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Invest in Belgium
Invest in Belgium
Invest in Belgium
Invest in Belgium
Invest in Belgium
Invest in Belgium
Invest in Belgium
Invest in Belgium
Invest in Belgium
Invest in Belgium
Invest in Belgium
Invest in Belgium
Invest in Belgium
Invest in Belgium
Invest in Belgium
Invest in Belgium
Invest in Belgium
Invest in Belgium
Invest in Belgium
Invest in Belgium
Invest in Belgium
Invest in Belgium
Invest in Belgium
Invest in Belgium
Invest in Belgium
Invest in Belgium
Invest in Belgium
Invest in Belgium
Invest in Belgium
Invest in Belgium
Invest in Belgium
Invest in Belgium
Invest in Belgium
Invest in Belgium
Invest in Belgium
Invest in Belgium
Invest in Belgium
Invest in Belgium
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Invest in Belgium

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  • Because I think that a examples will prove the advantages better than I can say it. On the balance sheet above you see that the share capital of this Belgian entity has been used for group financing. With an intra-group interest rate applied of 4% the profit before taxes is 400 and currently you will pay around 136 of corparate tax. With notional interest deduction you will deduct 3.781% of the 10,000 share capital and you will pay less 7.44 of corporate tax, which brings the effective tax rate back to 1.86%
  • Let ’ s take the same example – but for another operational company in the production field or in any other business. Depending on your return on equity you can see that the effective corporate tax rate is indeed very interesting. With a net return on equity of less than 3.781%, you pay no corporate tax. With a net return on equity of 10 % you will have an effective tax rate of about 21%. In between you can see the rates for other cases. This positions Belgium very favorably on the international tax map.
  • What are the opportunities? Well it is a: It ’ s a valuable further development for Coordination Centre activities; It creates a considerable tax benefit for companies that have good solvency ratios; And it opens possibilities for international groups of allocating new activities to a Belgian entity such as intra-group financing, central procurement or factoring; It is a real win-win situation that increases the attractiveness of Belgium for capital intensive companies, equity funded headquarters and treasury centres.
  • Transcript

    • 1. Invest in Belgium Fiscal Aspects of doing Business with Belgium Marc De Mil – FPS Finance
    • 2. Belgium Main Tax Incentives <ul><li>Corporation </li></ul><ul><li>Notional Interest Deduction (NID) </li></ul><ul><li>Numerous fiscal treaties to avoid double taxation </li></ul><ul><li>Innovative measures to support R&D </li></ul><ul><ul><li>Patent income deduction </li></ul></ul><ul><ul><li>Investment deduction for R&D related investments and patents </li></ul></ul><ul><ul><li>Income tax reduction for researchers </li></ul></ul><ul><li>Ruling practice : legal certainty for investors </li></ul><ul><li>Shareholder </li></ul><ul><li>No taxation on capital gain </li></ul><ul><li>Management </li></ul><ul><li>Reduction of employment costs for expatriates, with simple proceedings </li></ul>
    • 3. Belgium Effective (Average) Corporate Tax Rate (ECTR) 2009* Sources : Report 2009, made by ZEW (Centre for European Economic Research) for the EU Commission Project : Taxud/2008/CC/099, Mannheim and Oxford, October 2009 *(based on asset and source of finance) Especially in Belgium, the ECTR is considerably below statutory tax rates (-9,3%)
    • 4. Belgium Effective (Average) Corporate Tax Rate (ECTR) 2009* Sources : Report 2009, made by ZEW (Centre for European Economic Research) for the EU Commission Project : Taxud/2008/CC/099), Mannheim and Oxford, October 2009 *(based on asset and source of finance) Especially in Belgium, the ECTR is considerably below statutory tax rates (-9,3%)
    • 5. <ul><li>What is it? </li></ul><ul><li>A notional interest calculated and deducted yearly from the taxable basis </li></ul><ul><li>Used to off-set operational or financial income (thus lowering effective tax rate) </li></ul>Notional Interest Deduction
