In Belgium, employers have several tax responsibilities. One of these is the withholding of income tax, known as Professional Withholding Tax (PWT), from employee salaries according to tax tables. The withheld taxes must be remitted to the Federal Fiscal Administration based on the company's size, with small employers remitting quarterly and larger employers monthly. Additionally, employers are required to issue yearly reports detailing employee earnings to the tax authorities.

Social Security Contributions

Employers also have responsibilities related to Belgium's comprehensive social security system. Both employers and employees contribute to this system, with employers responsible for calculating, withholding, and remitting both their own contributions and those of their employees. The employer's share of social security contributions is approximately 27% of gross salary, while the employee's share is 13.07%.

Corporate Income Tax

Companies in Belgium are subject to corporate income tax on their profits. The standard corporate tax rate in Belgium is 25%, although there may be reduced rates for smaller companies.

Other Potential Taxes

Employers may also be liable for additional regional or local taxes. However, these will vary depending on the specific region or municipality in which the business operates.

Belgium employs a progressive income tax system, which means your taxable income is divided into brackets, each taxed at a different rate. The higher your income, the higher the tax rate applied to the portions of your salary that fall into the higher brackets.

While income tax is calculated on your gross salary, deductions can be made for professional expenses. You have two options:

Professional Expenses

1. Actual expenses: Provide proof of work-related costs for materials, travel, etc.
2. Standard deduction: Claim a percentage of your gross earnings automatically.

Social Security Contributions (SSC)

SSCs are mandatory contributions that fund the Belgian social security system. These contributions cover healthcare, pensions, unemployment benefits, and more. The employee share of SSCs is 13.07% of gross salary.

Additional Deductions

Belgium allows for several deductions, potentially reducing your overall tax burden:

1. Charitable Contributions: Donations of at least €40 to recognized charities are eligible for a tax reduction.
2. Life Insurance Premiums: A percentage of life insurance premiums can be deducted up to a certain amount.
3. Domestic Personnel Costs: Remuneration for domestic staff qualifies for a tax reduction with limitations.
4. Childcare Expenses: A percentage of childcare costs (up to a certain amount per day) is deductible for children under 14 years old.

Belgium operates a complex VAT system with multiple rates applicable to different services. The standard VAT rate is 21%, applied to the majority of services. Reduced rates of 12% and 6% apply to specific services such as social housing, some renovations of older properties, certain restaurant/catering activities, and a limited number of basic necessities like certain foods, pharmaceuticals, and cultural events. Some services, such as specific medical and educational services, might be exempt from VAT with the ability to deduct input VAT costs.

Determining the Place of Supply for Services

The place of supply is crucial for establishing VAT obligations. In Belgium, the general rule is that the place of supply for B2B (Business-to-Business) Services is generally where the customer is established. For B2C (Business-to-Consumer) Services, the place of supply is usually where the supplier is established.

Special Rules for Specific Services

Several services have specific VAT rules. VAT rules for e-services (like software downloads or digital subscriptions) to B2C customers have changed in line with EU directives. You'll often charge the VAT rate of the customer's country of residence. Rules also exist for the supply of services between businesses within the European Union.

VAT Registration & Compliance

If your turnover from services exceeds €25,000 within a calendar year, VAT registration in Belgium might become mandatory. Certain activities might trigger registration even below this threshold. Quarterly VAT returns are the norm for businesses in Belgium, with electronic filing being mandatory.

Companies can take advantage of various investment deductions designed to encourage qualifying investments. These include:

General Investment Deduction

A standard investment deduction is available on specific asset categories. The percentage varies depending on the type of asset and the tax year.

Investment Deduction for Energy-Saving and Ecological Investments

A higher investment deduction rate may be available for investments in assets that promote energy efficiency or environmental protection.

Notional Interest Deduction (NID)

The NID, a mechanism that allowed businesses to deduct a hypothetical interest expense from their taxable income, reflecting the cost of using their equity for financing, has been abolished for taxable periods ending as of 31 December 2023. It is included here for historical context, but businesses should not rely on it for future planning.

Research & Development (R&D) Incentives

Belgium offers numerous incentives to support research and development activities:

Innovation Income Deduction

Up to 85% of qualifying innovation-related income can be deducted from the company's taxable base. This results in a substantially reduced effective tax rate on income generated through elements like patents.

Partial Withholding Tax Exemption for Researchers

Companies employing qualifying researchers can benefit from a substantial exemption on withholding taxes associated with the researcher's salaries.

Investment Deduction / Tax Credit for R&D

Businesses can claim additional investment deductions or tax credits linked to qualifying R&D expenditures.

Other Incentives

Tax Incentives in the Walloon Region

Wallonia offers specific incentives for investments made within the region.

Deduction for Risk Capital

This deduction has replaced the Notional Interest Deduction and provides companies with deductions calculated on the incremental capital.