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The Belgian tax system reformed: discover the benefits for your Flanders-based business

Out with the old, in with the new: the Belgian tax system, including the labor and pension policy, has been completely reformed. Find out how this new tax system benefits your (international) business in Flanders, Belgium’s northern region at the heart of Europe.

Reduced nominal corporate tax rate

Applied to the first EUR 100,000 earned, the standard nominal corporate tax rate was reduced in 2019 and will be even lower in 2020. Any income exceeding EUR 100,000 is subject to the standard corporate tax rate.

(Flanders Investment & Trade, tax rate figures for 2020)

Year Rate
2017 33.99%
2018 and 2019 29.58%
2020 25%

Average effective corporate tax rates

Notional interest deduction for risk capital

The notional interest deduction (NID) enables companies to deduct a portion of its adjusted equity capital from taxable profits – offsetting operational or financial income. Beginning in the 2019 tax year, NID is computed based on the average 5-year increase of a company’s net equity.

(Flanders Investment & Trade, tax rate figures for 2019)

Company size NID rate 
Large enterprises 0.726%
SMEs 1.226%

Dividend withholding tax exemptions

The dividends that Flanders-based companies receive from subsidiaries will now be 100% exempt from taxation (vs. 95% previously). Foreign businesses with local holdings in Flanders, multinationals and family businesses with local bases can repatriate an even greater share of profits from abroad.

Dividend distributions are generally subject to a 30% withholding tax.  However, reduced rates are possible, and a full exemption can be claimed if the dividends are distributed by a Belgian tax-resident company to a receiving firm that:

  • was established in Belgium or an EU member state;
  • directly holds 10% of the capital of the distributing company;
  • has maintained this holding for at least one year with no interruptions;
  • is appropriately incorporated in a cross-border situation.

Even more, dividend withholding tax for dividends paid to corporate shareholders in treaty countries is no longer applied in Belgium. Dividends distributed by subsidiaries of companies in Belgium are 100% tax exempt.

Deduction of losses sustained by subsidiaries or branches

As of 2019, corporate groups may aggregate gains and losses from multiple Belgian subsidiaries or branches and pay taxes on the total amount of profit. As a result, companies generating low profits while operating a subsidiary at a loss will no longer be taxed.

Minimum taxes paid on profits over EUR 1 million

Companies generating profits of over EUR 1 million pay a minimum tax charge, as limits are placed on the number of corporate tax deduction items. Even more, a new order of deduction applies.

Fiscal consolidation

2019 marks the first year of tax consolidation in Belgium. As a result, only the consolidated tax base of a corporate group pays corporate income tax.

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