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Posted By: Christophe Boeraeve | 05 Jun 2017

Doing business in Belgium

Doing business in Belgium

By Christophe Boeraeve – Law Right

In this article you would be able to find useful information and links to all you need to know of doing  business in Belgium

Part 1                    Forming a subsidiary or branch in Belgium

Part 2                    Overview of the Belgian economy in 2016/2017

Part 3                    Constitution of a Belgian Company & Obtaining of a Belgian professional card

Part 4                    Legal And Practıcal Aspects Of The Incorporatıon Of A Company In Belgıum

Part 5                    Where to Start?

Part 6                    Summary Of Tax Advantages To Invest In Belgıum

Part 1 Forming a subsidiary or branch in Belgium

Introduction

A subsidiary in the form of a company organized under Belgian law is endowed with legal personality and hence forms a legal entity distinct from its parent

A branch, on the other hand, although perhaps constituting a separate economic entity from the head office of the foreign company, which sets up said branch, is not endowed with a distinct legal personality, but is part of the legal entity of that foreign company.

This basic distinction explains differences in the law as applied to branches and subsidiaries, which differences shall be discussed in the following detailed article which will talk about: Formation, Legal Aspects and Tax Aspects of a subsidiary/branch

https://www.adamglobal.com/downloads/Belgian%20subsidiary%20or%20branch.pdf

 

Part 2 Overview of the Belgian economy in 2016/2017

The Belgian Economy

The Belgian economy is largely dependent on international conditions and economic indicators indicate an improvement in the economic situation. Economic activity recorded moderate growth of 1.5% in 2015 and the 2016 growth estimate has been revised down to 1.2%, which is more than expected. The economy is expected to grow by 1.4 percent and 1.5 percent in 2017 and 2018, respectively.

The following link will give an insight about various trade activities that took place in 2016/ 2017 within Belgium and across the globe.

https://www.adamglobal.com/downloads/Report%20of%20Activities%202016%20-%202017.pdf

Part 3 Constitution of a Belgian Company &

Obtaining of a Belgian professional card

1) Minimum Capital requirement

A SPRL is a form of company with minimum two shareholders (“single shareholder” companies are also available).

A minimum capital of € 18,550 has to be subscribed by the founders and, € 6,200 paid on a bank account issued in the name of the company information.The bank will need documents identifying the domicile of the managers and a description of the specific business the Company will engage in.

The bank representatives also have to meet “face to face” the future managers of the new company.

The bank will then issue a certificate of deposit and the founders will, together with this certificate and the financial plan they have prepared with an accountant, appear before a notary to formally incorporate the company.

2) Financial Plan drafted with the assistance of an accountant

This plan should give a detailed overview of all debts, assets & income required for the first two years of operation of the company.

In order to assist in drafting this financial plan, the accountant will need various information:

– Turnover

– Expected costs such as

. Rent

. Furniture

. Insurances

. Cars

. Consultants’ Fees

– Investments

– Loans

3) Public Notary & preparation of the Articles of Incorporation

The notary must be provided with various information in order to prepare the deed, e.g. the Corporate name & purpose, number of shares & identity of the shareholders, managers & board members.

The founders-subscribers must be present or represented by someone holding a proxy.

When the deed is signed, the notary shall provide the persons who are appointed members of the board of the new company, a certificate confirming that the company is incorporated.

This certificate allows the manager to obtain the release of funds that have been paid on the company’s bank account.

4) VISA & PROFESSIONAL CARD

Foreign (non-European Economic Area) nationals intending to settle in Belgium as self-employed (directors of an EE-company) have to obtain a professional card (carte professionnelle/beroepskaart)& a Visa.

The professional card is a form of permit for self-employed individuals and directors who are not Belgian citizens; are not citizens of a Member State of the European Economic Area (EU Member States plus Iceland, Norway and Liechtenstein) or Switzerland; or have not been exempted from this requirement.

Applications for professional cards must be submitted either to the Belgian diplomatic or consular representation in the country of residence if the applicant resides abroad.

The road to become self-employed does not end with a professional card and the procedure mentioned above. One also has to evidence that he/she possess basic management knowledge.

Becoming a self-employed individual (or director of a Belgian company) will depend on the public interest for Belgium of the specific business to be carried, which will be appreciated according to various economic parameters by the Belgian regions, i.e. it is examined whether the business project meets economic needs, creates employment, involves useful investments, what economic impact it has on enterprises and whether it promotes export, innovative or specialized activity.

Hence, the project funding the application for a professional card application should produce clear and measurable economic benefits for Belgium.

