act of 10 August 2015 also provided for the possibility to benefit from the tax relief for indirect investments via a crowdfunding platform, a funding vehicle or a start-up fund. However, for indirect investment the tax relief is then capped to 30%, including for investments realized in a “very small enterprise”.

The Act of 10 August 2015 did not set forth the conditions and formalities required for crowdfunding platforms, funding vehicles and start-up funds to operate. Hence, a new intervention of the Parliament was necessary.

The legislation adopted on the 15th of December in 2016 defines now these conditions and formalities.

Investment by an individual – different possibilities

After the entry into force of this new legislation, an individual will be able to invest in a start-up and benefit from the tax relief by opting to one of the four following possibilities:

  • An investor may directly invest in a start-up’s capital without the intervention of any intermediary as initially organized by the Act and explained above.
  • An investor may invest in a start-up with the intervention of a crowdfunding platform or a regulated company. In this situation, the investor becomes a shareholder of the start-up. The crowdfunding platform / regulated company acts as a “mere” broker between the investor and the start-up.
  • An investor may invest in a funding vehicle which invests itself in start-up. The investor does not become a shareholder of the start-up but a shareholder of the funding vehicle. However, the investment is dedicated to a well identified start-up and remains bound to this start-up.
  • Finally, an investor may invest in a start-up fund which invests in several start-ups. Here again, the investor is not directly a shareholder in any start-up. His investment is however not bound to a specific startup. The investment is managed by the start-up fund on the basis of its investment policy and may be allocated in a portfolio of a startup that may vary in time.

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Overview of the tax shelter regime

A company may allow its investors to benefit from the measure up to a maximum of EUR 250,000 (cap at the level of the start-up) and any individual may benefit from such advantage up to EUR 100,000 per year (cap at the level of the investor).

However, in order to offer the benefit of the tax relief to its investors, the start-up has to respect conditions:

  • the start-up shall be a Belgian or EU tax resident company or must have a permanent establishment in Belgium or the EU;
  • the start-up may not result from a merger or spin-off transaction;
  • any director of the start-up is not eligible to the tax advantage;
  • the shares received in consideration of the tax shelter investment may not exceed 30% of the start-up’s share capital;
  • the tax shelter investment shall be fully paid-up in cash;
  • during at least 48 months as of the equity investment, the start-up may not be a management company, real estate company, patrimonial company, investment company, treasury company or finance company;
  • the investment may not be used to fund a dividend distribution, to grant a loan or to buy shares during 48 months as from the date of equity investment;
  • the start-up may not have distributed any dividend or made any capital reduction previously;
  • the start-up cannot be listed on a stock exchange;
  • the start-up business may face insolvency issues during 48 months as of the date of equity investment;

Furthermore, the investor should keep the shares which he holds in the start-up’s share capital for at least four years, except in case of decease.

Corporate income tax

Companies and for-profit organisations which are legal entities and which have their registered office, their main business centre or their seat of management in Belgium are subject to Belgian corporate income tax on their worldwide profits.

Foreign companies may be subject to corporate income tax if they are engaged in business activities in Belgium through a permanent branch.

Corporate income tax rates

The standard Belgian corporate income tax rate is currently 33.99%.

Small and medium-sized companies benefit from a reduced progressive tax rate, provided certain conditions are met (e.g. taxable income does not exceed €322,500 and no more than 50% of the shares in the Belgian company are held by another company).

This reduced rate amounts to:

  • 25% on income up to €25,000.
  • 31% on income between €25,000 and €90,000.
  • 5% on income between €90,000 and €322,500.

The reduced rates only apply if the following conditions are met:

  • The company’s taxable profit does not exceed €322,500.
  • The company is not a ‘financial institution’.
  • Fifty percent or more of the shares are not held by one or more other companies.
  • The company does not distribute dividends for an amount exceeding 13% of the issued share capital of the income year.
  • The company pays a salary of at least €36,000 to at least one of its managers.
  • The company is not part of a group which owns a coordination centre.

Reforms are on their way, read an interesting article about the planned measures here >> https://startups.be/blog/post/summers-big-announcement-belgian-corporate-tax-reform-whats-it-startups

Personal income tax

Resident individuals are subject to individual income tax on their worldwide income which, in principle, is computed by aggregating all forms of income such as business and employment income, real estate income, income from movable property, and miscellaneous income.

A resident is defined as a person who has his domicile or centre of economic interests in Belgium. Any individual registered in the national register of persons is presumed to be resident unless the contrary is proven. For married persons, the domicile is considered to be the place where the family resides. This is an indisputable presumption. Non-resident individuals are only subject to Belgian tax on income generated in Belgium.

A specific regime is applicable to senior foreign employees who are either transferred to Belgium or who are directly hired from outside Belgium (see ‘tax-related incentives’).