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EUROPEAN HOLDING COMPANIES

The Belgium Holding Company

About the Belgium Holding Company Related Resources Belgium Key Elements

HOW TO PROCEED

ABOUT THE BELGIUM HOLDING COMPANY OVERVIEW

The Belgian Holding Company is an ordinary company which falls within the scope of general tax law and may benefit from the double taxation treaties concluded by Belgium and the European tax directives.

There are no limitations on the activities of the company.

Legal Form

The most common forms of companies in Belgium are the “Société Anonyme” (company limited by shares- SA) and the “Société Privé à Responsabilité Limitée” (private limited company- SPRL).

Formation

The minimum share capital for incorporation of a Belgian company is €61,500 for a “Société Anonyme” and €18,550 for a “Société Privé à Responsabilité Limitée”. While for a company incorporated in the first form the paid-up capital must be 1/4 with a minimum value of €61,500, for the second type of company it is only necessary a minimum of 1/3 paid-up capital (€6,200).

A company incorporated as a “Société Anonyme” may have bearer shares, although this is not expected to be the case in the near future.

Taxation

A Belgian company is fully subject to tax at a normal rate of 33.99% (including a 3% crisis surcharge) but is eligible to benefit from the double tax treaties concluded between Belgium and other countries and from EU directives.

For companies with an annual profit margin of less than EUR 322,500 this rate is decreased to 24.98%.

Capital duties were abolished on 1st January 2006 on new corporations or when the capital of an existing corporation is increased.

No tax credit is granted for foreign withholding taxes (taxable income is calculated on income net of foreign withholding taxes).

Income

The taxable income of a Belgian company is based on income reported in the annual financial statements and includes all profits and losses, gains and losses (speculative and non speculative), dividends, interest, royalties and rent.

Provided that the interest rate does not exceed arm’s length interest rates, all interest paid on financing the acquisitions of shares is deductible against taxable income. However, if the interest is paid to a beneficiary who benefits from a beneficial tax regime the interest will not be deductible to the extent that the related loans exceed 7 times the paid/up share capital at the end of the taxable period.

Dividends Exemption

Dividends received by a Belgian company may be subject to a reduced level of corporate income tax if received from:

  • An EU subsidiary where the provisions of the EU Parent-subsidiary Directive apply. Dividends are exempt from any further corporate income tax if the Belgian company controls at least 10% of the shares of the subsidiary for a minimum period of 1 year.
  • A non-EU subsidiary only 5% of the dividend received is subject to the Belgian corporate income tax rate the other 95% is exempt, if:
    • The Belgian holding company owns a minimum of 10% of shares or owns a shareholding with an acquisition value of at least €1.2 million for a minimum continuous period of 1 year and to have accounted for these shares as financial assets.
    • The profits out of which the dividends are paid must have been subject to tax at a minimum rate of 15%.
    • The subsidiary is not resident in a territory with a more favourable tax regime.
Capital Gains Exemption

Capital gains on the sale of shares are exempt from tax if dividends qualify for the participation exemption.

Capital losses are not tax deductible. Exception is made for capital losses realised on the occasion of the liquidation of the company and to the extent that effectively paid-up capital is lost.

Interest and Royalties

See income above.

Some Advantages of the Belgian Holding Company

Besides the common advantages of a holding company, the Belgian company may also enjoy from the following:

Exemption on Winding-Up

A 10% withholding tax is levied on liquidation proceeds. However, this tax may be credited against the Belgian corporate tax liability for Belgian corporate shareholders and is reimbursable in case it exceeds the tax liability of the taxpayer. The 10% tax rate is not applied if the conditions of the EU Parent-subsidiary Directive are satisfied.

Exemption from Withholding Tax on Payment of Dividends

Dividends paid by a Belgium company are exempt from withholding tax provided:

  • The EU parent corporation has held 25% of the shares of the Belgian subsidiary for a consecutive period of at least 1 year.
  • Dividends paid by a Belgian company to a Belgian corporate shareholder are not subject to withholding taxes as long as the recipient and paying companies are subject to corporate income tax.
Exemption from Withholding Tax on Payment of Interest

Interest on loans, registered securities or deposits paid to a non-resident are exempt from withholding tax if the following conditions are met:

  • there is a double-taxation agreement in existence, or
  • both companies are located in the EU and one has a direct or indirect participation of 25% or more in the other company.

Notional Interest Deduction (NID)

All companies operating in Belgium and subject to corporate tax may deduct a part of their adjusted equity capital. The rate of the Notional Interest Deduction (NID) will be equal to the yield of the Belgian 10 year Government Bond.

The unused notional interest may be carry forward 7 years from the year of deduction. However, the amount of notional interest deducted may not be used freely by the company and must remain as a liability on the balance sheet during the 3 following years.

RELATED RESOURCES

Double Tax Treaties

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BELGIUM KEY ELEMENTS

Formation
Legal Form: Société Anonyme (SA/NV);
Société Privé a Responsabilité Limitée (SPRL/BVBA)
Minimum Subscribed Capital: €61,500 (SA)
€18,600 (SPRL)
Minimum Paid-Up Capital: €61,500 (SA)
€6,200 (SPRL)
Number of Shareholders: 2 (SA)
1 (SPRL)
Type of Shares: Registered (SA)
Registered (SPRL)
Substance Requirements: Nil
Taxation
Capital Duty: 0.5%
Net Worth Tax: 0%
Corporate Income Tax: 33.99% (including a 3% crisis contribution)
Double Tax Treaties: 80+
Dividends Exemption: 95%
Holding Requirements: 10% or €1.2M for 1 year
15% corporate tax
Capital Gains Exemption: Yes
Holding Requirements: 10% corporate tax
Tax Credit: Yes
Relief of Losses: Carry forward indefinitely
CFC Rules: No
Debt-to-Equity Ratio: 7:1 (from low tax country)
1:1 (from foreign director)
Withholding Taxes
Dividends: EU Parent Co- 0%2
Treaty Countries- 10%-20%
Others- 25%3
Interest: EU Parent Co- 0%2
Treaty Countries- 0%2-25%
Others- 25%
Royalties: EU Parent Co- 0%2
Treaty Countries- 0%-15%
Others- 15%
Liquidation: 10%

1Losses carry forward may only be offset against 75% of the profits of the year.

2If conditions are met.

3The lower rate applies if the recipient owns more than 20% of the shares.

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FREE INITIAL CONSULTATION

A bespoke 'offshore' solution can be complex and requires careful planning and execution. We therefore encourage our clients to contact us directly, without obligation.

While all of our consultants in our offices provide a Free Initial Consultation, the office and consultant listed below has particular expertise in this area and will gladly assist with advice on how to approach your unique challenge.

Alternatively, to select one of our multilingual offices, click here for a list of our office contact details.

OCRA (Luxembourg) S.A.
Parc d'Activité Syrdall 2
18-20 rue Gabriel Lippmann
L-5365 Munsbach
Luxembourg

Tel: 
Fax: 
Email: 
+352 224 286
+352 224 287
luxembourg@ocra.com

Languages spoken in this office:Languages Spoken: English, Dutch, French, Italian, German and Spanish

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Joao Ferreira (Managing Director)
LUXEMBOURG OFFICE
Tel: 
Fax: 
+352 224 286
+352 224 287
Email: ferreira@ocra.com
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