    • 6. <ul><li>Who? </li></ul><ul><li>Companies subjected to </li></ul><ul><li>Corporate tax </li></ul><ul><li>Non-residents / Corporate Tax </li></ul>Notional Interest Deduction
    • 7. How does it work ? Annual Tax Deduction = EQUITY X RATE (OLO 10 years) Notional Interest Deduction
    • 8. EXAMPLE 1: (Return on Equity: 4%) Notional Interest Deduction Assets Liabilities Group Financing 100.000 Share Capital 100.000 P&L Account Before N.I.D. After N.I.D Profit before tax 4.000 4.000 N.I.D. (3,425%) / - 3.425 Taxable 4.000 575 Corporate Tax (33,99 %) 1359 195 Effective Tax Rate 33,99 % 4,89%
    • 9. EXAMPLE 2: Notional Interest Deduction Net Result (Return on Equity) Effective Tax Rate ≤ 3,425 % 0 % 4 % (Previous slide) 4,89 % 5 % 10,71 % 8 % 19,44 % Assets Liabilities Business Assets 100.000 Share Capital 100.000
    • 10. <ul><li>«  Qualifying  » equity </li></ul><ul><li>Equity = total equity as defined under Belgian GAAP (includes retained earnings) </li></ul><ul><li>in the opening balance sheet of the taxable period </li></ul><ul><li>“ adjusted ” to avoid double use and abuse. </li></ul>Notional Interest Deduction
    • 11. <ul><li>Interest Rate </li></ul><ul><li>RATE = a nnual average of the monthly published rates of the long term Belgian Government Bonds (10-year OLO) </li></ul><ul><li>Fixed yearly </li></ul><ul><li>for 2011 (Tax Year 2012) : </li></ul><ul><li> 3,425 % </li></ul><ul><li>+ 0,5 %  3,925 % (SME) </li></ul>Notional Interest Deduction
    • 12. <ul><li>Other particularities </li></ul><ul><li>Permanent measure </li></ul><ul><li>Carry forward of 7 years </li></ul><ul><li>No ruling nor agreement is needed </li></ul><ul><li>Suppression of the 0,5% capital duty as of 1/1/2006 </li></ul><ul><li>EU compliant </li></ul>Notional Interest Deduction
    • 13. <ul><li>OPPORTUNITIES </li></ul><ul><li>It’s a valuable tool for further development of Coordination Centre activities </li></ul><ul><li>Opens possibilities for international groups of allocating new activities to a Belgian entity such as intra-group financing, central procurement or factoring </li></ul>Notional Interest Deduction THUS: increases attractiveness of Belgium for capital intensive companies, equity funded headquarters and treasury centers.
    • 14. Extensive tax treaty network
    • 15. Dividend withholding tax exemption <ul><li>Conditions to benefit </li></ul><ul><li>be resident in a country with which Belgium has </li></ul><ul><li>concluded a double tax treaty; </li></ul><ul><li>the beneficiary holds a participation of at least 10% in a </li></ul><ul><li>Belgian subsidiary, for an uninterrupted period of at least </li></ul><ul><li>12 months = low participation threshold ; </li></ul>
    • 16. <ul><li>No WHT </li></ul><ul><li>No LOB </li></ul><ul><li>10% shareholding </li></ul><ul><li>12 months </li></ul>Dividend withholding tax exemption US parent company (treaty partner) Belgian subsidiary
    • 17. <ul><ul><li>Patent income deduction </li></ul></ul><ul><ul><li>Investment deduction for R&D related investments and patents </li></ul></ul><ul><ul><li>75% exemption from withholding tax on the remunerations of researchers, in favour of employers </li></ul></ul>Unique tax features for R & D
    • 18. What is it ? Deduction of 80% of the income from patents from the taxable basis, resulting in an effective tax rate of maximum 6,8% on this income Who can benefit ? Belgian companies and Belgian establishments of foreign companies Patent income deduction
    • 19. <ul><ul><li>Example </li></ul></ul><ul><ul><li>Patent income: 100 </li></ul></ul><ul><ul><li>Deduction: (80) </li></ul></ul><ul><ul><li>Taxable basis: 20 </li></ul></ul><ul><ul><li>Corporate Tax (33,99%) (6,8) </li></ul></ul><ul><ul><li>Net income after tax: 93,2 </li></ul></ul><ul><ul><li> Effective Tax rate: 6,8 % </li></ul></ul>Patent income deduction
    • 20. <ul><li>Patents concerned </li></ul><ul><ul><li>self-developed by a Belgian company or branch in R&D centers (*) in Belgium or abroad; </li></ul></ul><ul><ul><li>acquired by a Belgian company or branch provided they are being further developed in R&D centers (*) in Belgium or abroad (by acquisition, or license,…) </li></ul></ul><ul><li>(*) R&D center must qualify as branch of activity </li></ul>Patent income deduction
