Belgium is one of the premier European countries, with a Gross Domestic Product (GDP) of 599.88 billion US dollars in 2021. It is a free-enterprise economy, and the service sector is the major contributor to the GDP of Belgium. The country is located in central Europe, which gives it easy access to the entire continent. As per World Bank Report 2020, Belgium ranks 46 out of 190 economies in terms of ease of doing business and therefore, trade is not a concern for Belgium.
Belgium has always been among the top 20 countries in strong economies. It contributes 0.03 % to the world economy. The export industry in Belgium is quite strong, and consequently, several businesses have set up their export business there. The country is also one of the founding members of the European Union and has contributed significantly to the creation of the European currency.
The conducive business environment of Belgium makes it easy for companies to set up subsidiaries in the country. However, before starting the operations, you must set up a subsidiary business in Belgium. Once you set up a subsidiary in Belgium, you can carry out all kinds of legal business activities in the country.
What are the Types of Subsidiaries in Belgium?
Before you set up a subsidiary business in Belgium, you must be aware of the options that you have at your disposal. You must decide the business line you want to enter before opening a subsidiary business in Belgium.
Let’s look at the different forms a subsidiary can take in Belgium.
Private Limited Company (Besloten vennootschap)
- Small enterprises that want to establish their presence in Belgium take up this company structure.
- You must have a minimum share capital of EUR 18,550 to establish a private limited company in Belgium.
- The entire capital is then broken up into shares, out of which an amount equivalent to 20% of each share needs to be paid up before the company gets incorporated.
- At least two shareholders are needed to incorporate the company. However, the liability of these shareholders will be limited to their contribution.
Public Limited Company (Naamloze vennootschap)
- Public limited companies are one of the most popular choices for companies planning to set up a subsidiary in Belgium.
- Anyone can establish a public limited company irrespective of their citizenship.
- Companies require a minimum share capital of EUR 61,500 to incorporate a public limited company in Belgium.
- At least two shareholders will contribute the share capital.
- The liability for the business is limited to the shareholders.
Cooperative Company with Limited Liability (Coöperatieve vennootschap)
- At least three members must unite to establish a cooperative company in Belgium.
- The cooperative company owners have unlimited liability.
- To set up a cooperative company in Belgium, a company must have a minimum share capital of EUR 18,500.
- You must pay at least EUR 6,200 before registration and can pay the remaining amount in the next five years.
Partnerships (Vennootschap onder firma)
- To set up vennootschap onder firma, companies require at least two founders.
- These founders run the business and are liable to carry out all the business obligations.
- There is no designated minimum capital for starting a partnership company. Hence, the shareholders will be directly responsible for managing the company.
- There are two other types of partnerships: general partnership and limited partnership.
- In a general partnership, the member’s liability is unlimited. The general partner will have unlimited liability in a limited partnership and manage the business’s daily operations.
How to Set Up Subsidiaries in Belgium?
Setting up a subsidiary in Belgium is relatively simple. You need to follow a few steps, and your subsidiary will be incorporated in a few days. The steps are:
Step 1: Business plan
Companies must submit the business plan to the notary public in Belgium. You must also provide an incorporation deed for setting up a subsidiary providing a business plan mentioning the next two-year program and resources.
Step 2: Company name
Organizations must provide a name suggestion for the company. You must conduct a preliminary name check to ensure that the proposed name is unique.;
Step 3: Open bank account
Set up a bank account where the companies can deposit the minimum share capital. Once the account is activated, you need to deposit at least 20% of your required share capital to the account opened in the credit institution.
Step 4: Subsidiary registration
Next, companies must register their subsidiaries for the register of legal entities and social security. You must submit the registration documents and the registration form to the Crossroads Bank for Enterprises. The form contains important information about the company and the shareholders.
Step 5: Register for VAT
To register for VAT, companies need to fill and submit form 604A and submit it to the competent authority. The form is then examined, and BCE approves the business number as VAT identification.
Step 6: Obtain licenses
You must obtain the necessary licenses based on your industry of operations. For instance, if you plan to provide financial services to the people in Belgium, you need to obtain permits and licenses that enable you to provide the service in the country. Such a company will also have to register with the Financial Services and Markets Authority.
Benefits of Setting Up a Belgium Subsidiary
There are plenty of benefits of setting up a subsidiary in Belgium. As business owners, you must be aware of these advantages once you begin your subsidiary’s business activities. These benefits include:
- Financial benefits: Different areas provide several kinds of economic benefits to companies. For instance, Flanders is known for providing financial help to small and medium-sized enterprises that have set up their companies within the industrial zones of Belgium.
- Easy funding: Biotech or environmental sector companies can easily apply for funding as Belgium is known for supporting these causes.
- Government assistance: If you are setting up a subsidiary in the Wallonia region, the Government helps you procure land, equipment, and other related assets that you might require to run your business.
- Investment grants: You can also avail yourself of the investment grants provided to the Brussels-Capital Region businesses. Also, you will be exempted from paying the withholding taxes for a few months. In some cases, the Government also provides interest-free loans to support the business and contribute to the industry’s growth.
- Tax incentives: The companies have to pay a tax based on their net income, and the corporate tax rate is set at 25% in 2022.
- Lenient annual financial report: One of the main advantages of setting up a subsidiary in Belgium is the lenient submission of yearly reports than a branch. A foreign company established in Belgium is exempted from the submission of financial statements and not liable for the actions of a subsidiary.
