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main reasons to set up your business 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.
  • InvestinBelgium2011

    1. 1. Invest in Belgium Embassy of Belgium, Washington, DC May, 2011
    2. 2. 10 (good) reasons to invest in Belgium <ul><li>Economic heart, at the center of a large and prosperous EU customer base </li></ul><ul><li>Access to European centers of decision making </li></ul><ul><li>Trading tradition of trade: more than 85% of Belgian GDP exported </li></ul><ul><li>One of the most popular destinations for foreign investment </li></ul><ul><li>Access to a highly qualified and productive labor force </li></ul><ul><li>Center of knowledge </li></ul><ul><li>Modern and efficient business infrastructure </li></ul><ul><li>Low real estate costs and low costs of living </li></ul><ul><li>Ease of starting up </li></ul><ul><li>Attractive tax regime </li></ul>
    3. 3. Reason #1 Economic Heart of Europe
    4. 4. Spain France Italy Germany Denmark United Kingdom Ireland The Netherlands Brussels London Belgium Switzerland Dublin Barcelona Rome Paris Frankfurt Milan Bern Luxembourg Amsterdam The economic power- base of Europe
    5. 5. Reason #1 Economic Heart of Europe <ul><li>Belgium is at the heart of an area with 60% of Europe’s purchasing power, 30% of EU consumers. </li></ul><ul><li>Outside the Northeast US corridor, Belgium sits at the heart of the world’s 2 nd largest concentration of wealth. </li></ul><ul><li>140 million consumers are located within a 300 mile radius of Brussels. </li></ul><ul><li>The international orientation of its economy and its diverse population on the border of Latin and Germanic influence in Europe make Belgium an ideal test market for U.S. companies </li></ul>
    6. 6. Reason #1 Economic Heart of Europe <ul><li>Distances from Brussels: </li></ul><ul><li>Luxembourg 134 miles </li></ul><ul><li>Paris 184 miles </li></ul><ul><li>Amsterdam 213 miles </li></ul><ul><li>London 219 miles </li></ul><ul><li>Frankfurt 245 miles </li></ul><ul><li>Travel time by High Speed Train (HST) from Brussels: </li></ul><ul><li>London 2h40 </li></ul><ul><li>Paris 1h25 </li></ul><ul><li>Amsterdam 2h40 </li></ul><ul><li>Cologne 2h30 </li></ul><ul><li>Geneva 5h15 </li></ul><ul><li>Direct flights to Brussels from New York, Newark, Washington DC, Atlanta, Chicago, Boston, and Philadelphia </li></ul>
    7. 7. Reason #2 Decision-Making Center <ul><li>Belgium is home to EU, NATO, and 1400 governmental & non-governmental international organizations </li></ul><ul><li>Brussels is: </li></ul><ul><ul><li>World n°2 location for number of diplomats (3800, behind New York ) </li></ul></ul><ul><ul><li>World n°2 for number of foreign journalists (behind Washington, DC) and home of 2400 lobbyists </li></ul></ul><ul><ul><li>World n°2 international conference center for number of events per year </li></ul></ul>
    8. 8. Reason #3 Foreign Trade Leader <ul><li>Exports = €265 billion (2009), making Belgium the 8 th exporter of goods worldwide </li></ul><ul><li>( WTO International Trade Statistics 2009 ) </li></ul><ul><li>BE= 13 th exporter of services worldwide </li></ul><ul><li>Destination of 77% of Belgian exports = the EU (84% of GDP exported) </li></ul><ul><li>U.S. = Belgium’s 5th trading partner, 5 th export market for Belgium </li></ul><ul><li>Belgium = the U.S.’s 18th trading partner </li></ul><ul><li>U.S. exports to Belgium = $ 25.5 billion (2010), i.e. almost 30% of U.S. exports to China </li></ul><ul><li>Belgium = 14 th market for export of U.S. goods (Nov. 2010) </li></ul><ul><li>Bilateral U.S.-Belgian trade = $ 41billion (2010), with a large U.S. trade surplus (US Census Bureau) </li></ul><ul><li>Antwerp is the leading port in the world for transport of goods to and from the United States. </li></ul><ul><li>Almost 3,000 Belgian companies currently export to the U.S. market. </li></ul>
    9. 9. Reason #3 Foreign Trade Leader
    10. 10. Major Trading Partner for the U.S.
