Law & Numbers - News Tax

Belgian News

15.01.2008 (Belgium)

Hong Kong Tax Treaty

Belgium is one of the few Western countries who, besides its tax treaty with China, signed a tax treaty with the Hong Kong special administrative Region of the People’s Republic of China .

This convention is dated 10 December 2003.

It is interesting to recall that the profits tax rate in Hong Kong is the same for foreign and local companies : 17.5 percent. There is no capital gains tax in Hong Kong, no withholding tax on dividends and interest or collection of social security benefits. There is no tax either on off shore activities…

Notional Interest deduction
Belgian tax law has set up a new and innovative measure : the notional interest deduction . Its aim is to reduce the effective tax rate by allowing all companies to deduct a percentage of their equity (capital + reserves). For the tax year 2007, the applicable interest rate is 3.442 %.

This new tax regime is considered as a substitute to the Belgian coordination center regime which was criticised by the EU authorities. It offers planning opportunities for all types of companies, from the large multinational to the tiny SME.

Depreciation of intangible assets received free of charge
In a ruling dated 30 January 2007, the Belgian Ruling Commission accepted the scheme planned by the Belgian entity of a multinational group to depreciate for tax purposes the intangible assets received free of charge from the group. In other words, the Belgian tax authorities will not submit to tax the part of the profits made by the Belgian company, which derives from the possibility of benefiting from the know how, procurement, list of clients, etc. which are owned by the group and used free of charge by the Belgian company.

This ruling will be applied regardless of the tax regime (taxation or exemption) of the same part of the profits in the State where the counterpart is settled. It is not regarded as an adjustment to a tax charged in the other country.

New Tax treaty between Belgium and the US

The new tax treaty between Belgium and the US entered into force on January, 1st, 2008. The text is based on the OECD model but also and mainly on the US model.

There are some improvements in comparison with the former text. For example, the scope of the exemption of withholding tax on dividends and interests is much larger than before. On the other hand, the anti-abuse provisions are more complicated than ever.

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