    • 21. <ul><li>Calculation of the deduction </li></ul><ul><li>For patents that are licensed: 80% of the patent income received, to the extend the income is at arm’s length </li></ul><ul><li>F or patents that are used in the production process: deemed deduction of 80% of the at arm ’ s length royalty that would have been received had the patents been licensed to unrelated third parties </li></ul>Patent income deduction
    • 22. <ul><li>Applies to variable income streams, fixed income streams, as well as upfront fees, milestones, etc. </li></ul><ul><li>Other intellectual property rights (copyrights, know-how, designs, trademarks, etc.) do not qualify. </li></ul>Patent income deduction
    • 23. <ul><li>Anti-abuse provision in order to avoid double deduction of certain costs, in the case of patents acquired by the company; </li></ul><ul><li>no carry forward or carry back; </li></ul><ul><li>compliant with EU rules; </li></ul><ul><li>formalities: an enclosure to join to the tax return; </li></ul><ul><li>applicable to new patent income as from Tax Year 2008 (financial year ending on or after December 31, 2007). </li></ul>Particularities Patent income deduction
    • 24. <ul><li>Very low effective tax rate of maximum 6,8% and absence of any capping rules; </li></ul><ul><li>Tax deduction in addition to normal tax-deductibility of R&D related expenses; </li></ul><ul><li>Investment deduction for R&D related investments and patents; </li></ul><ul><li>Can be combined with Notional Interest Deduction for invested equity, etc. </li></ul>Highly competitive measure Patent income deduction
    • 25. <ul><li>Investment deduction for R&D related investments : </li></ul><ul><li>for assets which aim to promote R&D of new products and </li></ul><ul><li>advanced technologies which are environment-friendly : </li></ul><ul><li> deduction of 13,5% on the investment value (in one shot) </li></ul><ul><li>or 20,5% on the annual depreciation (spread deduction) </li></ul><ul><li>Investment deduction in patents </li></ul><ul><li>acquired or self-developed by the company </li></ul><ul><li> deduction of 13,5% on the investment value </li></ul><ul><li>NB: In case of insufficient profits, deduction carried forward for </li></ul><ul><li>an unlimited period . </li></ul>Investment deduction for R&D
    • 26. <ul><li>75% exemption from withholding tax on the remunerations of researchers, in favour of employers </li></ul><ul><ul><li>Principle: the salary withholding tax is normally retained </li></ul></ul><ul><ul><li>on the remunerations paid to the researcher, </li></ul></ul><ul><ul><li>but the amount of tax so retained must not be totally paid </li></ul></ul><ul><ul><li>to the Revenue Collector </li></ul></ul><ul><ul><li>(= extra financial means for the employer) </li></ul></ul><ul><ul><li>For researchers with a specific degree, engaged in R&D program </li></ul></ul>75% exemption from withholding tax
    • 27. <ul><li>Manufacturing company with a R&D division: </li></ul><ul><ul><li>Share capital: 10.000 (of which 2.000 = contributed patent value) </li></ul></ul><ul><ul><li>Return on equity: 12% </li></ul></ul><ul><ul><li> Net profit: 1200 </li></ul></ul><ul><li>(of which 300 = patent income ; 900 = product revenue) </li></ul><ul><li>To deduct </li></ul><ul><ul><li>Invest. ded. on patents: 13,5% x 2.000 = 270 </li></ul></ul><ul><ul><li>Patent Income Ded.: 80% x 300 = 240 </li></ul></ul><ul><ul><li>N.I.D. 3,425% x 10.000 = 342 </li></ul></ul><ul><ul><li>Taxable basis: 348 </li></ul></ul><ul><ul><li>Corporate Tax: (348 x 33,99%) = 118,28 </li></ul></ul><ul><ul><li>Effective tax rate: 9 ,85% </li></ul></ul>Example
    • 28. <ul><li>Advanced decisions or ruling is about creating CONFIDENCE to invest in Belgium; </li></ul><ul><li>The investor describes the facts, allowing the tax administration to determine, in advance, how the tax laws are to be applied on a CASE BY CASE BASIS </li></ul><ul><li>It ensures a LEGALLY BINDING ACCURATE FORECAST of all the tax implications of your investment project </li></ul>Tax Ruling
    • 29. Tax Ruling <ul><li>Unlimited application field for ruling: </li></ul><ul><ul><li>Transfer pricing </li></ul></ul><ul><ul><li>Business Restructuring </li></ul></ul><ul><ul><li>Deductible expenses </li></ul></ul><ul><ul><li>Financing </li></ul></ul><ul><ul><li>Branches </li></ul></ul><ul><ul><li>Bonded warehouses, etc. </li></ul></ul>
