Business Expansion - International Strategies
With exports accounting for about 75% of the total Belgian economic output, Belgium has, without doubt, an export-oriented economy. It is therefore not surprising that a growing number of international companies have shown an interest to set-up an entity in the heart of Europe. However, taking a local business global is a complex and dynamic process. Regardless of which countries are involved, taking a local business to a global level requires an in-depth analysis of each aspect of the restructuring, such as finding the optimal structure for the envisioned activities, analyzing the market chain and income streams, drafting deeds and contracts according to the specific interests, as well as assisting with finding the right key people to further develop your business.
Apart from gaining an extensive understanding in foreign legislation, market trends, competitors, administrative practices and cultural differences, it is also of vital importance to be aware of tax pitfalls and opportunities in the envisioned market. One has to take into account not only the local rules, but also the web of international rules in all the relevant source jurisdictions. For example, a Belgian company investing in Africa’s growth potential may want to use a subsidiary in Mauritius as a gateway. Trading activities between Asia and Europe can go through Hong Kong or the UAE. Also within Europe there are major differences between states. A production unit in one state may be able to produce the same goods at a substantially lower cost, due to corporate taxes, labour costs, (social) regulations, etc.
Various jurisdictions offer attractive solutions for businesses. This can be achieved through lower corporate tax rates. For example, Cyprus and Ireland both have a broad 12.5% rate, and Hungary has recently even gone down to 9%. But also other incentives may prove even more advantageous, such as offshore exemptions, reduced taxable bases for IP and royalty-based income, notional interest deductions, increased R&D expense deductions etc. The advantages are there, you just need to find them.
Investing in Belgium
Strategically located in the heart of Europe and surrounded by the key European countries including the Netherlands, Germany, France, Luxembourg and the UK, Belgium offers the perfect platform to further your business ambition in Europe. In addition to its prime geographic location, Belgium has the following advantages which make it the ideal hub for accessing over 500 million potential consumers within the EEA (i.e. EU + Norway, Iceland and Liechtenstein):
(a) World-class infrastructure: Belgium is renowned for its world-class infrastructure, which includes: 5 international airports that handle both cargo and passenger traffic; high-speed trains to the major European capitals (e.g. London, Amsterdam and Paris); 4 seaports including the port of Antwerp being ranked the 2nd best in Europe and 10th in the world; and efficient motorways which offer an excellent distribution solution alongside other top-notch telecommunication and internet infrastructures.
(b) Global business climate: Belgium is the 10th largest exporting country in the world, with exports amounting to over 80% of the national GDP. Belgium is a flourishing and open marketplace, being ranked the 3rd most globalized country in the world according to the KOF Globalization Index 2017.
(c) Market access: Belgium is located in the centre of one of the most wealthy and developed regions in the world, with 60% of Europe’s purchasing power in a radius of 500 kilometers and even 80% in a radius of 500 miles. Belgium also has a reputation as a consumer test market, due to its diverse, multicultural inhabitants. If a product is successfully launched in Belgium, similar success could be expected in other European markets.
(d) Skilled workforce: The Belgian workforce has one of the highest productivity levels in the EU attributable to the quality education system in Belgium and the multiple languages commanded by the Belgian. Belgium has 16 universities, and seven of which are ranked top in the Academic Ranking of World Universities 2017.
(e) Access to international institutions: Various international organisations, interest groups, multinationals and lobbyists have set up offices in Belgium. Most notably, the European Union and NATO have their headquarters in Brussels.
2. Setting up
There are three main options to formalise a presence in Belgium. The lightest option is to establish an office that provides supportive activities. However, if you wish to carry out core business activities and to transact with clients in Belgium, you must either set up a branch office of a foreign company, or incorporate a local Belgian company which often in the form of a private limited company (NL: BVBA; FR: SARL) or a public limited company (NL: NV; FR: SA). Do note that any of these activities might open your route to acquiring Belgian citizenship.
As a general rule, Belgium has no limitation on foreign shareholders or capital transfers. To incorporate a company, it must be done before a notary public. The company is required to deposit a certain minimum amount of capital in a Belgian bank account. The deed of incorporation, identity of the directors and the annual accounts of the new company are all published and the company is registered with the Central Enterprise Register (NL: Kruispuntbank van Ondernemingen; FR: Banque-Carrefour des Entreprises).
Belgium currently imposes a high nominal corporate tax rate of 33.99%. However, this will be changed soon because the government has recently approved a proposal to lower the nominal tax rate to 25% from the year 2020 onwards, making Belgium even more competitive with its neighbouring countries (Luxembourg: 27.08% or 26.01% in 2018; Germany: 29.79%; Netherlands: 25%; France: 33⅓%).
In fact, the effective rates in Belgium are often lower than the nominal rates due to special deductions. Most notably, Belgium has introduced the notional interest deduction whereby a fictitious interest based on the share equity is deducted from the taxable base. Belgium also offers a deduction for innovative income, thereby greatly reducing the tax liability on income generated from patents and software.
Furthermore, Belgium is known for its ruling system, whereby taxpayers can apply for a binding ruling which provides legal certainty on their tax position. Unlike other countries, the Belgian system allows for a completely unanimous pre-filing phase. As the ruling commission is a semi-autonomous entity within the Ministry of Finance, the decisions are impartial (not influenced by the general tax administration).