Country - Belgium
Corporate Vehicles
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A. DIRECT INVESTMENT
In Belgium, there are two ways to effect a direct investment in real estate: either without a permanent establishment (vaste inrichting/établissement stable) in Belgium, or through a permanent establishment.
1. Investment without a permanent establishment
Minimum capital
Not applicable.
Set-up costs
Not applicable.
Time required to become operative
Not applicable.
Costs per annum for corporate and accounting compliance
If the VAT paid on investment activities is to be effectively recovered, a VAT representative should be appointed and regular VAT declarations must be filed. Appointing a VAT representative, however, is only an obligation for investors who are not resident in an EU member state and undertake VAT-taxable transactions which are located in Belgium for VAT purposes.
Costs amount to approximately EUR 5,000 per annum or higher if the number of VAT invoices to be registered exceeds 100 per year.
Corporate governance
Not applicable.
Regulatory control
Not applicable.
Taxation of current income in Belgium
Taxation of current income of foreign individuals in Belgium
Where the income qualifies as professional income, non-resident personal income tax is payable at the rate of 25% to 50% on net income after the deduction of expenses, with additional 7% municipal surcharges.
Where the income qualifies as non-professional income, non-resident personal income tax is payable at the rate of 25% to 50% on net income, after the deduction of expenses, with additional 7% municipal surcharges, unless the immovable income is the only income and amounts to less than EUR 2,500. There is an income tax exemption in cases where the total income consists solely of immovable income from non-let real estate.
Income tax for corporate entities
Non-resident corporation tax is payable at a rate of 33.99% (33%+3% crisis surcharge) on net income, after deduction of costs.
Immovable withholding tax is also payable.
Regional tax is payable at the rate of 1.25% on the cadastral value of the real estate, with additional local surcharges (in total +/- 50% of the cadastral value of the real estate). For individuals, immovable withholding tax can only be offset against income tax on professional income where the real estate is being used for business purposes. For non-resident corporation tax purposes, immovable withholding tax is always treated as tax deductible.
Taxation of distributions of current income to investors
No further income tax or withholding tax.
Taxation of capital gains
Capital gains tax for individuals
If the capital gains qualify as professional income, non-resident personal income tax will be payable at 25% to 50%, levied as a creditable professional withholding tax. The final income tax due will incur an additional surcharge of 7%. Under certain conditions, capital gains on real estate qualifying as tangible fixed assets which have been used for more than five years are subject to a special assessment of 16.5%, with a surcharge of 7%. A system of tax deferral may apply to the taxation of realised capital gains if the real estate has been held as fixed asset for more than five years at the time of disposal, and if the income is reinvested in depreciable assets in Belgium within three or five years.
If the capital gains qualify as non-professional income, non-resident personal income tax will only be due at a rate of 16.5% if the real estate is being sold within five years of the date of acquisition. The special assessment of 16.5% will be the final tax due.
Capital gains tax for corporate entities
Non-resident corporation tax is due at a rate of 33.99%, which is levied by way of a creditable professional withholding tax.
Afterwards a corporate entity is allowed to offset any relevant charges and losses carried forward against this income through their normal tax return. The withholding tax, therefore, only results in a pre-financing cost but can be avoided by careful tax planning.
A system of tax deferral may apply to the taxation of realised capital gains, if the real estate has been held as a fixed asset for more than five years at the time of disposal, provided that the amount is kept on a blocked reserve account and is reinvested in depreciable assets in Belgium within three or five years.
2. Investment through a permanent establishment
Minimum capital
Not applicable.
Set-up costs
Around EUR 1,500.
Time required to become operative
10 days.
Costs per annum with corporate and accounting compliance
Costs include accounting fees for corporation tax and VAT purposes. Filing of annual corporate tax returns and monthly/quarterly VAT returns, and the preparation of an annual financial statement, are required. Annual costs amount to approximately EUR 20,000.
Corporate governance
Not applicable.
Regulatory control
Not applicable.
Taxation of current income in Belgium
Income tax for individuals
Where the income qualifies as professional income, non-resident personal income tax is payable at a rate of 25% to 50% on net income after the deduction of costs, with an additional 7% surcharge.
Income tax for corporate entities
Non-resident corporation tax is payable at a rate of 33.99% (33%+3% crisis surcharge) on net income after the deduction of expenses.
Immovable withholding tax is payable. Regional tax is payable at the rate of 1.25% on the cadastral value of the real estate, with additional local surcharges (in total +/-50% of the cadastral value of the real estate). Where there is a permanent establishment, the immovable withholding tax is treated as tax deductible for both individuals and corporate entities, subject to non-resident income tax.
