There are 5 possible scenarios for establishing a business presence in Flanders. One option is to set up a principal branch. Discover the different tax incentives your company may be eligible for.
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Setting up a principal branch in Flanders
What it is
- provides management services for strategic and/or marketing support to its principal head office in exchange for a remuneration according to the arm’s length principle (ALP).
- has a significant presence in Flanders because it employs highly qualified personnel, but does not constitute a legal entity in the region.
Direct tax aspects
- If the branch constitutes a Permanent Establishment in Belgium, it can be attributed and taxed for arm’s-length profits that can be determined on a cost-plus basis.
- There is no branch remittance tax on the distribution of branch profits to the foreign head-office.
- Thanks to the Tax Treaty Network, branch income is generally exempt in principal jurisdiction.
- As a Permanent Establishment, branches may be entitled to various tax incentives.
- An advance ruling can be obtained to secure arm’s length profits.
Indirect tax aspects
- The VAT position of a branch – i.e. if it is a Permanent Establishment for VAT purposes, and if it requires a VAT registration – depends on its characteristics and its activities in Flanders. The branch’s characteristics need to be closely analyzed to determine the correct VAT status and possible deductions.
- Depending on the outcome of this analysis, the Belgian input VAT can be recorded via the Belgian VAT return procedure, or via a VAT credit refund procedure for non-established and non-VAT-registered foreign entities.
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