News: Belgian company and international tax planning

Belgian government launched a new tax reform

At the beginning of 2018, Belgium announced the introduction of a new tax reform, the main element of which will be the reduction of some key tax rates.

It concerns reducing the corporate tax to 25% by 2020 and the introduction of the principle of filing consolidated reporting by groups of companies.

Previous corporate tax rates were significantly higher than the European average, accounting for 33.99%. They consisted of 33%, to which a special "anti-crisis" tax was added in the form of 3% of the basic tax.

Changes will be introduced step-by-step. Thus, in 2018 the income tax rate is 29%, and the "anti-crisis" tax is 2%. By 2020, the tax rate will be reduced to 25%, and the additional tax will be abolished altogether. In total, the tax burden by the end of the reform will decrease by one third.

In addition, tax deductions for previously formed dividends will be increased from 95% to 100%, which are deductions for income received from dividends of subsidiary enterprises  deductions of a similar format in the country of its own tax residence. Such a change will affect companies that meet the following requirements:

1. Belgian company is obliged to participate in the capital of a subsidiary of more than 10% of the shares or own them for the amount of more than 2,500,000 Euros,
2. Participation in the capital of a subsidiary should be continuous for a minimum of 12 months,
3. The subsidiary enterprise must be registered by the payer of the profit tax in the country of its residence.

The application of these measures, may lead to the increase in the attractiveness of Belgium for major international holdings in global tax planning.

It is worth noting that the Belgian government has taken a number of measures to combat zealous tax evasion, which may be a consequence of the use of this easing. In relation to enterprises that set the goal of establishing a Belgian company, only for the possibility of obtaining deductions from the dividends received, refusal to grant such tax privileges and other benefits will be applied.

It is noteworthy that the Belgian company is extremely difficult to operate as a transshipment terminal for the transfer of dividends to tax-free jurisdiction, since in Belgium the tax on the payment of dividends is 30%. The tax rate can be minimized only through the application of the provisions of the agreement on avoidance of double taxation.

Usage of any of the tax benefits is possible only in the case of redistribution of the capital of the Belgian company, which thus becomes a full part in the enterprise commercial  structure.

Let us remind you that Belgium signed double taxation agreements with more than 100 countries around the world.