United States-Belgium Tax Treaty
Belgium – US Tax Treaty Quick Summary. Belgium is a constitutional monarchy combined with a parliamentary democracy. It is comprised of three regions: The Flemish region; The Brussels region; and the Walloon region.
Belgium underwent a corporate income tax reform under the Corporate Tax Reform Law of 25 December 2017–which was subsequently amended in 2018. The reformed tax provisions provide for a reduced corporate tax rate, a minimum tax base, and a participation exemption system, as well as other measures. Belgium undertook the European Anti-Tax Avoidance Directive (ATAD) measures, which became effective in 2020, including controlled foreign company (CFC) rules, hybrid rules, an EBITDA rule, and exit taxation.
The individual tax system underwent reform through the 6th Reform of the State in 2014 and still further subsequent reforms. Personal income tax rates range up to 50%. Under the 6th Reform, Belgian regions are authorized to impose a regional personal income tax.
U.S-Belgium Tax Treaty
- Convention between the United States of America and the Kingdom of Belgium for the Avoidance of Double Taxation and the Prevention of Fiscal Evasion with respect to Taxes on Income was signed at Brussels on July 9, 1970
- TECHNICAL EXPLANATION OF U.S. – BELGIUM INCOME TAX CONVENTION, SIGNED JULY 9, 1970
- CONVENTION BETWEEN THE GOVERNMENT OF THE UNITED STATES OF AMERICA AND THE GOVERNMENT OF THE KINGDOM OF BELGIUM FOR THE AVOIDANCE OF DOUBLE TAXATION AND THE PREVENTION OF FISCAL EVASION WITH RESPECT TO TAXES ON INCOME
- TECHNICAL EXPLANATION OF U.S. – BELGIUM INCOME TAX CONVENTION, SIGNED JULY 9, 1970
- Technical Explanation of the Convention between the Government of the United States of America and the Government of the Kingdom of Belgium for the Avoidance of Double Taxation and the Prevention of Fiscal Evasion with respect to Taxes on Income, signed at Brussels on November 27, 2006
Currency. Euro (EUR).
Common Legal Entities. Limited liability company (SA/NV), private limited liability company (SRL/BV), cooperative limited liability company (SC/CV), general partnership (SNC/VOF), ordinary limited partnership (SCS/Comm.V), and branch. The Belgian Companies and Associations Code, enacted under The Act of 23 March 2019, provides for relevant new corporate law theories and reduced the types of entities available.
Tax Authorities. FOD Financien / SPF Finances.
Tax Treaties. Belgium is a party to more than 90 tax treaties, most of which follow the OECD model treaty. Moreover, Belgium is a signatory to the OECD MLI, which entered into force for Belgium on October 1, 2019.
Corporate Income Tax Rate. 25%.
Individual Tax Rate. 25% – 50% (depending on income).
Corporate Capital Gains Tax Rate. 0% / 25%.
Individual Capital Gains Tax Rate. 0% / 16.5% / 33%.
Residence. A corporation is a resident if its principal establishment, registered office, or place of management is in Belgium. An individual is a resident in Belgium if his or her domicile is in Belgium during the year.
Dividends. 30% (company resident) / 5% – 30% (individual resident) / 0% – 30% (company nonresident) / 5% – 30% (individual nonresident).
Interest. 0% – 30% (company and individual residents and nonresidents).
Royalties. 15% / 30% / Various (company and individual residents and nonresidents).
Transfer Pricing. Arm’s length standard.
CFC Rules. Foreign company may be a CFC if it meets the “control” and “low taxation” requirements. If CFC status, a Belgian company may be taxed on the “nondistributed profits” of the CFC if an essential purpose of the CFC is for obtaining a tax advantage.
Hybrid Treatment. The treatment of “hybrid mismatches,” “hybrid entities,” and “hybrid transfers” is aligned with the EU Anti-Tax Avoidance Directive.
Inheritance/estate tax. Inheritance tax in Belgium is imposed at regional levels and the rate depends on the region. Belgian also has a gift tax on certain transfers of real and personal property.
OVERVIEW OF TAXATION IN BELGIUM
Belgium imposes an income tax on net income at the national and local levels. Income subject to tax includes capital gains. Taxable income is computed on an annual basis and is either taxed by assessment or by a withholding tax. Any withholding tax paid may be credited against the income tax liability, and any excess is refunded. Aside from a few special exceptions, Belgium residents and nonresidents are generally subject to the same tax rules and tax rates on Belgian-source income.
