European Holding Companies

Belgium Holding Company Information

» Belgian Holding Company Overview
» Belgium Key Elements

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Belgian Holding Company Overview


Definition

The Belgian Holding Company is an ordinary company which falls within the scope of general tax law and may benefit from the double taxation treaties concluded by Belgium and the European tax directives.
There are no limitations on the activities of the company.

Legal Form

The most common forms of companies in Belgium are the “Société Anonyme” (company limited by shares- SA) and the “Société Privé à Responsabilité Limitée” (private limited company- SPRL).

Formation

The minimum share capital for incorporation of a Belgian company is €61,500 for a “Société Anonyme” and €18,550 for a “Société Privé à Responsabilité Limitée”. While for a company incorporated in the first form the paid-up capital must be 1/4 with a minimum value of €61,500, for the second type of company it is only necessary a minimum of 1/3 paid-up capital (€6,200).
A company incorporated as a “Société Anonyme” may have bearer shares, although this is not expected to be the case in the near future.

Taxation

A Belgian company is fully subject to tax at a normal rate of 33.99% (including a 3% crisis surcharge) being eligible to benefit from the double tax treaties concluded between Belgium and third countries and from EU directives.

Companies with an annual profit margin of less than EUR 322,500 this rate is decreased to 24.98%.

Capital duties were abolished on 1st January 2006 on new corporations or when the capital of an existing corporation is increased.

No tax credit is granted for foreign withholding taxes (taxable income is calculated on income net of foreign withholding taxes).


Income

The taxable income of a Belgian company is based on income reported in the annual financial statements and includes all profits and losses, gains and losses (speculative and non speculative), dividends, interest, royalties and rent.
Provided that the interest rate does not exceed arm’s length interest rates, all interest paid on financing the acquisitions of shares is deductible against taxable income. However, if the interest is paid to a beneficiary that benefits from a beneficial tax regime it will not be deductible to the extent that the related loans exceed 7 times the paid/up share capital at the end of the taxable period.

» Dividends Exemption

Dividends received by a Belgian company may be subject to a reduced level of corporate income tax if received from:

- an EU subsidiary where the provisions of the EU Parent-subsidiary Directive apply. Dividends are exempt from any further corporate income tax if the Belgian company owns at least 25% of the shares of the subsidiary for a minimum period of at least 1 year.

- a non-EU subsidiary only 5% of the dividend received is subject to the Belgian corporate income tax rate the other 95% is exempt, if:

• the Belgian holding company owns a minimum of 10% of shares or a participation with an acquisition value of at least €1.2 million for a minimum continuous period of 1 year and to have accounted for these shares as financial assets ;
• the profits out of which the dividends are paid must have been subject to tax at a minimum rate of 15% ;
• the subsidiary is not resident in a territory with a non-discriminatory but more favourable tax regime ;
• holding or financial subsidiaries are not resident in a territory which has a tax system considerable more beneficial than in Belgium ;
• the subsidiary must not be located in a territory which has discriminatory fiscal laws or in a territory which is a free trade zone.

» Dividends Exemption

Capital gains on shares are exempt from tax if dividends qualify for the participation exemption. The subsidiary must have been subject to income tax at a minimum rate of 15%, irrespective of the size and duration of the shareholding.
Capital losses are not tax deductible. Exception is made for capital losses realised on the occasion of the liquidation of the company and to the extent that effectively paid-up capital is lost.

» Dividends Exemption

See income above.

Some Advantages of the Belgian Holding Company

Besides the common advantages of a holding company, the Belgian company may also enjoy from the following:

» Exemption on Winding-Up

A 10% withholding tax is levied on liquidation proceeds. However, this tax may be credited against the Belgian corporate tax liability for Belgian corporate shareholders and is reimbursable in case it exceeds the tax liability of the taxpayer.
The 10% tax rate is not applied if the conditions of the EU Parent-subsidiary Directive are satisfied.

» Exemption from Withholding Tax on Payment of Dividends

Dividends paid by a Belgium company are exempt from withholding tax provided:

• The EU parent corporation has held 25% of the shares of the Belgian subsidiary for a consecutive period of at least 1 year;
• Dividends paid by a Belgian company to a Belgian corporate shareholder are not subject to withholding taxes as long as the recipient and paying companies are subject to corporate income tax.

» Exemption from Withholding Tax on Payment of Interest

Interest on loans, registered securities or deposits paid from a mixed holding company to a non-resident are exempt from withholding tax if the following conditions are met:

• the company must be a Belgium company or a Belgian branch of a foreign company;
• must own shares as financial fixed assets with an acquisition value of not less than 50% of the total assets in the balance sheet at the end of the taxable period prior to the payment of the interest;
• the company is listed on a recognised stock exchange or is directly or indirectly held for at least 50% of a listed company subject to corporate income tax and does not benefit from a considerably more favourable tax regime than in Belgium.

Belgium has an extensive Double Tax Treaty network which can reduce the standard withholding tax of 25% on dividends to between 5% and 15%.

» Notional Interest Deduction (NID)

All companies operating in Belgium and subject to corporate tax may deduct a part of their adjusted equity capital. The rate of the Notional Interest Deduction (NID) will be equal to the yield of the Belgian 10 year Government Bond.

The unused notional interest may be carry forward 7 years from the year of deduction. However, the amount of notional interest deducted may not be used freely by the company and must remain as a liability on the balance sheet during the 3 following years.

Belgium Key Elements

	Formation
	Legal Form:		Société Anonyme (SA/NV); Société Privé a Responsabilité Limitée (SPRL/BVBA)
	Minimum Subscribed Capital:		€61,500 (SA) €18,600 (SPRL)
	Minimum Paid-Up Capital:		€61,500 (SA) €6,200 (SPRL)
	Number of Shareholders:		2 (SA) 1 (SPRL)
	Type of Shares:		Registered (SA) Registered (SPRL)
	Substance Requirements:		Nil
	Taxation
	Capital Duty:		0.5%
	Net Worth Tax:		0%
	Corporate Income Tax:		33.99% (including a 3% crisis contribution)
	Double Tax Treaties:		80+
	Dividends Exemption:		95%
	Holding Requirements:		10% or €1.2M for 1 year 15% corporate tax
	Capital Gains Exemption:		Yes
	Holding Requirements:		15% corporate tax
	Tax Credit:		Yes
	Relief of Losses:		Carry forward indefinitely
	CFC Rules:		No
	Debt-to-Equity Ratio:		No 7:1 (from low tax country) 1:1 (from foreign director)
	Withholding Taxes
	Dividends:		EU Parent Co - 0%2 Treaty Countries - 10%-20% Others - 25%3
	Interest:		EU Parent Co - 0%2 Treaty Countries - 0%-25% Others - 25%
	Royalties:		EU Parent Co - 0%2 Treaty Countries - 0%-15% Others - 15%
	Liquidation:		10%

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Double Tax Treaties	39KB