    11. 11. Major Trading Partner for the U.S.
    12. 12. Major Trading Partner for the U.S.
    13. 13. Major Trading Partner for the U.S. <ul><li>In states like Texas, Pennsylvania, Georgia and South Carolina, Belgium is among the top 10 export destinations. </li></ul><ul><li>Belgium is among the top 5 European export markets in more than half the U.S. states, including California, Texas, New York and Illinois. </li></ul>
    14. 14. Reason #4 Leading FDI Destination
    15. 15. Reason #4 Prime FDI Destination <ul><li>Belgium’s regions rank among top 10 regions for FDI Strategy (European Cities and Regions of the Future 2010/2011, FDI Magazine). </li></ul><ul><li>11 of the top 15 global chemical companies have production plants in Belgium </li></ul>
    16. 16. Favorite U.S. Investment Partner
    17. 17. Favorite U.S. Investment Partner
    18. 18. <ul><li>The U.S. is the largest foreign investor in Belgium </li></ul><ul><li>The value of foreign investment between the U.S. and Belgium exceeds $100 billion. </li></ul><ul><li>The value of U.S. investment in Belgium at the end of 2009 equaled U.S. investments in China and India combined . </li></ul><ul><li>Over the last decade, Belgium has been the 11th overseas market for U.S. foreign investment. </li></ul><ul><li>Belgium is among the top 10 foreign investors in Georgia, Ohio, Pennsylvania and South Carolina. In Georgia alone, 76 Belgian companies are present, employing about 5800 people. In Ohio, Belgian-owned companies employ over 6600 people. In Pennsylvania, there are 111 Belgian-owned companies. </li></ul>Favorite U.S. Investment Partner
    19. 19. Favorite U.S. Investment Partner
    20. 20. Reason #5 High Quality Labor Force
    21. 21. Reason #6 Global Center of Knowledge <ul><li>In an area the size of Maryland, Belgium offers 16 university centers and an extensive community of world-renowned scientific institutes such as IMEC (micro-electronics), the Institute for Tropical Medicine, or the Institute for Cellular Pathology (ICP) at the University of Louvain-la-Neuve </li></ul><ul><li>R&D activities employ about 80,000 people in the country, including some 50,000 researchers. 60% of R&D personnel works in the private sector, 33% in the education sector, 7% in the public sector </li></ul><ul><li>Close to all the leading university centers, innovation and incubation centers and science parks provide new innovative businesses, shared facilities, equipment and services </li></ul><ul><li>The World Competitiveness Yearbook ranks Belgium consistently among the top 10 countries worldwide for its scientific infrastructure, its educational system and the quality of education at university level </li></ul><ul><li>Belgium is the best country in the OECD for innovation performance and biotech industry development (OECD Science & Technology Outlook, 2008) </li></ul><ul><li>5 th place in the qualitative assessment of world scientific research institutes (WEF Global Competitiveness Report, 2008-2009) </li></ul><ul><li>Belgium, with its 200 biotech and pharmaceutical companies, is a biopharma concentration zone. </li></ul>
    22. 22. Reason #6 Global Center of Knowledge <ul><li>Case Study: Pharmaceutical Industry </li></ul><ul><li>Belgium employs more than 28,000 in the pharmaceutical sector, in over 150 pharmaceutical companies and 31 R&D centers </li></ul><ul><li>Pharma represents 11% of Belgian exports </li></ul><ul><li>Belgium is ranked 2 nd in pharma exports worldwide (OECD, 2006) </li></ul><ul><li>More than 5,000 researchers work in clinical testing (100% increase since 1995) </li></ul><ul><li>Private pharmaceutical R&D investment has tripled since 1995, now representing 40% of all private R&D in Belgium </li></ul><ul><li>Belgium has the largest number of clinical trials per capita in Europe, between 2006 and mid-2009, almost 2000 clinical studies were approved </li></ul><ul><li>Belgium produces more than 5% of all new medicines worldwide </li></ul><ul><li>Innovative drug companies employ about 3400 full time researchers . </li></ul><ul><li>BE has the highest number of pharma drugs in development per capita in Europe </li></ul><ul><li>Over 40% of private investment in R&D is targeted at the pharma sector </li></ul>
