Belgium has introduced an attractive new tax measure giving equal treatment to equity and debt financing as from tax year 2007 (i.e. financial years ending on 31/12/2006 or later).
Companies/branches can claim a tax deduction for their cost of capital by deducting notional (deemed) interest on their net equity.
Key features
There are some limitations to avoid multi-stage deductions and “artificial” inflation of the equity base. There is no need to apply for a Belgian tax ruling to benefit from the NID.
Benefits include:
The more thickly capitalised the company is, the greater its NID.
Easy to implement and administer and applicable generally to all Belgian companies and branches of non-resident companies.
If implemented appropriately, CFC-compliant in the majority of countries with CFC legislation.
Results in substantial tax savings, e.g. for treasury, shared service centre and IP activities.
Attractive alternative in a Europe-wide M&A project by using Belgium as a leverage vehicle.
Example of how the regime might apply Finance company (simplified) – “thickly” capitalised.
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