Residents of Belgium are subject to tax on their worldwide income. Belgian-source dividends and interest income are subject to withholding. Capital gains are subject to tax.
Certain items of income (e.g., capital gains) are generally taxable at separate tax rates. The national income tax is subject to a regional surcharge ranging generally from zero to nine percent (no explicit maximum is provided), depending on the region/municipality.
Corporations resident in Belgium are subject to tax on their worldwide income. A corporation is any company, association, establishment, or institution that has legal personality and is engaged in business or in profit-making activities. A corporation is a resident of Belgium if it has its legal seat, main establishment, or place of effective management in Belgium.
In general, all income derived by a corporation is taxable business income; this includes income from real property or personal property. Capital gains are generally taxed at a 25% rate.
International Aspects of Taxation in Belgium
An individual is considered a resident of Belgium if his or her main home or center of economic interests is in Belgium. Nonresident individuals are subject to the same tax rules and tax rates on Belgian-source income as those generally applicable to resident individuals. Belgian-source income includes: income from real property located in Belgium; personal property income (e.g., dividends, interest, and royalties) produced or collected in Belgium; profits generated through a Belgian establishment; gains derived from a professional activity exercised in Belgium; profits and gains derived from a former independent professional activity exercised in Belgium; certain employment; certain pension and annuities; income derived by nonresident public performers and athletes from performances in Belgium; and miscellaneous income obtained in Belgium.
A foreign company is subject to the same tax rules and tax rates as resident companies if it has an establishment in Belgium or receives Belgian-source income. A Belgian establishment is any fixed installation through which a foreign enterprise conducts, either wholly or partly, its business activities in Belgium. The activities of a nonresident’s representative are also deemed to constitute a Belgium establishment. Belgian-source income includes: income from real property located in Belgium; dividends, interest, and royalties produced or collected in Belgium; profits generated through a Belgian establishment; gains derived from a professional activity exercised in Belgium; profits and gains derived from a former independent professional activity exercised in Belgium; certain employment income; certain pension and annuities; income derived by nonresident public performers and athletes from performances in Belgium; and miscellaneous income obtained in Belgium.
Relief from double taxation
In the absence of a treaty, relief from double taxation of foreign source income may be provided in the form of an exemption, credit, or tax reduction, depending on the type of income.
Inheritance, gift, and wealth taxes
Belgium imposes an inheritance tax on all assets of a deceased person if the deceased was a resident in Belgium at the time of death. If the deceased was residing abroad at the time of his or her death, the Belgian inheritance tax is limited to Belgian real property that was owned, wholly or partly, by the deceased. The property of the deceased is valued at its market value at the time of death. The inheritance tax rate varies depending on the inherited amount, the degree of kinship between the deceased and the beneficiary, and the region in which the deceased was domiciled. A gift tax is levied on gifts of real property located in Belgium and gifts of personal property, wherever located, that are evidenced by a registered written document. The rate of the gift tax is determined by the region in which the donor permanently resides. Belgium does not levy a wealth tax.
Social security contributions are levied on gross income. For self-employed individuals, the contribution rate varies depending on net income. Social security contributions are deductible for income tax purposes.
Other indirect taxes
Belgium imposes a value-added tax (“VAT”) on the consumption of goods and services. Although the VAT is levied at each stage of the economic chain, it is ultimately borne by the final customer. The VAT due on any sale is a percentage of the sale price less all the tax paid at the preceding stages. The standard VAT rate is 21 percent. The rate is reduced for certain products and services and in some cases is zero.
Belgium also imposes registration duties on documents recorded in an official registry, stamp fees, road tax, betting tax and tax on gambling machines, tax on the right to use highways, excise duty on petroleum vehicles, and tax on employee profit-sharing. Also, companies are subject to a commissions’ tax of 300 percent for failure to document certain payments that constitute earned income.
Ecotaxes are regional taxes levied on a product that is placed on the market for consumption. Ecotaxes are imposed because of the negative ecological effects the product may generate. The following categories of products are subject to ecotaxes: drink receptacles, disposable items, batteries, and receptacles for certain industrial products.
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