Taxation of distributions of current income to investors
No further income tax or withholding tax.
Taxation of capital gains
Capital gains tax for individuals
Non-resident personal income tax is payable at a rate of 25% to 50%, levied by way of a creditable professional withholding tax. Final income tax incurs an additional 7% surcharge. Under certain conditions, capital gains on real estate qualifying as tangible fixed assets which have been used for more than five years are subject to a special assessment of 16.5%, with an additional 7% surcharge. A system of tax deferral may apply to the taxation of realised capital gains, if the real estate has been held as a fixed asset for more than five years at the time of disposal, and is reinvested in depreciable assets in Belgium within three or five years.
Capital gains tax for corporate entities
Non-resident corporation tax is payable at a rate of 33.99%, which is levied by way of a creditable professional withholding tax. Corporate entities can offset any relevant charges and losses carried forward against this income through their normal tax return. The withholding tax, therefore, only results in a pre-financing cost but can be avoided by careful tax planning.
A system of tax deferral may apply to the taxation of realised capital gains, if the real estate has been held as a fixed asset for more than five years at the time of disposal, provided the amount is kept on a blocked reserve account and is reinvested in depreciable assets in Belgium within three or five years.
B. INDIRECT INVESTMENT THROUGH CORPORATE VEHICLES
There are several types of corporate vehicle which can be used for investment in real estate in Belgium. In practice, the closed limited liability company (besloten vennootschap met beperkte aansprakelijkheid, BVBA/société privée à responsabilité limitee, SPRL) and the limited liability company (naamloze vennootschap, NV/société anonime, SA) are the most commonly used.
1. Closed limited liability company (Besloten Vennootschap met Beperkte Aansprakelijkheid/Société Privée à Responsabilité Limitée)
Minimum capital
EUR 18,550.
Set-up costs
EUR 5,000. No capital duties apply to contributions in kind or in cash, unless an individual contributes to real estate located in Belgium which can be used for residential purposes, in which case 12.5% registration duties apply (10% if the real estate is located in the Flemish Region).
Time required to become operative
10 days.
Costs per annum for corporate and accounting compliance
A minimum of EUR 2,000, as well as the cost of auditors: EUR 10,000/20,000 (this is only required when certain thresholds are exceeded).
Corporate governance
The shareholders can appoint and dismiss business managers. There can be one or more business managers, who form the board. Unless the articles of incorporation provide otherwise, the company is represented officially by a single business manager acting individually.
By law, a statutory auditor must be appointed only if the company has more than 100 employees or exceeds two of the following thresholds: the company has more than EUR 3,125,000 on its balance sheet; its annual turnover exceeds EUR 6,250,000; or the company has more than 50 employees. An auditor must also be appointed if the company belongs to a group of companies which need to prepare consolidated accounts.
Regulatory control
Not applicable.
Taxation of current income in Belgium
Corporation tax
All running income is treated as business profits, which are subject to corporation tax at the rate of 33.99% (33%+3% crisis surcharge) on net income. Under certain conditions, reduced corporation tax rates may apply.
Immovable withholding tax
Regional tax is payable at the rate of 1.25% on the cadastral value of the real estate, with additional local surcharges (in total +/- 50% of the cadastral value of the real estate). The immovable withholding tax is tax-deductible.
Taxation of distribution of current income to investors
Withholding tax
For individual shareholders, dividends incur a 25% withholding tax, or 15% if the shares were issued after 1 January 1994 and have been registered in a share register since their issue (a legal obligation for a closed limited liability company). The withholding tax will generally constitute the final tax due.
For shareholders which are corporate entities, dividends incur the same 25% withholding tax rate (15%) as applies to individuals. However, where the Parent-Subsidiary Directive applies, no withholding tax is payable. Where this does not apply, Belgium's double tax treaties usually provide a reduced withholding tax rate ranging from 5% to 15%.
Income tax at the level of corporate shareholders resident for corporate income tax purposes
Corporate entities receiving dividends can normally benefit from the dividend received deduction, which is a non-transferable deduction applied for corporation tax purposes. As a result of this, 95% of the dividend received is exempt from corporation tax.
Taxation of capital gains
Capital gains on the sale of real estate assets
Corporation tax is payable at the rate of 33.99%. A system of tax deferral may apply to the taxation of realised capital gains, if the real estate has been held as fixed assets for more than five years at the time of disposal, provided that the amount is kept on a blocked reserve account and is reinvested in depreciable assets in Belgium within three or five years.
Capital gains on the sale of participation in a BVBA/SPRL
For individual shareholders, capital gains not realised from professional activities will generally be exempt from income tax, unless speculation can be invoked by the tax authorities.