    • 30. <ul><li>Characteristics of the Belgian ruling </li></ul><ul><ul><li>Ruling on all kind of taxes (Corporate, Personal, VAT,..) </li></ul></ul><ul><ul><li>Case-by-case ruling in a new open culture </li></ul></ul><ul><ul><li>Legal certainty for investors </li></ul></ul><ul><ul><li>In accordance with international rules </li></ul></ul><ul><ul><li>Open to potential AND existing investors </li></ul></ul><ul><ul><li>Legally binding for a 5 year renewable period </li></ul></ul><ul><ul><li>Economic “substance” required </li></ul></ul>Tax Ruling
    • 31. Belgian DISTRIBUTION Centre Belgian SERVICES Centre Operational Companies Operational Companies PARENT COMPANY USA * OECD accepted norm: arm ’ s length standard Cost plus % case-by-case ruling * Notional Interest Deduction Tax Ruling
    • 32. Expenses Transport (27.000 €) Warehousing (27.000 €) Staff (46.000 €) Income Interco Reinvoicing European Distribution Centre 100.000 € 105 % X 100.000 € = 105.000 € Income 105.000 € Expenses - 100.000 € Profit 5.000 € Notional Interest Deduction -3.425 € Taxable basis 1.575 € Corp.tax rate: 33,99 % Corporate tax 535 € European Distribution Centre Income approved by the ruling Commission (ex. 105% of operational exp.) mark up 5% on operational expenses +NID
    • 33. Belgium Management : Expatriate Status <ul><li>For employees (foreign executives) </li></ul><ul><li>Tax free allowances : </li></ul><ul><ul><li>for moving expenses and school fees of the children : unlimited amount </li></ul></ul><ul><ul><li>for cost of living, cost of housing, tax equalisation : </li></ul></ul><ul><ul><ul><li>operational entity: 11 250 € </li></ul></ul></ul><ul><ul><ul><li>HQ or research centre: 29 750 € </li></ul></ul></ul><ul><li>Travel exclusion (of workdays performed outside Belgium) </li></ul><ul><li>For employers </li></ul><ul><li>Reduction of employment costs (no tax, no social security contribution) </li></ul>
    • 34. <ul><li>VAT fiscal unity </li></ul><ul><li>Bonded warehouses and VAT deferal </li></ul><ul><li>European pension funds </li></ul><ul><li>Tax shelter for audiovisual sector </li></ul><ul><li>Extensive tax treaty network </li></ul><ul><li>Customs… </li></ul>Other incentives
    • 35. Tasks of the Belgian Customs Belgian Customs European Customs Legislation 27 Member States : One Goods Classification One Customs Tariff One Customs Legislation Protect financial interests of the EU Ensure safety and security Combat fraud Support legitimate business activity Facilitate legal trade <ul><li>Traditionally the Belgian Customs were trendsetters in facilitating licit trade </li></ul><ul><li>by introducing Simplified Customs Procedures , as: </li></ul><ul><ul><ul><ul><ul><li>Temporary storage </li></ul></ul></ul></ul></ul><ul><ul><ul><ul><ul><li>Customs bonded Warehouse, VAT-Warehouse) </li></ul></ul></ul></ul></ul><ul><ul><li>Transit </li></ul></ul><ul><ul><li>Local clearance procedures </li></ul></ul>
    • 36. <ul><li>Smooth import and export systems (simplified procedures) </li></ul><ul><li>All formalities (customs, excises, healthcare, economic licences ) executed in one process </li></ul><ul><li>Client-orientated customs service spread over the entire territory </li></ul><ul><li>7/7 and 24/24 </li></ul><ul><li>Customs decision as near as possible to the flow of goods </li></ul><ul><li>Well trained customs staff and multilingual skills </li></ul><ul><li>E-Customs: 100% electronic & paperless </li></ul><ul><li>Single office </li></ul>Belgian Customs & Excise Department The best solution = PARTNERSHIP Customer oriented Customs Customs oriented Customers
    • 37. Belgian Customs & Excise Department Seaport ANTWERP Seaport ZEEBRUGGE Seaport GENT Int. Airport BRUSSELS Int. Airport LIEGE Int. Airport OOSTENDE Int. Airport CHARLEROI Int. Transport EYNATTEN Int. Transport MENEN-LAR Int. Transport MOUSCRON Int. Transport STERPENICH The main Customs posts where customs is facilitating trade
    • 38. For Further Information Marc De Mil Federal Public Service Finance Fiscal Department for Foreign Investments Wetstraat, 24 (Parliament Corner) 1000 Brussels - BELGIUM Email: [email_address] Tel.: +32 257 870 19

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