Belgium Agrees To New Corporate Tax Regime

by Ulrika Lomas, Tax-News.com, Brussels

10 May 2004

Belgium last Thursday agreed to modify a set of tax breaks given to foreign firms which set up their head offices in the country, ending a five year dispute with the European Commission.

The dispute stemmed from a law which allowed multinational firms with headquarters in Belgium ('coordination centres') to be taxed on their operating costs rather than their revenues, which the Commission considered a breach of European state aid rules.

A Belgian finance ministry official told Reuters that under the new agreement, all costs previously exempt, including financial and personal costs, will be covered by corporate tax. In addition, a 0.25% capital investment tax is to be imposed on foreign firms in Belgium, whilst rates for domestic firms may be reduced from 0.5% to 0.25%.

Certain domestic firms may also be excluded from a withholding tax that previously only exempted foreign firms, according to the Belgian official.

The Belgian tax break was one of a list of ‘harmful’ tax measures that the Commission is committed to eliminating by 2010 in order to improve cross-border tax transparency.

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