■ Tax Questions

· Levels of corporate taxation for companies setting up in Belgium

1. Common rate

CIT is payable at a rate of 39%.

2. Reduced rates

Reduced rates can be applied when the taxable profit does not exceed 323,750 EUR.

Table 1

Reduced rates of CIT

Taxable net profit in BEF (in EUR)

Rate applicable to this bracket

0 ~ 25.000 EUR

25,000 ~ 89,500 EUR

89,500 ~ 323,750EUR

28%

36%

41%

In order to qualify for these reduced rates, a company must however fulfil a number of additional conditions relating to :

· The activities of the company

· The shareholding of the company

· The rate of return on the capital

· The remuneration of their managers

3. Surtax

In addition to the above rates, a 3% surtax is imposed on the corporate income tax. The surtax is a temporary measure for which the expiration date has only been announced for the personal income tax.

4. Changes announced by the Government

Table 2

Changes announced by the government

Taxable income in EUR

Old rate

New rate (still to be voted)

Total rate (3% surcharge included)

0 ~ 25,000 EUR

28%

24,25%

24,98%

25,000 ~ 89,500 EUR

36%

31%

31.93%

89,500 ~ 323,750EUR

41%

34.5%

35.54%

323,750 and more

39%

33%

33.99%

· Are corporate tax rulings available?

Companies interested in establishing or expanding operations in Belgium can approach the Belgian tax authorities and request a tax ruling prior to establishing or expanding their operations. The advance tax ruling will provide legal certainty to the company on the tax consequences of its investments in Belgium.

Due to its central location with a link to all European and international head offices, good infrastructure, dynamic, highly educated and multilingual workforce, Belgium is a very interesting country for foreign companies to locate their European headquarters, shared service centers, logistic or innovative activities. Hence regarding the tax implications of this kind of activities.

· How are corporate taxes usually paid?

Corporate taxes are to be pre-paid, on a quarterly basis.

· Are there any tax incentives for corporations?

Tax incentives are available to companies investing in Belgium, including exemptions from withholding taxes, investment deductions, accelerated depreciation.

The general Belgian corporate tax system offers great opportunities for multinational companies to locate their holding company, e.g. as a rule Belgium totally exempts capital gains on shares from any taxes. Moreover as a rule the possibility of deducting interest and management expenses is combined with a 95% deduction for dividends received.

Additionally, exemption from real estate taxes and capital duties, and double depreciation can be available in conjunction with the qualification for capital grants and interest subsidies.

Interesting regimes of customs, fiscal or VAT warehouses are available. A special regime for avoiding the prefinancing of VAT on import of goods in another.

Furthermore, there are various employment-related programs, granting, among others, substantial exemptions from social security contributions when hiring certain categories of job seekers. An attractive regime was put in place for employee participation in a company’s capital and profit.

Levels of personal taxation in Belgium

1. tax rates

The tax rates applicable to 2002 income are as follows:

Table 3

Progressive rate

Taxable income in EURO

Marginal rate

0 ~ 5,480 EUR

0 ~4,350 EUR

0%

5,480 or 4,350 ~6,730 EUR

25%

6,730 ~ 8,920 EUR

30%

8,920 ~ 12,720 EUR

40%

12,720 ~ 29,260 EUR

45%

29,260 ~ 43,870 EUR

50%

More than 43,870 EUR

52%

2. Exemptions for dependent children

Table 4

Exemptions for dependent children

Rank of the child

Total exemption in EURO

1

2

3

4

1,160

3,000

6,270

10,860

For any child after the fourth, the exemption amounts to 4,150 EUR per child.

Finally, the cities and communities levy municipal taxes, which can vary from 0% to 8% and are taken as a percentage from the federal tax amount.

· What are the withholding tax rates in Belgium?

1. Payments to countries not covered by a tax treaty

The normal statutory withholding tax rate under domestic law for dividends paid by Belgian companies is 25%. Under most of Belgium’s tax treaties this rate is reduced. For shares issued on or after 1 January 1994, a 15% rate applies if the shares are issued to the public or are registered with a financial institution. No withholding tax is levied on the remittance of branch income to the head office abroad.

Interest paid on securities issued or loans contracted as from 1 March 1990, is subject to the withholding tax at a rate of 15% under domestic law. The same rate applies on royalties paid for patents, know how, etc. on contracts concluded as from the mentioned date.

2. Treaty withholding tax rates

Table 5

Treaty withholding tax rates for a sample of countries

Dividends

interest

Royalties

Australia

15%

10%

10%

Canada

15%

15%

10% (a)

India

15%

15% (b)

10% (c)

Japan

15% (d)

10%

10%

South-Africa

15% (d)

10% (e)

0%

Sri Lanka

15%

10%

10%

United States

15% (d)

15%

0% (f)

(a) A 0% rate applies to copyright royalties other than for motion pictures

(b) A 10% rate is applies to interest paid in respect of a loan granted by a bank

(d) The following lower rates apply to dividends paid by subsidiaries if the recipient holds the indicated level of participation

Lower rate level of participation

Japan 5% 25%

South Africa 5% 25%

United States 5% 10%

(e) A 0% rate applies to some categories of interest

(f) Subject to a ’Limitation of Benefits’ Provision

· Are there any special rules for non-Belgian tax payers?

The Tax Circular of August 8, 1983 has established a special tax regime for non-Belgian taxpayers locating to Belgium for business reasons on a temporary basis. Among other things, expatriates are not taxed on reimbursements of expenses incurred as a result of their temporary stay in Belgium. Furthermore, the Tax Circular recognises a number of non-taxable allowances such as cost of living subsidies, allowances for housing, school fees, etc. The expatriates are not taxable on their salary income earned outside Belgium. The concept behind the Tax Circular is to encourage companies to invest in Belgium by minimising their salary costs for foreign executives.

· How do I obtain status as foreign expatriate?

The employer in Belgium of the expatriate must file the application for expatriate status with the Belgian tax authorities within six months of the expatriate’s assignment or arrival in Belgium. Once the six month deadline has passed, the status can only be obtained for the future.

· Do I qualify for any other investment incentives?

Belgium offers a multitude of investment and employment-creating incentives, at a federal, regional and local level. However, as a general rule, a "critical mass" of investment and/or creation of new jobs must be reached before incentives can be granted. The rules and regulations of what that "critical mass" are varied and complex. The various economic development authorities referred to in the back of this booklet can provide further information and assistance.

Taxable income in EUR	Old rate	New rate (still to be voted)	Total rate (3% surcharge included)
0 ~ 25,000 EUR	28%	24,25%	24,98%
25,000 ~ 89,500 EUR	36%	31%	31.93%
89,500 ~ 323,750EUR	41%	34.5%	35.54%
323,750 and more	39%	33%	33.99%

Taxable income in EURO	Marginal rate
0 ~ 5,480 EUR 0 ~4,350 EUR	0%
5,480 or 4,350 ~6,730 EUR	25%
6,730 ~ 8,920 EUR	30%
8,920 ~ 12,720 EUR	40%
12,720 ~ 29,260 EUR	45%
29,260 ~ 43,870 EUR	50%
More than 43,870 EUR	52%

	Dividends	interest	Royalties
Australia	15%	10%	10%
Canada	15%	15%	10% (a)
India	15%	15% (b)	10% (c)
Japan	15% (d)	10%	10%
South-Africa	15% (d)	10% (e)	0%
Sri Lanka	15%	10%	10%
United States	15% (d)	15%	0% (f)