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.
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% |
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% |
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:
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.
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.
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.
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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Learn more about Flanders’ tax system: |
