Investment Incentives

Since the August 1980 law on regional devolution in Belgium, investment incentives and subsidies have been the responsibility of Belgian’s three regions: Brussels, Flanders, and Wallonia.  Nonetheless, most tax measures remain under the control of the federal government, as do the parameters (social security, wage agreements) that govern general salary and benefit levels.  In general, all regional and national incentives are available to foreign and domestic investors alike.   The federal government does not have a practice of issuing guarantees or jointly financing foreign direct investment projects.

Belgian investment incentive programs at all levels of government are limited by EU regulations and are normally kept in line with those of the other EU member states.  The European Commission has tended to discourage certain investment incentives in the belief that they distort the single market, impair structural change, and threaten EU convergence, as well as social and economic cohesion.   In January 2016, the European Commission ordered Belgium to reclaim up to USD 900 million in tax breaks from 36 companies (12 of which are U.S. companies) going as far back as 2004.  The Belgian Government had given these breaks to companies through a series of one-off fiscal rulings. The scheme had reduced the corporate tax base of the companies by between 50% and 90% to discount for excess profits that allegedly resulted from being part of a multinational group. However, in a February 14, 2019 ruling, the EU General Court decided that the excess profit ruling was not a State-aid scheme.  Observers note that the ruling is based on a procedural defect from the European Commission, and highlight that the General Court did not per se validate the excess profit ruling. Belgium challenged the EC decision legally and won, but the EC has appealed the ruling.

In their investment policies, the regional governments emphasize innovation promotion, research and development, energy savings, environmental protection, exports, and most of all, employment.  The three regional agencies have staff specializing in specific regions of the world, including the United States, and have representation offices in different countries.  In addition, the Finance Ministry established a foreign investment tax unit in 2000 to provide assistance and to make the tax administration more “user friendly” for foreign investors.

It is permitted for companies established in Belgium, foreign or domestic, to deduct from their taxable profits a percentage of their adjusted net assets linked to the rate of the Belgian long-term state bond.  This permits companies to deduct the “notional” interest rate that would have been paid on their locally invested capital had it been borrowed at a rate of interest equal to the current rate the Belgian government pays on its 10-year bonds.  This amount is deducted from profits, thus lowering nominal Belgian corporate taxes.  Even though this system was made slightly less attractive in the recent past, it remains an important tool to stimulate investment in Belgium.

As of 2019, corporate groups may aggregate gains and losses from multiple Belgian subsidiaries or branches and pay taxes on the total amount of profit.  As a result, companies generating low profits while operating a subsidiary at a loss will no longer be taxed.

Dividend distributions are generally subject to a 30% withholding tax.  However, reduced rates are possible, and a full exemption can be claimed if the dividends are distributed by a Belgian tax-resident company to a receiving firm that:

• was established in Belgium or an EU member state;
• directly holds 10% of the capital of the distributing company;
• has maintained this holding for at least one year with no interruptions; and
• is appropriately incorporated in a cross-border situation.

Withholding taxes on dividends paid to corporate shareholders in treaty countries are no longer taxed in Belgium. Dividends distributed by subsidiaries of companies in Belgium are 100% tax exempt.

More information about the Belgian tax system can be requested at:

Federal Public Service Finance –
Foreign Investment Cell
Parliament Corner, Wetstraat 24 B-1000 Brussel, België
Tel: 02 579 38 66 – Fax: +32 257 951 12
e-mail: taxinvest@minfin.fed.be
Web: http://taxinvest.belgium.be

Foreign Trade Zones/Free Ports/Trade Facilitation

There are no foreign trade zones or free ports as such in Belgium.  However, the country utilizes the concept of customs warehouses.  A customs warehouse is approved by the customs authorities where imported goods may be stored without payment of customs duties and VAT.  Only non-EU goods can be placed under a customs warehouse regime.  In principle, non-EU goods of any kind may be admitted, regardless of their nature, quantity, country of origin or destination.  Individuals and companies wishing to operate a customs warehouse must be established in the EU and obtain authorization from the customs authorities.  Authorization may be obtained by filing a written request and by demonstrating an economic need for the warehouse.

Performance and Data Localization Requirements

Performance requirements in Belgium usually relate to the number of jobs created. There are no national requirement rules for senior management or boards of directors. There are no known cases where export targets or local purchase requirements were imposed, with the exception of the military offset programs that were reintroduced under Prime Minister Verhofstadt in 2006.  While the government reserves the right to reclaim incentives if the investor fails to meet employment commitments, enforcement is rare.  However, in 2012, with the announced closure of an automotive plant in Flanders, the Flanders regional government successfully reclaimed training subsidies that had been provided to the company.

There is currently no requirement for foreign IT providers to share source code and/or provide access to surveillance agencies.

Performance requirements in Belgium usually relate to the number of jobs created. There are no national requirement rules for senior management or boards of directors. There are no known cases where export targets or local purchase requirements were imposed, with the exception of the military offset programs that were reintroduced under Prime Minister Verhofstadt in 2006.  While the government reserves the right to reclaim incentives if the investor fails to meet employment commitments, enforcement is rare.  However, in 2012, with the announced closure of an automotive plant in Flanders, the Flanders regional government successfully reclaimed training subsidies that had been provided to the company.

There is currently no requirement for foreign IT providers to share source code and/or provide access to surveillance agencies.

