Last modified:Thursday 31 October 2019
Who is liable for corporation tax?
A company, association or institution pays corporate tax if it:
- is a legal entity;
- has its registered office or its main establishment in Belgium;
- is a for-profit organisation.
There are a few exceptions, like inter-municipal associations especially. In principle, non-profit organisations are not liable for corporation tax.
What is the taxable base for corporation tax?
Corporation tax is levied on the company’s taxable profit or taxable income. That is not quite the same as the accounting profit. (For example, some profits are tax exempt and you may not be able to deduct certain costs for tax purposes. In addition, the accounting depreciation does not necessarily correspond to fiscally accepted depreciation. Finally, assets may be undervalued and liabilities overvalued.)
Taxable profit is calculated by adding together:
- the taxed reserves
- non-deductible expenses
- distributed profits
Then profit needs to be divided into two categories: profit of Belgian origin and foreign origin.
The following are then deducted from each category:
- non-taxable items (such as tax-exempt donations)
- Dividend Received Deduction and income exempt from withholding tax
- net innovation income
- the notional interest (also known as risk capital)
- previous losses
- the investment allowance
- the stock of the transferred deduction for risk capital
The result is the taxable profit on which you pay corporation tax.
What is the corporation tax rate?
A 29.58% corporation tax is levied on your taxable profit. It will further decrease to 25% by 2020.
Some small or medium-sized companies pay a lower rate on the first tranche of € 100,000, i.e. 20.4%. In order to benefit from this rate, the company must meet the following criteria:
The company must be an SME within the meaning of Article 15 of the Company Code;
Other companies may not hold more than half of the shares;
The sum of the shares held by your company, the taxed reserves and the realised capital gains may not exceed half of the paid-up capital;
Your company must annually pay a gross salary of at least 45,000 euros to one of the company managers. Paying a gross salary below 45,000 euros is also possible, provided that this gross salary is at least equal to the taxable profit of your company. This condition does not apply during the first four financial years of a company.