    23. 23. Reason #7 Top Business Infrastructure Ranking of Major European Distribution Locations Cushman & Wakefield, 2008 Italy 10 Slovenia 9 Germany 8 Austria 7 France 6 Poland 5 Czech Republic 4 Hungary 3 Netherlands 2 Belgium 1
    24. 24. Reason #7 Top Business Infrastructure <ul><li>Air </li></ul><ul><li>Brussels harbors the 5th cargo airport in Europe (Brucargo), ten miles from the city </li></ul><ul><li>Europe’s largest highway interchange is located 2 minutes from Brussels Airport </li></ul><ul><li>Every 15 minutes, a passenger rail service links Brussels Airport to the city center and the HST/TGV European high speed train network. </li></ul><ul><li>Liège, Charleroi, Ostend, and Antwerp provide fast-growing regional airports </li></ul><ul><li>Rail </li></ul><ul><li>The Belgian railway freight system B-Cargo offers daily links to Europe’s major economic zones, with no border stops and speeds of up to 60 mph </li></ul><ul><li>Sea and Waterways </li></ul><ul><li>4 major seaports (Antwerp, Ghent, Zeebrugge, Ostend), and 2 major riverports (Liège and Brussels) provide for the biggest port concentration in Europe </li></ul><ul><li>Antwerp is the 5th port in the world (and 2nd in Europe), hosting the 2nd largest chemical cluster in the world </li></ul><ul><li>The port of Antwerp participates in the U.S. Container Security Initiative (CSI) </li></ul><ul><li>Liège is the 2nd riverport in Europe and more than 900 miles of canals provide the world’s densest inland waterway network, connecting all major Belgian cities, France, the Netherlands, the Rhine-Main-Danube area and Central and Eastern Europe </li></ul>
    25. 25. Reason #8 Low Cost of Living and Realty
    26. 26. Reason #8 Low Cost of Living and Realty
    27. 27. Reason #8 Low Cost of Living and Realty
    28. 28. <ul><li>Low Effective Tax Rate </li></ul><ul><li>Widely available Tax Ruling </li></ul><ul><li>Notional Interest Deduction </li></ul><ul><li>“ Tax Shelter” System </li></ul><ul><li>Dividend Withholding Tax Exemptions </li></ul><ul><li>Holding regime </li></ul><ul><li>Reduced Wage Costs </li></ul><ul><li>R&D Tax Breaks </li></ul><ul><li>Double Taxation Treaties </li></ul>Reason #9 Highly Attractive Tax Regime
    29. 29. Reason #9 Highly Attractive Tax Regime ( n.b. ) - Effective average corporate tax rate 2009 (based on asset and source of finance) - Especially in Belgium, the EATR is considerably below statutory tax rates (-9.3) Source : Report 2009, made by ZEW (Centre for European Economic Research) for the EU Commission (Project Taxud/2008/CC/099), Mannheim and Oxford, October 2009
    30. 30. <ul><li>Ruling: Upfront Legal Certainty for Investors </li></ul><ul><li>Since January 1, 2005 a new general ruling practice has been established </li></ul><ul><li>Upon request, an independent ‘ruling commission’ of the Federal Public Service (FPS) Finance will inform investors about the tax implications of their investments prior to the start or expansion of operations </li></ul><ul><li>Rulings can cover all matters under the jurisdiction of the FPS Finance, and will be given within three months of the ruling request, unless otherwise determined by mutual agreement </li></ul><ul><li>Ruling decisions will be binding for a maximum of five years and based on Belgian law, providing investors with maximum legal certainty </li></ul><ul><li>An elaborate pre-filing practice has been developed, with pre-filing meetings available on a ‘no name’ basis </li></ul>Reason #9 Highly Attractive Tax Regime
