Corporate income tax (CIT)
In general, the tax base for CIT purposes is determined on an accrual basis and consists of worldwide income less allowed deductions. The rules are equally applicable to companies and PEs. It is assumed that all income received by a company is, in principle, business income. The income tax base is based on the Belgian Generally Accepted Accounting Principles (GAAP) financial statements of the company.
As of tax year 2019 (financial years ending 31 December 2018 and later), CIT is levied at a rate of 29% plus a 2% crisis tax, which is a surtax, implying an effective rate of 29.58% (the prior effective rate amounted to 33.99%). This rate applies to both Belgian companies (subject to Belgian CIT) and Belgian PEs of foreign companies (subject to Belgian non-resident CIT). Capital gains on qualifying shares realised without meeting the one-year holding requirement are taxed at 25.50% (25% plus a 2% crisis tax, which can be offset against available tax losses), provided certain conditions are met. Non-qualifying shares are subject to the 29.58% rate.
As of tax year 2021 (financial years ending 31 December 2020 and later), the standard CIT rate is lowered to 25%, without any crisis tax (will be abolished). Capital gains on qualifying shares realised when meeting all conditions remain fully exempt. Non-qualifying shares will be subject to the 25% rate.
Large companies (i.e. not SMEs, see below) are subject to a fairness tax on all or part of their distributed dividends. The fairness tax is a separate assessment at a rate of 5.15% (5% increased by a 3% crisis surtax) borne by the company distributing the dividends.
The tax is only applicable if, for a given taxable period, dividends have been distributed by the company that stem from taxable profit that has been offset against (current year) NID and/or carried forward tax losses. Liquidation bonuses and share buy-back proceeds are not in scope of the fairness tax.
However, the Constitutional Court decided in its decision of 1 March 2018 to repeal the fairness tax as of tax year 2019 (financial years ending 31 December 2018 and later). The annulment does not have a retro-active effect, except in specific situations (e.g. redistribution of EU dividends).
As of tax year 2019 (financial years ending 31 December 2018 and later), SMEs (based on article 15 of the Companies Code and provided several other conditions are met) will be able to profit from a decreased rate of 20% plus a 2% crisis tax, implying an effective rate of 20.40% on the first bracket of 100,000 euros (EUR) profit.
As of tax year 2021 (financial years ending 31 December 2020 and later), this rate will amount to 20% as the crisis tax will be abolished.
A surcharge is due on the final CIT amount upon assessment (including the crisis surtax). The surcharge can be avoided if sufficient advance tax payments are made (see Payment of tax in the Tax administration section for more information). For tax year 2018 (financial years ending 31 December 2017 and later), the surcharge is 2.25%. As of tax year 2019 (financial years ending 31 December 2018 and later), the surcharge amounts 6.75%.
Secret commissions tax
A special assessment of 103% (100% plus 3% crisis tax) is applicable to so-called ‘secret commissions’, which are any expense of which the beneficiary is not identified properly by means of proper forms timely filed with the Belgian tax authorities. These expenses consist of:
- Commission, brokerage, trade, or other rebates, occasional or non-occasional fees, bonuses, or benefits in kind forming professional income for the beneficiaries.
- Remuneration or similar indemnities paid to personnel members or former personnel members of the paying company.
- Lump-sum allowances granted to personnel members in order to cover costs proper to the paying company.
The secret commissions tax can be limited to 51.5% (50% plus 3% crisis tax) if certain conditions are met. In some cases, no secret commissions tax applies.
As of tax year 2019 (financial years ending 31 December 2018 and later), the special assessment will amount to 102% (100% plus 2% crisis), be it that this tax can be limited to 51% (50% plus 2% crisis tax).
As of tax year 2021 (financial years ending 31 December 2020 and later), the special assessment will amount to 100%, be it that this tax can be limited to 50%, and will no longer be tax deductible.
Minimum tax base
A minimum tax base is introduced for companies with a taxable profit that exceeds EUR 1 million via the limitation of certain deductions. As of tax year 2019 (financial years ending 31 December 2018 and later), deductions outside the basket are fully deductible. Deductions within the basket can only be claimed up to the amount of 70% of the profits exceeding the EUR 1 million threshold. The remaining 30% will be fully taxable at the CIT rate.
The deductions within the basket are the deduction of tax losses carried forward, the dividends-received deduction (DRD) carried forward, the innovation income deduction carried forward, and the NID (both carried forward and new incremental NID). Other deductions are excluded from the basket and thus fully deductible (e.g. current year tax losses, current year innovation income deduction, investment deduction [both current year and carried forward]).
Taxable income of non-residents
Certain income attributed by a Belgian tax resident to a non-resident is taxable in Belgium. A paragraph in the Belgian Income Tax Code functions as a ‘catch all clause’ to tax certain payments made to a non-resident of Belgium.
The ‘catch all clause’ applies in case the following conditions are all met:
- Revenues stem from ‘any provision of services’.
- Revenues qualify as benefits or profit in the hands of the non-resident beneficiary.
- The services are provided to an individual tax resident in Belgium in the framework of one’s business activity, a corporation, a taxpayer subject to the legal entities tax, or a Belgian establishment.
- There are (in)direct links of interdependence between the foreign supplier and its Belgian client.
- Such revenues are taxable in Belgium according to a double tax treaty (DTT) or, in the absence of any DTT, if the non-resident taxpayer does not provide evidence that income is actually taxed in the state where the taxpayer is resident.
Given the condition of ‘any direct or indirect links of interdependence’, provision of services between non-related parties should thus, in principle, remain out of scope.
The rate amounts to 33% on the gross fee paid (resulting in an effective tax rate of 16.5%, as a lump sum deduction of 50% as professional expenses is allowed).
Local income taxes
No tax is levied on income at the regional or local level. Note that immovable assets (land, building, and possibly machinery and equipment) situated within the Belgian territory are, in principle, subject to an immovable WHT that is levied locally.