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Notional Interest Deduction (NID)

Lower your effective tax rate with Flanders’ Notional Interest Deduction

Notional Interest Deduction – available to companies subjected to corporate tax – is used in Flanders to offset operational or financial income, lowering the effective tax rate. Here are the most important benefits:

  • Valuable tool for the further development of your start-up’s financing activities.
  • Allows international groups to allocate new activities to a Belgian entity in the form of intra-group financing, central procurement or factoring.
  • Decreases the effective tax rate.
  • Especially attractive to capital-intensive companies, equity-funded headquarters, treasury centers and R&D activities.


There are additional benefits for current investors in Belgium. Increasing the share capital of one or more Belgian companies results in a higher notional interest deduction and lower Belgian effective tax rate on returns of investment.

An example to make it all clear

The balance sheet of the Belgian entity shows that the share capital has been used for group financing. With the application of an intra-group interest rate of 4%, the profit before taxes is EUR 4,000.
 
Before the introduction of the NID, the corporate tax would have been EUR 1,360 (or 33.99%). Thanks to the NID, the effective corporate tax rate to be paid is EUR 975 (or 24.38%) only.
 
The rate for the notional interest deduction currently amounts to 1,131% (or 1.631% for SMEs).
Assets
Group financing
€ 100,000

Liabilities
Share capital
€ 100,000

P & L account Before NID With NID
Profit before tax € 4,000 € 4,000
NID (1,131%) / € -1,131
Taxable basis € 4,000 € 2,869
Corporate tax (33.99%) € 1,360 € 975
Effective tax rate 33.99% 24,38%

Source: Federal Public Service Finance

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