    31. 31. <ul><li>Notional Interest Deduction </li></ul><ul><li>(NID) </li></ul><ul><li>The notional interest deduction is a tax deduction for all Belgian companies and Belgian branches of foreign companies applicable since January 1, 2006 </li></ul><ul><li>It introduces an annual deduction on taxable income equal to the interest that would have been paid on the aggregate equity amount in the case of long-term debt financing, reducing the taxable base of the company </li></ul><ul><li>The deduction is based on the ‘equity capital’ as stated in the company’s opening balance sheet of the taxable period. Increases or decreases of the equity during the taxable period will be taken into account on a pro rata basis </li></ul><ul><li>The notional interest rate will be set each year and will follow the average annual 10-year government bond rate. At this time (assessment year 2011= income 2010), that rate is 3.8%% (4.3% for SME’s). The law sets forth a maximum deviation of 1% from one year to the next, and a maximum percentage of 6.5% </li></ul><ul><li>To the extent that the interest deduction does not have a direct tax effect ( e.g. in loss situations), the interest deduction can be carried forward for the next seven years </li></ul>Reason #9 Highly Attractive Tax Regime
    32. 32. <ul><li>Notional Interest Deduction (continued) </li></ul><ul><li>The NID is unique in the world in the area of corporate taxation </li></ul><ul><li>The NID encourages capital intensive investments, and provides an incentive for multinationals to allocate activities such as intra-group financing, central procurement and factoring, to a Belgian group entity </li></ul><ul><li>It is a viable alternative to the Belgian coordination-center regime, which was phased-out between 2006 and 2010 </li></ul><ul><li>Belgium abolished the 0.5% registration duty on capital contributions as of January 1, 2006. Therefore, the equity of companies in Belgium can be increased without any further tax burden </li></ul>Reason #9 Highly Attractive Tax Regime
    33. 33. Reason #9 Highly Attractive Tax Regime EXAMPLE NID : Assets Liabilities Group Financing 10,000 Share capital 10,000 P & L account Before notional interest deduction With notional interest deduction Profit before tax 400 400 Notional interest deduction (3.8 %) / - 380 Taxable 400 20 Corporate tax (33.99 %) 135.96 6.79 Effective tax rate 33.99 % 1.70 %
    34. 34. Reason #9 Highly Attractive Tax Regime EXAMPLE 2 NID : Assets Liabilities Business Assets 10,000 Share capital 10,000 1.70 % 4 % Net result (return on equity) Effective tax rate ≤ 3.8% 0 % 5 % 8.15 % 8 % 17.84 %
    35. 35. Reason #9 Highly Attractive Tax Regime <ul><li>“ Tax Shelter” </li></ul><ul><li>The Belgian ‘Tax shelter’ is a tax incentive designed to encourage the production of audiovisual works and films </li></ul><ul><li>The system allows companies wishing to invest in the production of an audiovisual work to benefit from a tax exemption on retained profits worth up to 150% of the capital actually invested </li></ul>
    36. 36. Reason #9 Highly Attractive Tax Regime <ul><li>Dividend Withholding Tax Exemption </li></ul><ul><li>This exemption extends the European Parent–Subsidiary Directive’s regime between the EU Member States and Switzerland to all countries that have a double taxation treaty with Belgium, such as Hong Kong and the U.S. </li></ul><ul><li>Using Belgium as their holding location for investments in Europe allows corporate investors from treaty countries to repatriate European profits without dividend withholding tax and without a limitation on profits </li></ul>
    37. 37. Attractive Tax Regime <ul><li>Holding Regime </li></ul><ul><li>almost all net capital gains on shares are 100% exempt from tax </li></ul><ul><li>95% of qualifying dividend income is deductible from taxable base. </li></ul>
