Types of taxes in Belgium

Tax payment in a country is considered the main income source in order to provide for need of the people and legal entities. Belgium is one of the most progressive countries in the EU because of its efficient tax system.

For residents or companies operating in Belgium, the taxes vary in accordance to monthly salary, properties, capital gain, type of company and other factors. Like in any country, there are different types of taxes in Belgium.

Corporate taxes in Belgium

Companies who operate in Belgium, their subsidiaries or Belgian companies have to pay various taxes.

The progressive rate of the corporate income tax ranges from 30% to 39%, depending on various factors. Social insurance contributions have a tax rate of almost 35% of the payroll.

The capital gains tax is a type of tax that must be paid in Belgium if a company sells, donates or exchanges certain properties. The percentage of this type of tax is almost 19.5%. If a company acquires a property, than a registration fee of approximately 12.5% of the value is applied. Property taxes in Belgium vary in accordance to the inventory.

Other corporate taxes paid by companies in Belgium include the stamp duty, the VAT and withholding tax on dividends, royalties and interests.

Company director tax

As the director of a company in Belgium, various taxes may be applicable to the income of the person holding this position. A company director is a person who is mandated to act as a director, general manager, liquidator or the like, as well as a person who holds a senior job or position within the company that involves daily management of commercial, technical or financial nature, without a contract of employment.

Taxable income for company directors consists of the following:

Interest – bearing advances may be treated as dividends under certain circumstances. If the interest qualifies for treatment as dividends, it is subject to a withholding tax at the rate of 25%. This tax cannot be deducted from the company’s tax as a business expense. If the income is treated as interest, it is a subject of a 15% tax rate.

A company director may rent to the company a building or a land. The rent paid for the property is deemed to be income for the property and is taxed at 60%. The tax may be further reduced by deducting interest paid on loans for acquiring or maintaining real estate that generates income. In order to prevent abuse, letting income is treated as professional income where it exceeds certain ceilings. The rent that the company pays is deductible from it taxable income.

Income from professional activities undertaken by company directors, such as professional remuneration is also subject of taxation. Statutory wage – bill tax is withheld on remuneration paid to company directors. However, this does not cancel out the obligation to make tax payments on account.

Individual taxes

All the persons who are listed and registered in the State Register need to pay individual taxes. Residents in Belgium are taxed on their worldwide income, derived from wages and salaries, as well as on income from real estate, securities and other capital investments. Non – residents have to pay taxes only on their Belgian – source income.

Other types of taxes in Belgium

Other individual taxes in Belgium include inheritance taxes. The inheritance tax is levied on the net value of the estate of the deceased. Each of the heirs pays this tax separately for their share of the inheritance. Various anti – avoidance rules increase the value of the estate:

• Certain rights and assets, which are acquired as a consequence of the death of the deceased.
• Gifts in the marriage contract that grant the surviving spouse more than half of the community property.
• Lifetime gifts made less than three years before of the time of death.
• Any rights granted to a third party under a life insurance contract are liable for this tax, except for statutory insurance schemes or employee pension schemes.
• Any schemes under which a third party had full property rights on and asset, but in which the deceased had a life interest are considered a gift in disguise and are added as value to the estate, unless the beneficiary proves that it was not a disguised gift.

In Belgium, the inheritance tax is paid to the regions. The regions set their own rates and the applied rates depend on the region where the deceased was a resident for most of the five years before death. Different tax rates also apply depending on the heir’s relationship with the deceased.