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Belgium

General Information

Country Name: Belgium
Currency: Euro (EUR, €)
Primary Tax Authority: Federal Public Service Finance (FPS Finance)

Key Legislation:

  • Belgian Constitution (La Constitution belge / De Belgische Grondwet): Provides the overall framework for governance and taxation.
  • Income Tax Code (Code des impôts sur les revenus / Wetboek van de inkomstenbelastingen 1992): Governs personal and corporate income taxation.
  • VAT Code (Code de la TVA / BTW-Wetboek): Establishes the rules for Value Added Tax.
  • General Tax Law (Code général des impôts / Algemene wet inzake rijksbelastingen): Defines the procedures, rights, and obligations related to tax collection and compliance.

Fiscal Authority Allocation

Centralized System with Regional Autonomy:
While Belgium operates under a federal tax system, certain tax competences, particularly around personal income tax surcharges, are devolved to the regions: Flanders, Wallonia, and the Brussels-Capital Region.

Taxes Collected by Central Authorities:
The FPS Finance is responsible for most major taxes, including personal and corporate income taxes, VAT, and customs duties.

Regional Taxes:
Regions may levy additional taxes or apply surcharges to national taxes, such as on personal income, inheritance, and vehicle registration.

Corporate Income Tax (CIT)

  • Standard CIT Rate: 25%.
  • Small and Medium-Sized Enterprises (SMEs): Reduced rate of 20% applies to the first €100,000 of taxable income for SMEs meeting specific criteria.
  • Taxable Income: All profits and income derived from Belgian or global activities are subject to tax for resident companies. Non-residents are taxed only on Belgian-sourced income.
  • Loss Carryforward/Carryback: Losses can be carried forward indefinitely, but there is no carryback option.
  • Tax Incentives: Belgium offers various tax incentives for innovation, R&D, and investment in qualifying businesses, including the Notional Interest Deduction and the Patent Income Deduction.

Value-Added Tax (VAT)

  • Standard VAT Rate: 21%
  • Reduced VAT Rates: 6% and 12% (applied to specific goods and services, such as food, medicines, and social housing).
  • Exemptions: Common exemptions include healthcare, education, and financial services.
  • VAT Scope: VAT applies to the sale of goods and services in Belgium. Special rules apply for cross-border and intra-EU transactions.

Personal Income Tax (PIT)

  • Progressive PIT Rates:
    • Up to €13,870: 25%
    • €13,870 – €24,480: 40%
    • €24,480 – €42,370: 45%
    • Over €42,370: 50%
  • Taxable Income: Personal income is divided into four categories: real estate income, investment income, professional income, and miscellaneous income.
  • Deductions and Credits: Deductions are available for mortgage interest, charitable donations, and childcare expenses. Each region may offer additional tax credits or deductions.
  • Foreign Income: Belgian residents are taxed on their worldwide income, with tax credits available for foreign tax paid.

Additional Mandatory Contributions

Social Security Contributions:
In addition to income taxes, Belgian residents must contribute to the national social security system. These contributions cover healthcare, pensions, unemployment, and family benefits.

  • Employer Contributions: Around 25-30% of gross salary.
  • Employee Contributions: Around 13.07% of gross salary.

Withholding Taxes

  • Dividends: 30% withholding tax, which can be reduced by applicable tax treaties.
  • Interest: 30% withholding tax, subject to treaty reductions.
  • Royalties: 30% withholding tax, which may be reduced under tax treaties.
  • Tax Treaty Benefits: Belgium has an extensive network of tax treaties to mitigate double taxation and reduce withholding taxes on cross-border payments.

Transfer Pricing Rules

  • Documentation Requirements: Belgium follows OECD guidelines for transfer pricing and requires documentation to support the pricing of transactions between related entities.
  • Penalties: Significant penalties may be imposed for non-compliance, including tax adjustments and fines.

Special Tax Regimes

  • Notional Interest Deduction: This regime allows companies to deduct a notional amount of interest on their equity, reducing the corporate tax base.
  • Patent Income Deduction: Allows an 85% deduction on qualifying income from patents, leading to a significantly reduced effective tax rate on intellectual property income.
  • R&D Tax Incentives: Belgium offers tax deductions and credits for qualifying R&D activities, including reduced withholding taxes for researchers and deductions for R&D investments.

Other Taxes

  • Inheritance and Gift Tax: Inheritance tax rates vary by region and can range from 3% to 30% for close relatives, and up to 80% for non-relatives.
  • Real Estate Transfer Tax: Property purchases are subject to registration duties, which are regionally determined (up to 12.5% in Wallonia and Brussels, 10% in Flanders).
  • Environmental Taxes: Belgium levies various environmental taxes on waste, energy, and emissions.

Double Taxation Agreements (DTAs)

Key Partner Countries:
Belgium has a broad network of tax treaties, including with the United States, China, and Germany, aimed at preventing double taxation and reducing withholding taxes.

Local Taxes

Regional and Local Taxes:
Regional taxes include vehicle registration duties, environmental taxes, and property taxes. Municipalities also levy a range of local taxes, including on waste collection and property ownership.

Compliance and Reporting

  • Corporate Tax Filing Deadlines: Corporate tax returns must be filed by the end of the sixth month following the end of the fiscal year.
  • VAT Filing Requirements: VAT returns are generally filed quarterly, but larger companies may need to file monthly.
  • Penalties: Penalties for late filing and underpayment can include fines and interest charges.

Recent Developments

Recent Tax Law Changes:
Belgium has introduced various reforms in recent years to enhance tax compliance, particularly around corporate tax rates and anti-tax avoidance measures.

COVID-19 Tax Relief:
Temporary relief measures were introduced during the COVID-19 pandemic, including deferred tax payments, deductions for home office expenses, and specific support for SMEs.

Digital Economy Taxation:
Belgium is actively participating in OECD and EU discussions on the taxation of the digital economy, and potential new digital taxes are under consideration.

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