For corporate shareholders, capital gains are exempt from corporation tax for their net amount.
2. Limited liability company (Naamloze Vennootschap/Société Anonyme)
Minimum capital
EUR 61,500.
Set-up costs
EUR 5,000. No capital duties apply on contributions in kind or in cash, unless an individual contributes to property located in Belgium which can be used for residential purposes, in which case 12.5% registration duties apply (10% if the property is in the Flemish Region).
Time required to become operative
10 days.
Costs per annum for corporate and accounting compliance
A minimum of EUR 2,500, as well as the cost of external auditors: EUR 10,000/15,000.
Corporate governance
It is possible to create different categories of shares, with different rights.
The board of directors of a limited liability company must have at least three directors, unless there are only two shareholders, in which case two directors will suffice. The board of directors normally represents the company but the articles of incorporation can provide for full representation by an individual or by jointly acting directors. Day-to-day management can be delegated to one or more managing directors or general managers. The articles of incorporation can also set up a management committee.
By law, a statutory auditor needs to be appointed only if the company has more than 100 employees or exceeds two of the following thresholds: the company has more than EUR 3,125,000 on its balance sheet; its annual turnover exceeds EUR 6,250,000; or it has more than 50 employees, or belongs to a group of companies which need to prepare consolidated accounts.
Regulatory control
Not applicable.
Taxation of current income in Belgium
Corporation tax
All running income is treated as business profit, which is subject to a corporation tax rate of 33.99% (33%+3% crisis surcharge) on net income. Under certain conditions, reduced corporation tax rates may apply.
Immovable withholding tax
Regional tax is payable at the rate of 1.25% on the cadastral value of the real estate, with additional local surcharges (in total +/- 50% of the cadastral value of the real estate). The immovable withholding tax is a tax-deductible expense.
Taxation of distribution of current income to investors
Withholding tax
For individual shareholders, dividends incur a 25% withholding tax, or 15% if the shares were issued after 1 January 1994 and have been registered in a share register or, if printed, deposited with a Belgian financial institution, since their issue. The withholding tax will normally be the final tax due.
For corporate shareholders, dividends normally incur the same 25% withholding tax rate (15%) as for individuals. However, where the Parent-Subsidiary Directive applies, no withholding tax is payable. If this does not apply, Belgium's double tax treaties usually provide a reduced withholding tax rate ranging from 5% to 15%.
Income tax at the level of a corporate shareholder resident for income tax purposes
Corporate entities receiving dividends can, in principle, benefit from the dividend received deduction, which is a non-transferable deduction only applied for corporation tax purposes, as a result of which 95% of the dividend received will be exempt from corporation tax.
Taxation of capital gains
Capital gains on the sale of real estate assets
Corporation tax is payable at the rate of 33.99%. A system of tax deferral may apply to the taxation of realised capital gains, if the real estate has been held as a fixed asset for more than five years at the time of the sale, provided that the amount is kept on a blocked reserve account and is reinvested in depreciable assets in Belgium within three or five years.
Capital gains on the sale of a participation in an NV/SA
For individual shareholders, capital gains not realised from professional activities will normally be exempt from income tax, unless speculation can be invoked by the tax authorities.
For corporate shareholders capital gains are exempt from corporation tax for their net amount.
C. INDIRECT INVESTMENT THROUGH PARTNERSHIPS
There are no specific investment structures for indirect investment through partnerships. Corporate vehicles are normally used for this kind of investment.
D. INDIRECT INVESTMENT THROUGH COLLECTIVE INVESTMENT VEHICLES
The only collective investment vehicle available for investment in real estate is the real estate investment fund (Vastgoedbevak/SICAF Immobilière - "Fund").
Management company
A Fund may only be set up as a naamloze vennootschap/société anonyme or as a commanditaire vennootschap op aandelen/société en commandite par actions (Comm.VA/SCA).
Mandatory listing on the stock exchange (Euronext Brussels).
Minimum capital
EUR 1,250,000 to be fully paid up at all times.
Set-up costs
Costs depend on the mandatory IPO and prospectus.
Several fees are payable to the banking and stock exchange authorities (CBFA, Euronext Brussels).
No capital duties apply on contributions in kind or in cash, unless an individual contributes specifically to property in Belgium which can be used for residential purposes, in which case 12.5% registration duties apply (10% if the real estate is in the Flemish Region).
Time required to become operative
Incorporation takes several weeks/months, depending on the filings with the banking and stock exchange authorities (CBFA, Euronext Brussels).
Costs per annum for corporate and accounting compliance
Costs depend on the size of Fund and the type of real estate investment.
An annual fee must be paid to the CBFA (banking authorities) in proportion to the net assets of the Fund.
