The complexity of taxes is a challenge for any company. Read on to find out when and especially how much corporate tax you are liable to pay.
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:
- definitively taxed income (RDT) and exempt income from movable property (RME);
- deduction for patent income
- deduction for innovation income;
- investment deduction
- deduction for intra-group transfer
- deduction for notional interest (also called risk capital deduction);
- deferred RTD
- previous losses;
- the stock of carry-overs (limited and unlimited) of the risk capital allowance.
The result is the taxable profit on which you pay corporation tax.
What is the corporation tax rate?
A 25 % corporation tax is levied on your taxable profit.
Some small or medium-sized companies pay a lower rate on the first tranche of € 100,000, i.e. 20%. In order to benefit from this rate, the company must meet the following criteria:
Your company must be a small company within the meaning of Article 1:24, §§ 1 to 6, of the Companies and Associations Code.
Small companies are those companies which, on the balance sheet date of the last closed financial year, do not exceed more than one of the following criteria :
- number of employees, as an annual average: 50;
- annual turnover, excluding value added tax: EUR 9 000 000
balance sheet total: EUR 4 500 000.
Exceeding or ceasing to exceed more than one of the criteria only has an impact if this situation occurs during two consecutive financial years.
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.