By Kooshila Takoordyal, 23.09.2020
Belgium is one of the best locations in Europe for foreign investors who wish to set up a company. There are suitable options for setting up a company in Belgium including a new stand alone company, a subsidiary of an overseas company, or a non-profit company. The Belgian Government offer a variety of incentives and benefits including favourable tax rates creating an attractive business environment. Foreign investors and local entrepreneurs have welcomed the opportunity to set up a business in Belgium.
Belgium is established in regions and states, which means that tax rates may vary from one province to another. The main locations considered best for foreign investors with the lowest tax rates are Brussels, Liege and Limburg. Taxes are accumulated on both the national and regional level.
Registering a business in Belgium is a suitable opportunity for global companies due to a large range of industries operating there including Social Services, health, Education, Estate Agencies, Engineering, IT, and financial institutions. Additionally, the low unemployment rate has created a demand for employing skilled employees from other countries.
Corporate Taxes in Belgium
Setting up a company in Belgium can benefit foreign investors with an advantageous tax system. The tax rates in Belgium depend on whether you are a resident or a non – resident of Belgium.
For taxation reasons, a person is categorized as a resident in Belgium if:
- The family residence or the workplace is located within the country; or
- A person lives in Belgium for at least 6 months or 183 days per year and is registered with a local community.
When the respective person is categorized as a resident, they must pay income tax on worldwide income. The chargeable income is the income left after deductions for personal allowance, social security contributions or professional costs.
If a person lives in Belgium for less than 6 months or 183 days per year, the individual will be taxed on the income earned in Belgium, including capital gains or rents.
Tax Reductions for Foreign Investors
Individuals who work in Belgium temporarily as executives, specialists, or researches for a Belgian company, may be eligible for a special tax status. This status allows individuals to be treated as non–residents, therefore they are only taxed on the Belgian ‘earned income’. Some other expenditures such as costs of living or costs for scientists up to an amount are tax–free.
To attain this special tax status, the company and the employer or employers must apply to the Belgian tax authorities within 6 months of the beginning of the month of arrival in Belgium.
Taxation in Belgium
Many foreign investors are drawn to the capital city of Brussels when considering setting up a company in Belgium. Foreign-owned businesses trading in Belgium may be eligible for one or more types of taxation.
Value Added Tax (VAT)
VAT is a tax on goods and services, as well as on taxable transactions, such as the import of goods into Belgium and the purchase in Belgium of goods that come from another EU country. The standard VAT rate in Belgium is 21%, reduced to 12% for certain goods and services, such as pay television or low – income housing. A reduced VAT rate of 5 is applied to basic goods and services.
Corporate Income Taxes
Belgium enacted a major corporate income tax reform at the end of 2017. The Nominal corporate income tax rate was gradually reduced from 33.99% to 29.58% in 2018 and to 25% in 2020. Small and medium sized enterprises (SME’s) can benefit from the further reduced rate of 20% on the first €100,000 taxable income.
Personal Income Tax
Personal income tax is applied to resident individuals only. A specific scheme is applied to senior foreign employees who are transferred to Belgium, or who are hired directly from outside Belgium.
Belgium’s New B2B-Act
SME businesses in Belgium benefit from the B2B Act. The new legislation addresses the unequal balance of power between companies and brings in regulations to address unfair clauses in existing business agreements. The first stage of the implementation entered into force on 22nd August 2020. Companies which are found to abuse their position can be sanctioned by the Belgian Competition Authority and face fines up to 2% of its turnover.
The B2B Act tackles abuse of economic dependence in commercial agreements between companies and unfair practices in B2B relationships. This amended system will give SME and new start-up companies a stronger position in the market. Existing companies in Belgium will need to prepare for the B2B-Act; standard contracts may need to be adapted and various business practices may need to change.
The business climate and favourable tax rates in Belgium make it an ideal location for foreign investors and local entrepreneurs looking to starting a new business and trade within the European single market.
For more information on registering a business in Belgium, please do not hesitate to contact our expert team on +353 1646 1627 or complete our contact us form and one of our agents will get in touch with you shortly.Contact US