Corporate Tax 2010 - BMR Advisors

Eubelius
Belgium
Belgium
decision on this issue in the KBC Bank NV v. Belgium case (C-
439/07).
Certain participation requirements must be respected by the Belgian
company in order to benefit from this dividend received deduction.
Its investment should: (i) at least correspond to a 10%-share in the
capital of the dividend generating company, or have an acquisition
value of at least €1.2 million; (ii) be held in full ownership for at
least 1 year, which must not necessarily have been completed at the
time of dividend distribution; and (iii) be recorded as a financial
fixed asset in its annual accounts.
In addition, the dividends received must meet detailed “subject to
tax” requirements, which ensure that subsidiaries (with no tier
limitation) are subject to a normal corporate tax regime.
Both the dividend-received deduction and capital gains exemption
on share investments (see supra), together with the extension of the
dividend withholding tax exemption to all foreign parent companies
that are resident of a treaty state, result in a very attractive regime
for holding companies established in Belgium, which could serve as
an important incentive to structure investments through Belgium.
purposes is mitigated in respect of transactions between the branch
and the non-resident company to which it relates. More specifically,
interest, royalty or rental payments by the branch to the non-resident
parent company are not accepted as deductible expenses by the
Belgian tax authorities, unless (for interest payments) it is a branch of
a non-resident bank. For the rest, the Belgian branch’s taxable base
is determined following the same corporate income tax principles,
being entitled to the same tax deductions (including the notional
interest deduction on the “equity” of the branch) and exemptions as
apply to resident Belgian companies.
6.4 Would such a branch be subject to a branch profits tax (or
other tax limited to branches of non-resident companies)
There is no “branch profits tax” or other form of withholding tax in
Belgium on the branch profits that are repatriated by the nonresident
company. The non-resident company doing business in
Belgium through a branch will be subject to non-resident income
tax, which implies in practice that it will end up paying Belgian
corporate income tax on the income realised through such branch.
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5.4 Is there any special relief for reinvestment
There is no specific relief for reinvestment, apart from the
reinvestment relief with respect to capital gains on certain
intangible and tangible fixed assets, as mentioned in question 5.1
above.
6 Branch or Subsidiary
6.1 What taxes (e.g. capital duty) would be imposed upon the
formation of a subsidiary
Generally, no taxes are imposed upon the formation of a subsidiary
(apart from a fixed registration duty of €25 and limited stamp
duties).
6.2 Are there any other significant taxes or fees that would be
incurred by a locally formed subsidiary but not by a
branch of a non-resident company
No, there are no other such significant taxes or fees.
6.3 How would the taxable profits of a local branch be
determined
The profits of a Belgian branch, provided that the branch can be
considered as a “permanent establishment” as defined in the
relevant bilateral tax treaty, are determined by treating it as a
separate enterprise for tax purposes. Most times, separate
accounting records and separate financial statements are drawn up
in respect of the Belgian branch, although this is not always
obligatory. In absence of separate accounting records and separate
financial statements, taxable income is generally fixed on a lump
sum basis (e.g. €22,000 per employee in the chemical industry),
with a floor of €19,000.
Income realised through transactions with third parties is attributed to
the Belgian branch, provided that it has intervened in realising such
income. Accordingly, expenses are deemed to be borne by the
branch, provided that they have been made for the benefit of the
branch’s business operations. The same goes for income or expenses
derived from assets or liabilities that are allocated to these operations.
However, this fiction of “independence” of the branch for tax
6.5 Would a branch benefit from tax treaty provisions, or some
of them
Generally, only resident companies can invoke the provisions of a
bilateral tax treaty to which Belgium is a party.
The foreign company having a branch in Belgium can also invoke
the treaty that its country of residence has concluded with Belgium
in order to protect the branch from discriminatory tax measures. In
a decision d.d. 26 November 2006, the Brussels Court of first
instance granted the benefit of a tax sparing credit, provided for in
the bilateral tax treaty between Belgium and India, to a Belgian
branch of an Indian company with respect to its Indian source
interest income, on the basis of the PE non-discrimination provision
in that treaty.
6.6 Would any withholding tax or other tax be imposed as the
result of a remittance of profits by the branch
Repatriation of profits is not a dividend, and therefore not subject to
Belgian dividend withholding tax, nor any other tax.
7 Anti-avoidance
7.1 How does your jurisdiction address the issue of preventing
tax avoidance For example, is there a general antiavoidance
rule or a disclosure rule imposing a requirement
to disclose avoidance schemes in advance of the
company’s tax return being submitted
With respect to income tax and registration tax, the Belgian
legislator introduced in 1993 a general anti-abuse provision, which
allows the tax authorities to recharacterise a series of legal actions
into another (single) legal action, if the taxpayer has set up such
series in order to avoid tax. The taxpayer may rebut this
recharacterisation by demonstrating the legitimate economic or
financial needs for the chosen legal characterisation of the
transaction. Recent case law of the Belgian Supreme Court has
however mitigated its effectiveness by requiring that the new
characterisation by the tax authorities covers all legal consequences
arising from the transaction
For VAT purposes, a general anti-abuse provision has entered into
effect in August 2006 and is based on recent case law of the ECJ in
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