    38. 38. <ul><li>Reduced Salary Costs </li></ul><ul><li>The Belgian tax system includes lower salary costs for foreign executives and researchers </li></ul><ul><li>Foreign executives or researchers assigned temporarily to Belgium within an international group of companies may qualify for a special ‘expat’ taxation regime. The expatriate will be treated for tax purposes as a non-resident, liable to Belgian personal income tax only on income related to the activities in Belgium. Days spent outside Belgium will not be taxed in Belgium under the so-called ‘travel exclusion’ </li></ul><ul><li>Non-taxable allowances apply, such as allowances or reimbursements made to cover the extra expenses caused by the assignment in Belgium </li></ul><ul><li>There is a 75% exemption from payroll tax for researchers </li></ul>Reason #9 Highly Attractive Tax Regime
    39. 39. <ul><li>R&D Tax Incentives </li></ul><ul><li>Partial exemption from payment of payroll tax for R&D personnel employed in: </li></ul><ul><li>- universities, institutions of higher education </li></ul><ul><li>- scientific institutes </li></ul><ul><li>- private companies </li></ul><ul><li>Tax credit for investments in new patents or investments related to R&D for environmentally friendly or energy-reducing new products and future technologies </li></ul>Reason #9 Highly Attractive Tax Regime
    40. 40. <ul><li>R&D Tax Incentives: </li></ul><ul><li>New Law on Patent Income </li></ul><ul><li>A ‘patent income deduction’ is effective since 2008, allowing Belgian companies, or Belgian branches of foreign companies, to deduct 80% of patent royalties from their taxable income </li></ul><ul><li>Companies will deduct from their taxable income 80% of the patent income. The 20% left from the patent income (after deduction) remains taxable, in effect decreasing the maximum effective tax rate from 33.99% to 6.8% of the patent income. This rate is substantially lower than the rates available for patent income in most other European countries </li></ul><ul><li>The deduction has no cap, but if the patent royalties' deduction exceeds the company's taxable income, it cannot be carried forward to the following tax year </li></ul><ul><li>The tax deduction applies not only to patents owned - and developed, by the company or one of its branches, but also to patents or licenses acquired from a third party </li></ul>Reason #9 Highly Attractive Tax Regime
    41. 41. Reason #9 Highly Attractive Tax Regime <ul><li>R&D Tax Incentives: </li></ul><ul><li>New Law on Patent Income </li></ul><ul><li>(continued) </li></ul><ul><li>For patents or licenses acquired from a third party, the company or the Belgian branch of a foreign company has to improve the patent in one of its own research centers, in Belgium or abroad, in order to benefit from this incentive </li></ul><ul><li>For patents used by the Belgian company or establishment for the manufacture of patented products, the tax deduction will amount to 80% of the license fee that the Belgian company would have received if it had licensed the patents used in the manufacturing process to an unrelated party </li></ul><ul><li>Companies can combine this measure with the other already existing tax incentives </li></ul><ul><li>The system significantly improves the prospects for patent development and holding companies in Belgium, licensing patents to U.S. affiliates </li></ul>
    42. 42. <ul><li>Extensive Network of Double Taxation Treaties </li></ul><ul><li>Belgium has a very extensive network of double taxation treaties, including the Double Taxation Convention between the United States and Belgium of 2007, that went into effect on December 28, 2007 </li></ul><ul><li>The double taxation treaties often provide for reduced or 0% withholding tax rates (for example on dividends and interests on company loans), and exempt (under certain conditions) foreign source profits </li></ul><ul><li>Belgium was the first country to conclude a taxation treaty with Hong Kong in 2004 (0% dividend withholding tax under certain conditions) </li></ul>Reason #9 Highly Attractive Tax Regime