Documents Needed When Opening a Subsidiary in Belgium
Maintaining a checklist for incorporating a foreign subsidiary in Belgium would prove helpful. Some of the documents that you need while setting up a subsidiary in Belgium are:
- The address of the subsidiary and a signed lease of the premises where the office is set up
- A financial plan that acts as a justification for the capital that you aim to raise
- A proof stating that you have locked 20% of your capital with a bank or a credit institution
- A signed copy of the deed of incorporation and other by-laws
- Name and address of all the shareholders
- The annual accounts of the parent company
- Articles of Association of the parent company
- A Board Meeting’s minutes’ extract that highlights the decision to open a subsidiary in Belgium
- A certificate confirming the legal identity of the parent company
What Business Forms can Belgium Subsidiaries Take?
The country offers various business forms that company owners can take while setting up a subsidiary in Belgium. When you establish a subsidiary in Belgium, you must be aware of the regulations that are in place concerning different types of subsidiaries.
- Branches, public and private limited companies are Belgium’s most commonly established subsidiaries. Even partnerships are a common sight in Belgium.
- You must have at least two shareholders to establish any subsidiary business in Belgium.
- If you have a large business, you can go with a public limited company and pay the minimum share capital of EUR 61,500.
- If the range of your operations is small, you can open a private limited company with a share capital of EUR 18,550.
Belgium Subsidiary Laws
The Belgium Companies and Association Code (BCAC ) have laid down some basic laws for foreign companies interested in opening a subsidiary in Belgium. Employers must adhere to Belgium’s federal laws during the subsidiary company formation process in Belgium. There are several laws that you must take care of before you start setting up your business. Some of these laws are:
- The incorporation of the subsidiary should be mandatorily done via a notary.
- For a company limited by shares, the company must print the Articles of Association (AOA) in the Official Belgian Gazette.
- All the documents submitted during the incorporation must be translated to either French, Dutch, or German, depending on the location of the business.
- It is mandatory to submit a business plan for the initial two years.
- Subsidiaries are taxed on their income earned in Belgium and their worldwide income under the same tax regulations as resident Belgian corporations. It must adhere to all applicable corporation tax, VAT, withholding, and social security tax rules.
- The companies will also have to pay payroll taxes, property taxes, etc., as per the rates released by the Government.
- A subsidiary established in Belgium can have only one shareholder. The shareholder can be a company or an individual.
- The subsidiary must mandatorily appoint a person who will act as a permanent company representative if the director is a legal entity.
Post Incorporation Compliance
All Belgian subsidiaries need to comply with all the government laws and regulations. This allows smooth incorporation of subsidiaries in Belgium.
Post incorporations, companies need to abide by particular administrative and legal compliance, which are as follows:
- Set up a permanent bank account: Once you have set up your business and have completed all the formalities, you need to open a bank account for the business. The account should have the capability to transact in different currencies.
- VAT details: All Belgium subsidiaries must submit the VAT details to the tax regulations.
- Register for social security: You must register your business with the Belgian National Social Security Office to make social security payments on time.
- Organize shareholder meeting: You need to organize a shareholder meeting at least once a year and pass necessary votes on the appointment of new directors, approval of annual accounts, etc.
- Submission of the annual report: Once the annual meeting of shareholders has been conducted, you need to submit the annual report and the auditors’ report to Belgian National Bank no later than seven months after the closure of the financial year.
Taxes on Subsidiaries in Belgium
When setting up a subsidiary in Belgium, you must be aware of how subsidiaries are taxed in Belgium. As the subsidiaries will be deriving their income from Belgium, all the local tax rules will apply to them. A subsidiary is treated no differently from companies that are established in Belgium.
- A 25% corporate tax applies to all the subsidiaries set up in Belgium. Also, the company’s income from worldwide operations is taxed at 25%.
- The withholding tax does not apply to companies in their initial year. However, this can go up to 30% in some cases.
- A 21% VAT is charged on businesses operating in Belgium. However, some industries have a reduced rate of 6% or 12% VAT.
- The companies also have to make social security contributions on behalf of their employees. A 13.07% has to be paid to the general social security accounts.
Additionally, subsidiaries also have to pay payroll and property taxes as applicable. The subsidiaries must adhere to all the compliances of the resident Belgium companies. You also need to pay corporate taxes to the relevant authorities quarterly.
Tax Incentives for Firms Setting Up a Subsidiary in Belgium
Belgium supports different kinds of industries and therefore, the country provides some flexibility in terms of taxes. Belgium does not levy withholding tax on the newly established subsidiaries. Also, the VAT applicable to a few industries is relatively low and can go as low as 6%.
Depending on the nature of income, unilateral relief from double taxation on foreign-sourced income may be given as an exemption, credit, or tax reduction. Businesses that are into research and development are offered tax breaks, deductions, and credits. Also, the innovation deduction scheme helps these companies save a lot of taxes as 85% of the income that the R&D companies earn through innovation is exempted from corporate tax.
Other Important Considerations
You must know all the local laws governing your subsidiary in Belgium. While setting up a subsidiary in Belgium, you should go through all the labor laws and understand the company’s tax structure.
You must get in touch with a global PEO as it might help you comply with local laws that govern the company and help in onboarding employees that would contribute significantly to the subsidiary’s growth.
Setting up a subsidiary in Belgium can get cumbersome. However, if you take a step-by-step approach to deal with it, you can easily navigate it.
How Can Multiplier Help You Hire & Scale in Belgium?
Setting up a subsidiary in Belgium can be daunting due to local and federal laws and regulations governing the incorporation of the subsidiary. Several legal documents need to be filled out and notarized.
You can easily partner with a global PEO like Multiplier. They will help you in making the entire process relatively easy. Our experts will aid you in onboarding employees even without establishing an office in Belgium. Moreover, we can also support you with other facets of business-like payroll processing, contract generation, and more.