 Part 4 LEGAL AND PRACTICAL ASPECTS OF THE INCORPORATION OF A COMPANY IN BELGIUM IN BELGIUM

This note is a simplified memorandum of all legal and practical aspects of the opening of a company in Belgium OR the purchase of shares of an existing company.

This memorandum may serve as a check-list of the obligations imposed UNDER BELGIAN LAW.

  1. OPENING OF A COMPANY IN BELGIUM

The purpose of this section is (a) to outline the various formalities required for the opening of a company in Belgium and (b) to gather the requested information under Belgian law.

(a) You will find on those 2 official websites all the information and formalities for the opening of a company in Belgium http://www.belgium.be/en/economy/how_to_create_a_company/ & http://business.belgium.be/en/managing_your_business/setting_up_your_business/

(b) Please find attached herewith our draft articles of incorporation as well as our document listing all the information needed (English version).

  1. PURCHASE OF SHARES OF AN EXISTING BELGIAN COMPANY

Foreign investors may also consider  buying the shares of an existing company. If a due diligence needs to be made, the advantages of such a solution is that you do not need to have the minimum paid-up capital ready (6.200 euros), no public notary fees apply, the company may already benefit from a reputation based on its commercial activity, founders, members, directors, staff members… and network (intangible assets).

Here is a brief outline of the tax aspects of acquiring such shares of a Belgian company:

  1. The seller

If the seller is a Belgian individual, he will not be taxable on the capital gain realized on the sale of the shareholding, except if the sale has a speculative character.  However, the capital gain will be taxable (at a 16.5% rate) even in the absence of any speculation if the shares are part of an important shareholding and the buyer is a non-Belgian corporate entity.  A shareholding is important if at any moment during the five years preceding the sale, the seller and his family have owned directly or indirectly a participation of more than 25% in the company.  The transfer of shares belonging to such an important shareholding does not give rise to the taxation of the capital gain if the shares are sold to a Belgian corporation or individual unless they are subsequently transferred to a foreign company within 12 months following the sale.  This rule explains why foreign companies buying a substantial shareholding in a Belgian company from individual shareholders are requested to use a Belgian company for the purpose of acquiring the shares. Such Belgian company has then to underwrite the obligation not to sell within 12 months its shareholding to a foreign company.

If the seller is a Belgian company, the capital gains will not be taxable provided that the dividends distributed by the (real estate) company would qualify for the dividend received deduction.

If the seller is a foreign company with tax residence in a country with which Belgium has concluded a tax treaty and the company has no permanent establishment in Belgium to which the shareholding is effectively connected, the seller will not be taxable in Belgium on the capital gain realized on the sale of the shares in the (real estate) company.

  1. The company

The company itself will not incur any tax liability as a result of the transfer of its shares.  The sale of the shares will not affect the tax situation of the company (e.g., no stepped-up basis of its assets and a possible loss of tax loss carry forward).

  1. The buyer

If the buyer is a Belgian company, it will have to record the shares at their acquisition price; consequently, there is no possibility to record part of the price as goodwill which is depreciable.  Any reduction in value on the shares is not tax deductible.  Any financing expenses incurred by the buyer will be fully tax deductible from any taxable income of the buyer, even if not related to the shareholding.  Note that there does not exist any tax consolidation in Belgium.

Part 5 Where to Start?

A to Z assistance provided by our firm

As recognized experts in assisting residents of both the UAE and Belgium (http://www.law-right.com/international/united-arab-emirates/&http://www.ablcc.org/component/sobipro/?sid=265:louise-lawyers&Itemid=0  see also: https://www.youtube.com/watch?v=butStZsHC-E)

We can handle all filing requirements with the National Bank of Belgium, the clerk’s office of the commercial court and the Belgian State Gazette, as well as all registration formalities with the commercial register and the V.A.T. authorities.

We can prepare all documents and special forms, including a draft of the affidavit to be issued by the company.  We can also arrange for all required translations with outside translators.

We can also assist with the application procedure for a work permit or a professional card for the company’s permanent representative in Belgium and any other staff member.

Our fees for those services would range between 15 to 30 hours at the hourly rate of 180 Euros.

You should add around 2000 Euros for the public notary fees and have 6.200 Euros (the minimum paid-up capital) on the bank account of the company the day we set it up (your total liability as shareholders of the company is 18.600 Euros). Our fees may be paid by the company with the minimum paid-up capital requirement (6.200 Euros).

