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Setting up a principal branch in Flanders

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.

What it is

A branch:

  • 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.

How to establish your HQ, sales or marketing activities in Flanders

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  • What makes Flanders a strategic and well-connected region
  • How to use its tax system and affordable office space to your advantage
  • Why the region is a great place for your expat employees
  • And much, much more

Handbook to setting up HQ, sales or marketing operations in Flanders

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