Corporate governance
A Fund incorporated as a naamloze vennootschap/société anonyme
A majority of the directors must be independent. Day-to-day management must be in the hands of at least two individuals. A management committee may also be set up. However, where real estate is bought or sold the Fund is represented by two directors.
By law, a statutory auditor (accredited with the CBFA) must be appointed.
A Fund incorporated as a commanditaire vennootschap op aandelen/société en commandite par actions
In the Fund's deed of incorporation as a Comm. VA/SCA, a managing partner is appointed who is held jointly and personally liable for the company's obligations. The other partners are only liable to the extent of their contribution.
This kind of Fund normally follows the same company law provisions as the naamloze vennootschap/société anonyme.
Requirements with respect to the Fund's management by a managing partner are the same as for a naamloze vennootschap/société anonyme.
By law, a statutory auditor (accredited with the CBFA) must be appointed.
Regulatory control
A Fund is subject to regulation by the CBFA, the Belgian regulatory authority. It will only be accredited and recorded on the list of funds incorporated and managed according to Belgian law if: the CBFA has granted it a licence; the CBFA has approved the Fund’s by-laws; and the Fund has chosen a depositor approved by the CBFA. The Fund remains at all times under the supervision of the CBFA.
The public issue of shares by the Fund and its trading on a stock exchange are subject to approval by the CBFA and a preliminary prospectus is required.
Taxation of current income in Belgium
Income tax
There is generally no taxation of the Fund's running income. It is subject to normal corporation tax at a rate of 33.99%, but its taxable basis consists only of: any abnormal or gratuitous advantages received; any disallowed expenses, other than write-downs or capital losses on shares; and any compensation granted for a missing coupon on the occasion of a share loan. No reduced corporation tax rates apply.
If a Fund is incorporated through the conversion of another company, or just newly recognised as a Fund, or if it is involved in a corporation tax-exempt merger or demerger, an exit tax is payable at a special corporation tax rate of 16.5%, calculated on the difference between the market value and the recorded value of all transferred assets.
Immovable withholding tax
Regional tax is payable at the rate of 1.25% on the cadastral value of the real estate, with additional local surcharges (in total +/- 50% of the cadastral value of the real estate).
Taxation of distribution of current income to investors
Withholding tax
Withholding tax is normally payable on the distribution of a dividend by the Fund, irrespective of whether the shareholder is an individual or a corporate entity. Non-resident savers, however, may receive a specific withholding tax exemption. A rate reduction may also apply under a bilateral tax treaty.
Dividends distributed by a "residential" Fund, however, are always exempt from withholding tax. In order to qualify for this exemption, at least 60% of the real estate of the Fund must be directly or indirectly invested in immovable property in Belgium used for residential purposes at the end of the financial year in which the dividends are distributed.
Income tax
There is no further income tax for individual shareholders.
Corporate shareholders receiving dividends from a Fund cannot normally apply the dividend received deduction, and will, therefore, be taxed at the rate of 33.99% (33%+3% crisis surcharge). There is a rare exception to this rule for dividends from Funds that distribute at least 90% of their income and satisfy certain other conditions, for example some foreign pension funds.
Taxation of capital gains
Capital gains on the sale of real estate assets
Capital gains are not taxed at the level of the Fund, since they are not part of its corporation tax basis.
Capital gains on the sale of a participation in a Fund
For individual shareholders, capital gains not realised from professional activities are normally exempt from income tax, unless speculation can be invoked by the tax authorities.
For corporate shareholders, capital gains are normally subject to (non-resident) corporation tax at 33.99% on the net amount.
E. RULES ON LEVERAGE
1. Thin capitalisation rules
There is no general debt to equity requirement under Belgian law, either from a legal, or from a corporation tax, perspective (except for a Real Estate Investment Fund (Vastgoedbevak/SICAF Immobilière) which has a maximum debt ratio of 50%).
However, according to article 198,11° of the Belgian income tax code, if the loan exceeds seven times the total of the retained earnings and the paid-up capital of the Belgian company, interest payments to foreign companies operating under significantly different or more advantageous tax regimes are not tax deductible on the proportion exceeding the limit.
2. Withholding tax on interest
Interest paid by Belgian companies and Belgian establishments of foreign companies is normally subject to the deduction of a 15% withholding tax, which can be reduced or waived where a double tax treaty (usually to 5% or 10%) applies.
However, a new exemption from withholding tax was recently introduced which applies to the interest on loans granted by credit institutions. In the future, Belgian corporate entities and professionals can pay gross interest on loans granted by credit institutions in the European Economic Area or in a country with which Belgium has concluded a bilateral tax treaty.
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