Corporate Taxation

Corporate taxation in Belgium

Corporate taxation is a key factor in investment decisions. Foreign investors need a simple and stable legal and fiscal framework to operate in an efficient and cost-effective way. 

The international tax environment is rapidly evolving, with such initiatives as the OECD’s Base Erosion and Profit Shifting (BEPS) project and the EU’s Anti-Tax Avoidance Directive (ATAD). As many ‘fiscal niches’ are eroded or eliminated, these reforms are driving countries to compete more and more on headline rates.

Belgian companies (including the Belgian subsidiaries of foreign companies) are subject to a standard corporate income tax rate of 25% as of tax year 2021, while SMEs benefit from a reduced tax rate of 20% on their first €100,000 of taxable profits. These rates exclude the 2% crisis surcharge, which will be abolished as of tax year 2021.

This is a positive development, and Belgium will no longer be an outlier, yet 25% is still well above the EU and OECD average. Most EU Member States started from a more competitive position than Belgium and are making greater efforts to maintain or improve their attractiveness.

 

A stable and predictable tax environment

In addition to competitive tax rates, international companies seek clear and consistent rules, where changes to the law can be anticipated and planned for. This is not the case in Belgium, as illustrated by several examples.

First, the Notional Interest Deduction (NID) has been subject to debate and change ever since its introduction, significantly eroding this regime to the point today where its impact has become very marginal. These constant changes to the NID have not only undercut its effectiveness, but they also send a negative signal to investors about the stability of the country’s corporate tax environment and investment incentives.

Second, corporate income tax is imposed at the federal level, but companies are also liable to pay regional and local taxes, such as the property tax on material and equipment. The property tax rates and modalities differ between the regions, resulting in complexity and uncertainty, particularly for companies which operate across the country.

Third, gold-plating – when, in its implementation, Belgium goes above and beyond the requirements set at the EU or international level – contravenes both simplicity and predictability. It exceeds minimum standards and creates additional burdens for companies which must then comply with different rules when doing business in multiple jurisdictions. Moreover, if new taxation proposals are being discussed at the EU or OECD level, Belgium should refrain from introducing them until there is an international consensus, such as the current debate around digital taxation.

Lastly, the tax administration, with its complex processes, imposes heavy administrative burdens and gives rise to uncertainty and instability. The business community looks to develop long-lasting relationships with the tax administration based on mutual respect to reduce uncertainty and promote predictability.

AmCham Belgium recommends

To improve business and investment opportunities

  • Create a stable tax environment
  • Adjust the tax framework to today’s realities
  • Reduce the cost of labor
Adjust the tax framework to today’s realities

Adjust the tax framework to today’s realities

  • Implement international taxation standards, for instance the European Commission’s Action Plan on Taxation, when required but without gold-plating.
  • Align VAT and excise late payment interests with the interest rate applicable to customs duties (2%) while ensuring that the statute of limitation for VAT payable and the VAT deduction/refund is the same as in other EU Member States.
  • If new taxation proposals are being discussed at EU or OECD level, refrain from introducing them in Belgium until there is an international consensus.
  • Embrace automatization and standardization in both business and tax administration processes, in accordance with international standards, building on the COVID experience.
  • Strive for a greener economy through targeted incentives and by shifting taxes, not raising them.
Create a stable tax environment

Create a stable tax environment

  • Further enhance recent measures, such as the Tax Shift, and benchmark them against neighboring countries and other relevant jurisdictions. No new personal and corporate income (or other business) taxes should be levied, and existing income taxes should be decreased rather than increased.
  • Ensure that implemented and upcoming tax legislation can withstand any test by national and supra-national courts or institutions. Companies require certainty to remain focused on their main mission of doing business.
  • Simplify tax legislation and enhance cooperation between businesses and tax authorities, in a spirit of mutual respect.
Reduce the cost of labor

Reduce the cost of labor

  • Enable investments in new business models by reducing labor costs and increasing flexibility.
  • Offer companies the ability to grant tax-friendly incentives to highly skilled and internationally mobile employees.
  • Re-introduce a cap on employer social security contributions.

COVID-19 and the Belgian tax environment

AmCham Belgium's Legal & Taxation Committee is actively engaged in discussions with policymakers and other stakeholders about the economic consequences of the COVID-19 crisis and the appropriate policy response. The Committee is particularly concerned about supporting businesses that are otherwise healthy but are now most affected by this crisis. Their recommendations are intended, in a first instance, to minimize the risk of negative snowballing effects to ensure the short-term continuity of businesses in Belgium and, in a second phase, to get the Belgian economy working again as quickly as possible in a healthy and safe manner.

The proposed measures were developed based on the following principles:

  • Short-term measures
  • For businesses materially impacted by the COVID-19 crisis
  • With the aim to keep cash in otherwise healthy companies
  • To delay reporting & payment of all types of taxes, both on regional and federal level
  • To reduce administrative burdens & red tape
  • Possibly linked to a condition to maintain employment after the crisis

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