A holding company is a type of company that focuses in acquiring and managing shares of other companies or in controlling other companies. A holding has the role of structuring the organization and financing the activities of other companies. Holding companies are not limited to these activities, as they can also perform other activities as well, such as commercial transactions or property purchase transactions. Foreign ownership is permitted in Belgium for holding companies.
Holding companies can be incorporated in Belgium as limited by shares – SA, or private limited companies – SPRL. The minimum share capital required depends of the type of company. Holding companies are subject to the normal corporate tax rate of 33.99%. A Belgian holding company does not need special approvals or particular controls, however it’s important to observe the holding requirements for taxation, respectively 10% of the corporate tax.
Benefits of a holding company
One of the most important benefits of a holding company in Belgium is that the dividends received by it may be a subject to a reduced corporate tax, even 95% exempt, considering that certain requirements are satisfied. In addition, a capital gains exemption is possible if the dividends qualify for the participation exemption.
The holding company may benefit from an exemption of company liquidation and from an exemption from the withholding tax on payment of interest.
Holding companies are a great option because they have lesser risks involved and reduced exposure. A holding can use its relationships with a subsidiary to secure loans and to create collateralized loans. It is possible for a holding company to set corporate policies in subsidiaries, due to the owned shares, but it doesn’t have to interfere with the management of the subsidiaries.
Dividends and capital gain exemptions
Dividends received by a Belgian company may be a subject of a reduced level of corporate income tax if they are received from an EU subsidiary where the Belgian company owns at least 10% of the shares. If the dividends are received from a non – EU company, 95% of them are exempt from the Belgian corporate income tax. In order to benefit from the exemption, the Belgian company must own minimum 10% of the shares, or it owns a shareholding with an acquisition value of at least 1.2 million euros for a minimum continuous period of 1 year. It is also important that the subsidiary is not a resident of a territory with a more favorable tax regime.
As far as capital gains goes, the gains received from the sale of shares are exempt from tax if the dividends qualify for the participation exemption. Capital losses, on the other hand, are not tax deductible. An exception is made for capital losses realized on the occasion of the liquidation of the company and to the extent that paid – up capital is lost.
All companies operating in Belgium, including holding companies that are subject to corporate tax may deduct a part of their adjusted equity capital.
Considering all these aspects, opening a holding company in Belgium is a relatively easy and quick process, while offering many important benefits for foreign shareholders who wish to make investments in this country.