What fiscal corrections lower the tax base?

Exempt foreign income

In principle, if a Belgian tax-resident company derives income from a foreign branch, it will be exempt from Belgian tax if the branch is located in a country with which Belgium has a double taxation treaty.

Dividends-received deduction

Dividends received by Belgian tax-resident companies or permanent establishments of non-resident companies from holdings in resident or non-resident companies are 95% exempt from corporate income tax, provided the following (simplified) requirements are fulfilled:

• Holding of 10% or a minimum acquisition price of EUR 1,200,000
• The shares must qualify as financial assets
• The beneficiary of the dividend must have had full legal ownership of the underlying shares for an uninterrupted period of at least one year before the dividend distribution, or must commit to holding them for a minimum period of one year
• Taxation condition: dividends from companies not resident in a country whose common tax regime is considerably more favourable than the Belgian tax regime (as a general rule, less than 15% (effective) taxation). The common tax regimes of the Member States of the European Union are deemed to fulfil this requirement

It should be noted that some exceptions to these rules apply to finance companies, treasury companies, investment companies, intermediaries and companies deriving income from branches located in a country whose common tax regime is considerably more favourable than Belgium’s.

Notional interest deduction

See: Notional Interest Deduction (NID)

Patent income deduction

Tax losses carried forward

Tax losses can be carried forward for an unlimited period of time and be deducted from future profits. However, carry-back of losses is not allowed. The deduction of tax losses is not allowed on abnormal or gratuitous benefits received from a related party or on the separate taxation of secret commissions.

The further use of tax losses may become partly or wholly unavailable where a company is involved in:

• certain tax-exempt reorganisations such as mergers and divisions (partly unavailable)
• a change of control that does not meet financial or economic needs (totally unavailable)

Specific rules apply in relation to the offsetting of foreign branch losses against Belgian profits by companies with activities abroad. As a general rule, foreign branch tax losses are deductible in the hands of the Belgian head office, but recapture is possible in the case of double use of tax losses.

Increased investment deduction

Companies acquiring new tangible or intangible fixed assets used in Belgium for environmentally friendly investments in research and development, energy-saving investments and patents and investments relating to security equipment can, subject to conditions, claim an additional deduction from their taxable profit equivalent to a basic percentage of the acquisition or investment value of those investments.

Rates for assessment year 2007:

• Basic rate: 0% (or 3% for investments contributing to the recycling of packaging)
• Deduction for patents, R&D and energy-saving investments: 14.5%
• Staggered deduction for R&D: 21.5%
• Safety and security investments: 21.5% (only for small and medium-sized companies)
• Certain investments in the maritime sector: 30%

Realised capital gains on shares

Net capital gains on shares are exempt on the condition that the dividends relating to such shares qualify for the dividends-received deduction at the time the gains are realised.

Contrary to the dividends-received deduction, this exemption is granted regardless of the percentage or value of the holding, the period for which it is held or its classification for Belgian GAAP accounting purposes.

In certain cases, capital gains on shares are only exempt to the extent they exceed previously deducted capital losses on those shares (since 1991 capital losses on shares have no longer been tax deductible,