    43. 43. <ul><li>The US-Belgian DTC contains very interesting features for U.S. companies with business plans in Europe: </li></ul><ul><ul><li>0% withholding tax on dividend payments from a Belgian subsidiary to its U.S. parent, provided the U.S. parent owns 10% or more of the Belgian company. This 10% ownership threshold is significantly lower than the threshold in other treaties recently concluded by the U.S. Combined with other general features of Belgium’s domestic tax system for holding companies, this may attract holding companies for holding the shares of U.S. affiliates </li></ul></ul><ul><ul><li>The exemption from withholding tax also applies to pension funds, provided the dividends are not the result of business activities by the fund </li></ul></ul><ul><ul><li>0 % withholding tax on interest. Together with the Notional Interest Deduction, this makes direct loans between the U.S. and Belgian affiliated companies more attractive, and increases possibilities for companies in Belgium to finance U.S. affiliates. </li></ul></ul><ul><ul><li>New categories of taxpayers such as qualified charities or pension trusts will now be able to claim benefits, and strengthened anti-abuse provisions designed to deny inappropriate use of the treaty will bring them into closer conformity with current U.S. treaty policy </li></ul></ul><ul><ul><li>The Convention extends the benefits to companies owned by so-called “equivalent beneficiaries”, which may provide opportunities for multinational groups that are based in the EU, Switzerland or NAFTA </li></ul></ul><ul><li>Other changes in the new Treaty include a more tax friendly treatment of pension plan contributions and an extended information exchange provision </li></ul><ul><li>The U.S. and Belgium will also, upon request by either government, exchange information held by a bank or other financial institution </li></ul>Reason #9 U.S.-Belgium Tax Convention
    44. 44. Reason #10 Tailor made solutions
    45. 45. Reason #10 Tailor made solutions <ul><li>Belgium </li></ul><ul><li>A federal state … made of 3 Regions, with additional regional business incentives </li></ul>
    46. 46. Reason #10 Tailor made solutions <ul><li>Regional Investment Offices in the U.S. </li></ul><ul><li>Flanders Investment & Trade </li></ul><ul><li> </li></ul><ul><li>Wallonia Trade &  Investment Agency </li></ul><ul><li> </li></ul><ul><li>333 North Michigan Avenue, Suite 905 </li></ul><ul><li>Chicago, IL. 60601-4186 </li></ul><ul><li>Tel. (312) 357-6349 </li></ul><ul><li>[email_address] </li></ul><ul><li>Economic & Commercial Office of the Brussels Capital Region </li></ul><ul><li> </li></ul><ul><li>1065 Avenue of the Americas - 22nd floor </li></ul><ul><li>New York, NY 10018 </li></ul><ul><li>Tel. (212) 399-8522 </li></ul><ul><li>[email_address] </li></ul>150 North Wacker Drive, Suite 2100 Chicago, IL. 60606 Tel. (312) 251-0622 [email_address] 6100 Wilshire Blvd., Suite 1200 Los Angeles, CA. 90048 Tel. (323) 857-0842 ext. 14 [email_address] 620 8th Avenue, 44th Floor New York, NY 10018 –USA Tel. (212) 664-0930 [email_address]
    47. 47. 10 (good) reasons to invest in Belgium <ul><li>Economic heart, at the center of a large and prosperous EU customer base </li></ul><ul><li>Access to European centers of decision making </li></ul><ul><li>Trading tradition of trade: more than 85% of Belgian GDP exported </li></ul><ul><li>One of the most popular destinations for foreign investment </li></ul><ul><li>Access to a highly qualified and productive labor force </li></ul><ul><li>Center of knowledge </li></ul><ul><li>Modern and efficient business infrastructure </li></ul><ul><li>Low real estate costs and low costs of living </li></ul><ul><li>Ease of starting up </li></ul><ul><li>Attractive tax regime </li></ul>
    48. 48. THANK YOU … and many, many others !