【From CFTInet, Beijing 07/07/2000】 MAJOR DEVELOPMENTS
The main provisions enacted in the 1996?997 tax
laws are:
q Increased the taxable real estate income for personal income taxes;
q Established a thin capitalization rule;
q Modified the participation-exemption rule (RDT?RBI?;
q Limited certain tax-deductions in the case of acquisitions or changes in the control of a company.
INCOME TAXES ON CORPORATIONS
1. Rates
Companies that are domiciled or effectively have their management in Belgium are subject to taxation on their worldwide income. The basic rate is 39%, which is reduced as follows:
Taxable Income
Tax on Percentage
Over Not Over Lower Amount on Excess
BEF 0 BEF 1,000,000 BEF 0 28%
1,000,000 3,600,000 280,000 36
3,600,000 13,000,000 1,216,000 41
13,000,000 5,070,000 39
These reductions, among others, are not granted if at least 50% of the share capital is held by another company or other companies, Belgian or foreign, if the company distributes a dividend exceeding 13% of its share capital or is classified as a holding company, or if the company allocates to each of its directors as remuneration for the tax period less than the lower of BEF 1 million and the taxable profit for the period.
An additional crisis contribution of 3% applies to all income taxes with the exception of withholding taxes on dividends, royalties, and interest paid.
As a result of the above, branches and subsidiaries of foreign corporations are subject to the flat rate of 40.17% (39% + (39% x 3%)) on profit at all levels. If taxes are not prepaid during the year on an estimated basis, penalties are assessed on the unpaid tax.
2. Local Income Taxes
None.
3. Capital Gains Taxes
Gains realized on the sale of fixed assets that have been held for less than five years are taxed as ordinary income. Gains realized on the sale of fixed assets held for more than five years are also taxable, but if the proceeds are reinvested, tax can be deferred over the depreciation period of the asset acquired as reinvestment.
Capital losses are fully deductible and are offset against trading income.
Gains realized on the sale of shares are tax-exempt under a similar tax condition as for the deduction of tax from dividends received (see item 28). Capital losses on the sale of shares are never deductible, except in case of liquidation and subject to certain limitations.
4. Branch Profits Taxes
If a nonresident company does not have a permanent establishment in Belgium, it is subject to tax only on income derived from property in Belgium, such as real property income, dividends, interest, and royalties.
If a nonresident company has a permanent establishment in Belgium, it will be taxed as a branch of a foreign enterprise. All its Belgian real estate income must be included in the taxable income of the Belgian permanent establishment. Investment income will not be included, unless effectively
connected with the permanent establishment.
To a large extent, a Belgian branch of a foreign company is subject to the same rules for determination of taxable income as a domestic Belgian corporation. However, no deduction is allowed for interest or royalties paid by a branch to its home office or to another branch or division of the same company. In addition, assessments to nonresidents tax (similar to corporation tax) are made on a notional basis if the branch cannot show that all transactions have been made on an arm-length basis (see item 17).
5. Foreign Tax Reliefs
A 75% rate reduction applies to net income earned and taxed abroad, unless that income is exempt by application of a double tax treaty.A system of tax credit applies to interest from a foreign source; the credit represents the amount of foreign tax, limited to 15% of the gross interest received. Moreover, the amount of the tax credit is limited to the proportion of financial charges to qual
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