Capital Markets and Portfolio Investment

Belgium has policies in place to facilitate the free flow of financial resources. Credit is allocated at market rates and is available to foreign and domestic investors without discrimination. Belgium is fully served by the international banking community and is implementing all relevant EU financial directives. At the same time, in 2020 Belgium ranked 67th out of 190 for “getting credit” on the World Bank’s “Doing Business” rankings, and in the bottom quintile among OECD high income countries.

The Belgian city of Bruges established the world’s first stock market almost 600 years ago, and the Belgian bourse is well-established today. On Euronext, a company may increase its capital either by capitalizing reserves or by issuing new shares. An increase in capital requires a legal registration procedure, and new shares may be offered either to the public or to existing shareholders. A public notice is not required if the offer is to existing shareholders, who may subscribe to the new shares directly. An issue of bonds to the public is subject to the same requirements as a public issue of shares: the company’s capital must be entirely paid up, and existing shareholders must be given preferential subscription rights.  Details on the shareholders of the Bel20 (benchmark stock market index of Euronext Brussels) can be found on http://www.gresea.be/Qui-sont-les-actionnaires-du-BEL-20.

In 2016, the Belgian government passed legislation to improve entrepreneurial financing through crowdfunding and more flexible capital venture rules.

Money and Banking System

Because the Belgian economy is directed toward international trade, more than half of its banking activities involve foreign countries. Belgium’s major banks are represented in the financial and commercial centers of dozens of countries by subsidiaries, branch offices, and representative offices. The country does have a central bank, the National Bank of Belgium (NBB), whose governor is also a member of the Governing Council of the European Central Bank (ECB).  Being a Eurozone member state, the NBB is part of the Euro system, meaning that it has transferred the sovereignty over monetary policy to the ECB.

Belgium has one of highest number of banks per capita in the world. Following a review of the 2008 financial crisis, the Belgian government decided in 2012 to shift the authority of bank supervision from the Financial Market Supervision Authority (FMSA) to the NBB. In 2017, supervision of systemically important Belgian banks shifted to the ECB. The country has not lost any correspondent banking relationships in the past three years, nor are there any correspondent banking relationships currently in jeopardy.

Since the introduction of the Single Supervisory Mechanism (SSM), the vast majority of the Belgian banking sector’s assets are held by banks that come under SSM supervision, including the “significant institutions” KBC Bank, Belfius Bank, Argenta, AXA Bank Europe, Bank of New-York Mellon and Bank Degroof/Petercam. Other banks governed by Belgian law – such as BNP Paribas Fortis and ING Belgium – are also subject to SSM supervision as they are subsidiaries of non-Belgian “significant institutions.”

In 2018, the banking sector conducted its business in a context of gradual economic recovery and persistently low interest rates. That situation had two effects: it put pressure on the sector’s profitability and caused a credit default problem in some European banks. The National Bank of Belgium designated eight Belgian banks as domestic systemically important institutions, and divided them into two groups according to their level of importance. A 1.5% capital surcharge was imposed on the first group (BNP Paribas Fortis, KBC Group and Belfius Bank). The second group (AXA Bank Europe, Argenta, Euroclear and The Bank of New York Mellon) is required to hold a supplementary capital buffer of 0.75%. These surcharges are being phased in over a three-year period.

Under pressure from the European Union, bank debt has decreased in volume overall, from close to 1.6 trillion euros in 2007 to just over 1 trillion euros in 2018, according to the National Bank of Belgium, particularly in the risky derivative markets.

It remains to be seen how the economic fallout of the COVID-19 crisis will impact banks on a long-term basis in Belgium.

Belgian banks use modern, automated systems for domestic and international transactions. The Society for Worldwide Interbank Financial Telecommunications (SWIFT) is headquartered in Brussels. Euroclear, a clearing entity for transactions in stocks and other securities, is also located in Brussels.

Opening a bank account in the country is linked to residency status.  The U.S. FATCA (Foreign Account Tax Compliance Act) requires Belgian banks to report information on U.S. account holders directly to the Belgian tax authorities, who then release the information to the IRS.

With regard to cryptocurrencies, the National Bank of Belgium has no central authority overseeing the network.

Unlike most other EU countries, there are no cryptocurrency ATMs, and the NBB has repeatedly warned about potential adverse consequences of the use of cryptocurrencies for financial stability.

Foreign Exchange and Remittances

Foreign Exchange

Payments and transfers within Belgium and with foreign countries require no prior authorization. Transactions may be executed in euros as well as in other currencies.

Remittance Policies

Dividends may be remitted freely except in cases in which distribution would reduce net assets to less than paid-up capital. No further withholding tax or other tax is due on repatriation of the original investment or on the profits of a branch, either during active operations or upon the closing of the branch.

Sovereign Wealth Funds

Belgium has a sovereign wealth fund (SWF) in the form of the Federal Holding and Investment Company (FPIM-SFPI), a quasi-independent entity created in 2004 and now mainly used as a vehicle to manage the banking assets which were taken on board during the 2008 banking crisis. The SWF has a board whose members reflect the composition of the governing coalition and are regularly audited by the “Cour des Comptes” or national auditor. At the end of 2019, its total assets amounted to € 2.35 billion.  The majority of the funds are invested domestically. Its role is to allow public entities to recoup their investments and support Belgian banks. The SWF is required by law to publish an annual report and is subject to the same domestic and international accounting standards and rules. The SWF routinely fulfills all legal obligations. However, it is not a member of the International Forum of Sovereign Wealth Funds.

* Source for Host Country Data:

https://data.imf.org/?sk=B981B4E3-4E58-467E-9B90-9DE0C3367363&sId=1481577785817 )