There are 5 possible scenarios for setting up a business presence in Flanders. One option is a principal or central entrepreneur. Discover the different tax incentives your organization may be eligible for.
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Setting up business in Flanders as a central entrepreneur
A central or principal entrepreneur:
- centralizes all business functions and risks in a single entity located in Flanders.
- has free access to and uses certain intangible assets from its overarching corporate group that would not have been available in a stand-alone situation. Examples of such ‘intangibles’: know-how, sales organization and procurement benefits, customer lists, managerial skills, and access to new markets and distribution channels.
assumes full responsibility for the profit drivers in Flanders (including strategic management), the ownership of high-value intangibles, and all major business risks. Consequently:
- finance, IP management and holding activities can be performed by the central entrepreneur as well;
- the creation of additional business functions or new investments in Flanders is required.
- retains contract and consignment manufacturers (either third parties or related parties) that produce products on its behalf and sell them via sales entities. These are typically limited risk distributors or commissionaires.
- Application of the Notional Interest Deduction is possible.
- An attractive and comprehensive tax regime is available if IP is developed and managed by the central entrepreneur.
- Access to European Directives, such as the Interest and Royalty Directive or the Parent-Subsidiary Directive – both of which provide withholding tax exemptions.
- Exemption of domestic dividend withholding tax to qualifying parent companies in treaty jurisdictions.
- Interest on the acquisition of shares is generally tax deductible, if certain conditions are met.
- An advance ruling is required to receive support in the form of economic and financial analyses and forecasts.
- Possibility of interesting expatriate regime for individuals.
- Belgian VAT registration and full (VAT) bookkeeping is mandatory. In addition, foreign VAT registrations may be needed as well depending on your logistics chain and business model.
The activities of the central entrepreneur in Flanders need to be analyzed closely to determine its correct VAT status and right to deduct input VAT:
- some activities, like treasury, will potentially not generate an input VAT credit;
- the financial impact of non-recoverable VAT may be limited if an efficient ‘real use’ methodology for input VAT deduction is agreed with VAT authorities;
- the recoverable Belgian input VAT can be recorded via the VAT return procedure.