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.