Disclaimer: This article was accurate at the time of publishing. To obtain the most up-to-date information, please get in touch with our local experts.
Belgium is located in the heart of the European Union and as such a strategic gateway to Europe’s 500 million customers. Belgium is home to a modern business environment with a lot of regulations and a high level of bureaucracy which can make it difficult to navigate through the local procedures without prior knowledge of the country and its regions.
Bordering France, Germany, the Netherlands and Luxembourg and within touching distance of Great Britain, Belgium is located at an intersection of some of the biggest economies in the world. London, Paris, Amsterdam and Frankfurt are well within an hour of Brussels, which is home of the European Union, The North Atlantic Treaty Organization (NATO) and hundreds of international non-governmental organizations. A modern infrastructure, common trade policies and a population of 11 million add to the appeal of Belgium, other than it being a logistic springboard into neighboring areas.
Belgium is one of the most important centers of economic activity in Europe. Several investment incentives granted by the federal and regional governments such as financial assistance, investment subsidies and tax breaks have resulted in a business friendly environment.
In other to find your way around the different procedures, having local help on board to streamline and speed up the different processes is essential.
Starting a Business
A subsidiary or branch is the most common business form used to establish an entity in Belgium.
Although Belgium knows more than ten different types of legal entities, the most commonly used entities are a public limited liability company (NV/SA) and a private limited liability company (BVBA/SPRL). The incorporation process of a Belgian company can in general be finalized within a week and requires the following steps: opening of a blocked bank account in which the company’s capital can be deposited, preparation of a financial plan, meeting before a Belgian notary and subsequent release of the share capital, registration with the Crossroad bank of Enterprises and affiliation with the social security. Depending on the activities of the Belgian company other types of registrations such as a VAT registration will be required. A company will have legal personality as from the moment the deed of incorporation is registered with the Commercial Court. It is however possible to undertake activities in the name of the Belgian company provided that they are ratified within two months after its registration with the Commercial Court.
Ongoing obligations of a company or branch
Once incorporated, a company is obliged to comply with at least the following annual obligations:
- Financial statements need to be prepared in a pre-defined format and deposited with the National Bank of Belgium (if the Belgian company is not considered as a small or medium sized company an audit is required. In case the Belgian company is part of a group of companies that needs to prepare consolidated financial statements, the criteria need to be calculated on a consolidated basis);
- An annual meeting of the board of directors and of the shareholders needs to be convened;
- An annual corporate income tax return needs to be prepared;
Depending on the activities of the company several additional filings might need to take place such as the filing of withholding tax returns, a social balance sheet, VAT-filings, statistical reporting with the National Bank of Belgium etc.
For a branch, the following recurring obligations apply:
- The financial statements of the parent company need to be translated into one of the official languages of Belgium and deposited with the National bank of Belgium;
- Internal financial statements need to be prepared on the basis of which a corporate income tax return needs to be filed;
- Depending on the activities of the Belgian branch, several additional filings might be required such as the filing of VAT-returns, withholding tax returns, etc.
The corporate income tax rate amounts to 33,99%.
The standard VAT rate for most products and services amounts to 21%, reduced rates of 6% or 12% are applied to certain products (such as food, water, pharmaceuticals, etc.)
In general a withholding tax rate of 25% on dividends distributed or interest payable applies, however this rate is reduced in specific cases to 15% or 21% and often no withholding tax is due as a consequence of the European Directives of which Belgian is part and the many double tax treaties Belgium has concluded (e.g. Hong Kong, Mexico, Macao, the USA,… a full list of countries with whom Belgium has concluded a double tax treaty is available on www.fisconet.fgov.be).
As briefly mentioned in the introduction, the Belgian government has introduced certain tax incentives such as The Notional interest Deduction, Full Capital gains exemption if certain thresholds are met (no longer applicable for multinationals as from the fiscal year 2014) and a foreign tax credit.
The existing incentives and tax regime are currently under review by the Belgian government.
TMF is following up on this closely.
Working in Belgium
Payroll is a highly complex matter to deal with in Belgium. Not only is this due to the difference in treatment of blue collar and white collar workers but also due to the different collective bargaining agreements that have been concluded on a sectorial level.
Citizens of the European Union do not require a work permit to come and work in Belgium, they will however require a residence permit if they intend to work in Belgium for more than three months. Non EU-residents will also require a work permit.
Dealing with construction permits
The time to obtain a construction permit varies from region to region. Obtaining a building permit from a municipality can take up to 110 days and obtaining a sewage and water connection can be similarly time incentive. In some cases permission from the fire department needs to be granted.
The World Bank and the IFC rank Belgium in the 176th place in the works for registering property. The procedure is initiated by a Belgian notary.
Getting Credit and protecting investors
Belgium is ranked in 70th place in the world by the World Bank and the IFC in respect of flexibility for obtaining a credit. The investor protection ranks much higher at the 19th place.
Trading Across Borders
Belgium is a part of the EU customs union which allows the free movement of goods without import duties and trade barriers among the EU member countries. Custom duty is only applicable on goods imported from outside of the European Union.
Excise duties are applied on petrol, heavy fuels, other energy products tobacco and alcoholic beverages.
A foreign company established outside of the European Union, has to apply separately for a VAT-number through a local or fiscal representative for importing goods into Belgium under its own brand.
Depending on the type of contract that needs to be enforced, a different procedure before a different court needs to be followed. Filing a claim and the servicing of such a claim are a streamlined process, however the time spent in court will vary on a case by case basis.
Resolving Insolvency – Liquidation process
When it comes to insolvency, Belgium supports a quick judgment by which it usually takes less than a year to complete with a healthy recovery rate.
Belgium knows two ways of liquidating a Belgian company. If the Belgian company does not have any liabilities (except towards its direct shareholder(s)), the company can be put into liquidation and liquidated in the same notary deed. A classic liquidation procedures can take up to six months.
We have the local knowledge to help you navigate these minefields. Whether you want to set up in Belgium or just want to streamline your Belgian operations, talk to us.