Housing the statutory seat of the company in our offices would cost you 100 euros per month and will also put you into contact with various governmental and private bodies that assist and sometimes offer office space in various incubators and business centers: http://www.belgianchambers.be/en/over-ons/

 

Part 6 SUMMARY OF TAX ADVANTAGES TO INVEST IN BELGIUM

Below you may find some useful links to the summary of tax advantages to invest in Belgium;

https://www.business.belgium.be/en/investing_in_belgium/tax_benefits

  1. NO capital gain tax on the sale of shares, either as an individual or via a company:

http://www.taxbites.be/taxation/content/view/64/42/

  1. Notional interests

Notional interest deduction: deduction of a deemed interest rate on venture capital funding gives you a lower tax base and, therefore, a lower effective rate.

https://finances.belgium.be/en/ondernemingen/vennootschapsbelasting/belastingvoordelen/notionele_interestaftrek

I provide for:

  1. A general reduction of the effective corporate tax rate for all companies, and a higher return after-tax on investment
  2. The promotion of capital-intensive investments in Belgium, and an incentive for multinationals to examine the possibility of allocating such activities as intra-group financing, central procurement and factoring to a Belgian group entity.

The principle is very simple. The amount that can be deducted from the taxable base equals the fictitious interest cost on the adjusted equity capital, or simply:


Notional Interest Deduction = Notional interest rate x adjusted equity 

Example 1 

Tax year 2013, i.e. accounting year ending on 31 December 2012 or later in 2013 

In the first example, the balance sheet of the Belgian entity shows that the share capital has been used for group financing. With the application of an intra-group interest rate of 4 %, the profit before taxes is 4.000. Before the introduction of the notional interest deduction, the corporate tax would have been 1.360 (or 33,99 %). Thanks to the notional interest deduction, the effective corporate tax to be paid is 340 (or 8,5 %) only.

 

Assets Liabilities
Group Financing Share capital
100.000 100.000

 

P & L account Before notional interest deduction With notional interest deduction
Profit before tax 4.000 4.000
Notional interest deduction (3 %) / – 3.000
Taxable 4.000 1.000
Corporate tax (33,99 %) 1.360 340
Effective tax rate 33,99 % 8,5 %

 

  1. Innovation income deduction

85% tax deduction for qualifying income from patents, copyrighted software, breeder’s rights, orphan drugs and data or market exclusivity.
Like the PID, the INNID constitutes, a tax deduction for certain qualifying IP income. The percentage of this deduction is, however, increased to 85%. It is also provided that this percentage can be adjusted going forward.

http://www.bakermckenzie.com/en/insight/publications/2016/12/new-belgian-ip-tax-regime

http://www.amcham.be/blog/2017/03/rd-belgium-gets-extra-boost-new-innovation-income-deduction

  1. Deduction on definitively-taxed income 

Paid dividends between companies are up to 95% tax exempt.

  1. Interest deductible

If you take out a loan to acquire the shareholding, it may also be deductible.

  1. Investment deduction on investment in new assets

Also on investments in energy savings, in R&D.

  1. Unrestricted carry forward of tax losses to following years
  2. Transfer of vat on imported goods: no need to pay the vat, or a guarantee, in advance
  3. Federal tax exemption on a number of regionally awarded subsidies
  4. Reduced social security contributions for employers
  5. Special tax regimes for e.g. the diamond sector

State aid: Commission authorizes alternative income tax regime for wholesale diamond sector in Belgium

Brussels, 29 July 2016

The European Commission has found that Belgian corporate tax provisions applicable to the wholesale diamond sector were in line with EU State aid rules. The provisions do not selectively favor certain companies and therefore involve no State aid within the meaning of EU rules.

http://europa.eu/rapid/press-release_IP-16-2683_en.htm

Remember to use my unique TAX OPTIMIZATION METHOD:

https://prezi.com/s5byiawmk_vr/tax-optimization-method-4-ws/, one eventually chooses the percentage of taxes one LOVES to pay, see also: http://www.jaimepayermesimpots.com/en/.

Economic Mission to the UAE

Useful contacts

Organisme Contact Mail TEL
Dubai Chamber deema dajani Deema.Dajani@Dubaichamber.com +971 4 202 8402
Dubai Chamber Ayesha Al Muhairi Ayesha.Almheiri@Dubaichamber.com +971 4 2028458
Abu Dhabi Chamber Omar Wahbi o.wahbi@adcci.gov.ae +971 2 6177503
Sharjah Chamber Fatema Al Muqarrab fatema@sharjah.gov.ae +971 6 5938725
RAK Chamber Imad Oubiri  
RAK Investment Authority Leila Kheloufi l.kheloufi@rakia.ae +971 7 206 86 66
Fujairah Chamber Sultan Jemei Obaid Jemei Chamber@fujcci.ae +971 9 2053737

 

 

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