Foreign companies operating in Belgium
Belgian branches are subject to the Belgian Accountancy Act. Consequently, they have to organise their accounting books and records according to Belgian accounting and direct and indirect tax requirements. Otherwise, they could be liable to serious penalties.
Belgian branches also have to comply with the Belgian tax rules, meaning, for instance, that they have to file a non-resident corporate income tax return. The tax returns for tax year 2010 (accounting years ended 31 December 2009 until 15 May 2010) have to be filed with the Belgian tax authorities by 16 November 2010.
As for determination of the tax base, depending on the business carried on in Belgium, it might be worth asking for a ruling from the Belgian tax authorities. Finally, depending on the costs incurred by the Belgian branch, other formalities might need to be complied with as well.
The notional interest deduction (NID) also applies to Belgian branches that fall under Belgian accounting law. As the basis for calculating the NID encompasses equity (share capital and retained earnings), it is important for Belgian branches to verify what is to be regarded as their “invested capital”, forming part of the accounting equity. By doing so, they may be able to optimise the amount of their NID entitlement. Further, depending on the tax position of the Belgian branch, it can be considered to carry out the Belgian activities via a Belgian company instead of a Belgian branch.
Besides (legal) branches, establishments that are considered to be permanent establishments from a corporate tax point of view are also obliged to comply with the above formalities. Whether or not an entity has a Belgian permanent establishment will depend on the business carried on in Belgium.
Failure to comply with these accounting, tax and legal obligations may give rise to penalties. Would it not therefore be worthwhile limiting or avoiding these by verifying whether your activities do indeed give rise to a Belgian permanent establishment and whether your branch is compliant with the Belgian legislation?
What can PwC offer you?
PwC can help you ensure compliance with the requirements of the law by providing services including the following:
- Analysing the business carried on in Belgium to assess permanent establishment exposure
- Assessing whether the (foreign) accounting system complies with Belgian requirements
- Assisting with the accounting and preparation of the Belgian statutory accounts
- Assisting with lodging the head office’s accounts
- Assisting with tax compliance obligations, such as preparation/review of the non-resident tax return
- Optimising NID entitlement by analysing the invested capital of the Belgian branch
- Analysing the tax position to assess the available optimisation possibilities
- Assisting in determining the taxable result of the Belgian branch and assisting with a ruling application in this respect
- Advice on accounting, legal and tax compliance-related matters
Should you have questions to which you can’t find the answer, please contact your client engagement team.
