Foreign companies investing in Europe will want to establish a European holding company (EHC) for a range of tax and non-tax reasons. For any multinational (MNC), a holding company may be a convenient way to own and manage a group of subsidiaries in a particular region such as Europe. A foreign holding vehicle is a key international tax planning tool for helping MNCs drive up shareholder value.

Belgian tax law offers substantial tax benefits to MNCs when they establish their EHC in Belgium. 

Key features of the Belgian holding regime:

• Extensive tax treaty network (including Hong Kong).
• As of 2007, no dividend withholding tax if tax treaty shareholders (minimum shareholding of at least 15% for at least 1 year)
• Capital gains realised by Belgian companies or branches on disposals of holdings, including foreign exchange gains, are tax exempt (no minimum holding threshold – no minimum holding period – no active trade test – only a taxation test).
• Dividends received by a Belgian company or branch are exempt from Belgian tax to the extent of 95% provided certain requirements are met (such as a minimum threshold – a minimum holding period).
• Nil Belgian capital duties upon incorporation or a capital increase.
• EU directives implemented: mostly, more favourable conditions than in the directives themselves.
• No CFC rules.
• No general shareholder debt-equity ratio, unless interest is paid to a “tainted” vehicle (7:1 Dept/Equity).
• No WHT leakage on EU dividends, interest and royalties.
• Costs in relation to shareholdings (interest included) are 100% tax deductible, thus often allowing an effective nil tax rate.
• Tax-attractive expatriate tax regime allows for swift substance.

Tax Planning Opportunities - The Mixed Holding Company

Given Belgium’s extensive tax treaty network and favourable holding regime features, a Belgian mixed holding company (i.e. combining holding and operational activity) can offer substantial tax savings.