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The corporate tax rate in Belgium dissected

When your company sets up a base in Flanders, it becomes subject to the Belgian tax system and needs to pay corporate tax on its profits. However, various exemptions and tax credits are available that can result in a lower effective tax rate for your foreign business.

Comparing nominal and effective corporate tax rates

Companies in Belgium are liable to pay tax on the total amount of their profits, i.e., their net income including distributed profits. Currently, the nominal corporate tax rate is 25%. However, under specific conditions, small- or mid-sized enterprises (SMEs) may benefit from a lower tax rate of 20% on the first profit bracket of EUR 100,000. 

What’s more, compared to neighboring and other OECD countries, both the nominal and effective corporate tax rates in Belgium are on the lower end of the spectrum according to studies by global consultancy firm Roland Berger and the OECD. 

Notional interest deduction for risk capital

The notional interest deduction (NID) enables companies to deduct a portion of their adjusted equity capital from taxable profits, offsetting operational or financial income. The main goal? To incentivize investing in equity. 

For small enterprises, the deductible rate is 0.340% for the 2022 tax year and 0.443% for the 2023 tax year. Your company is seen as a small enterprise if it did not exceed more than one of the following criteria in its most recently completed fiscal year: 

  • an annual average workforce of 50 employees;
  • an annual turnover excluding VAT of EUR 9,000,000;
  • a balance sheet total of EUR 4,500,000.

Dividend withholding tax exemptions

The dividends received by foreign businesses with local holdings in Flanders are 100% exempt from taxation. What’s more, zero capital duty is levied on their capital contribution, while their capital gains on shares are also 100% exempt from taxes. 

When it comes to the repatriating of profits, the dividend withholding tax exemption in Belgium is also at 100% under specific conditions: 

  • The transaction needs to fit within the scope of the EU Parent-Subsidiary Directive. 
  • The beneficiary should be the resident of a country with which Belgium has concluded a double tax treaty. 
  • The beneficiary must hold a participation of at least 10% in a Belgian subsidiary for an uninterrupted period of at least 12 months. 

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.

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