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PART I. —GENERAL DESCRIPTION OF SCHEDULAR AND COMPLEMENTARY INCOME-TAX SYSTEM.1

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The system of schedular taxes on incomes was introduced in Belgium after the war2 and has since constituted one of the chief sources of budget revenue. Out of an estimated total of more than 3 billions of francs for direct taxes, in the ways-and-means budget for 1933, schedular taxes account for approximately 1.7 billions, or 57 per cent. They amount to 19 per cent of the total fiscal revenue of the country in the same year (direct taxes, Customs and excise, registration).

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The laws concerning schedular taxes on income establish the territorial character of the tax in respect both of incomes and persons. All income produced or received in Belgium is subject to schedular taxation, regardless of the domicile or nationality of the beneficiaries; on the other hand, persons domiciled or resident in Belgium are also taxed on income produced or received abroad. This twofold characteristic is expressed as follows in Article 2 of the co-ordinated laws2:

“Tax is levied upon:

“(1) The income from all real or personal property produced or received in Belgium, even if the beneficiary is not domiciled or resident in the country;

“(2) The income of persons domiciled or resident in Belgium, even if such income is produced or received abroad”.

Domicile, Residence

The notions of domicile and residence apply to individuals as well as to companies and partnerships.

An individual is domiciled in the place where his personal rights and interests have their centre — this is, as a rule, the place where his name is registered on the census or poll lists. It is also the place where he declares himself domiciled when executing a deed before a notary.

Residence, on the other hand, is the place where a person has the habit to live actually; it is a material situation which results from a stay of some duration. In most cases, domicile and residence are identical.

Companies and partnerships are domiciled in the place of their head office or principal establishment.3 The principal establishment is the establishment where the legal entity is centred, where the business is directed and controlled, the profits collected and meetings of shareholders held. In most cases this is also the head office and, when the statutes fix another head office, the latter is sometimes more apparent than real. In this case, the principal establishment is the place containing the chief factors of management or administration — i.e., the offices, especially the managing offices proper, the commercial services and the central accountancy.

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Companies, Partnerships

Under Belgian law, the term “share company” (sociétés par actions) applies not only to companies by shares (sociétés anonymes) and limited partnerships with share capital (sociétés en commandite par actions) established within the precise meaning of the co-ordinated laws on commercial companies, but also to similar companies, such as private companies (sociétés àresponsabilité limitée), without distinction of nationality, provided, however, in all cases that they have their head office or principal establishment in Belgium and their capital divided into shares.

Accordingly, a share company, even if incorporated abroad, is subject to the regime governing similar Belgian companies, if it has its head office or principal establishment in Belgium.

Associations, other than share companies, which have legal entity, especially partnerships (sociétés en nom collectif and sociétés en commandite simple) are also taxable in Belgium if they have their head office or principal administrative establishment there; these associations are taxed as such on profits placed to reserve, but each partner is taxed separately on the sums allotted or distributed to him.

Foreign share companies and other foreign companies which have a branch, agency or any other establishment in Belgium are taxable in that country in respect of the profits resulting from any operations conducted by or through the said establishments.

There are three schedular taxes1:

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I. TAX ON INCOME FROM LAND AND BUILDINGS

(Articles 4 to 13, 33, 50 (paragraph 1), 51, 59 (paragraph 1, clause 2), 61, 65, 66 to 69, 72, 73, 74 (clause 2) of co-ordinated laws; Articles 1 and 2 of the Law of July 23rd, 1932.)

1 and 2. TAXPAYERS AND TAXABLE INCOME

This tax, representing in 1933 about 28 per cent of the yield from schedular taxes, is imposed upon income from any land or buildings situated in Belgium; it therefore does not apply to property owned abroad by persons domiciled or resident in Belgium.2

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EXEMPTIONS

Property is exempt from this tax if it fulfils the three following conditions: if it is national domain land: if it is at the same time essentially unproductive; if it is allocated to some public or public utility service.

Exemption is further granted to premises or parts of premises which an owner without any pursuit of gain may have devoted to the exercise of public worship, to education, or to the establishment of hospitals, hostels, clinics, dispensaries or similar charitable institutions.

This tax is not collected for the first ten years after a house is built, provided the owner can furnish proof that building began after December 31st, 1927, and that the house was occupied before January 1st, 1931.

This remission is subject to certain conditions regarding sanitation and habitableness; moreover, the cadastral income from these houses may not exceed certain maxima fixed according to the class of commune.1

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3. ASSESSMENT OF TAX

(a) COMPUTATION OF TAXABLE INCOME AND ABATEMENTS

The taxable or cadastral income (revenu cadastral) from land and buildings is determined by the competent authorities on the basis of an expert survey. It represents the ordinary average net income for one year — i.e., the gross income less the following deductions for upkeep, repairs, etc. —one-fifth in the case of buildings; one-tenth in the case of land.

The cadastral income is established by comparison with property of the same nature and similar yield situated in the same commune or in certain neighbouring communes selected as typical. The expert survey is made with due regard for the rent or for sale price and average rental value. If the taxpayer does not agree on the income ascribed to his property, the Administration and taxpayer may submit to arbitration of a third party, from whose decision there shall be no appeal, except on grounds of some material error.

Cadastral incomes are determined for a period of ten years.2

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In each commune or cadastral section of commune, a yearly revision may, however, be made of the cadastral income of standard types of properties (immeubles-types) of each of the two categories (buildings and lands) or of one of the two categories only. If, for a category, the average of the revised income is greater or less, by at least 10 per cent, than the average of the income assessed for the current year, the cadastral income of all the parcels of the category may, by virtue of a Royal Decree, be reduced or increased by the same proportion as from the following year.

Revision is effected when an explanatory request is made before July 1st by the mayor or by a group of proprietors owning at least 10 per cent of the total number of the parcels of a category registered in the Cadastral Record. Revision may also be made by order of the Minister of Finance.3

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(b) COMPUTATION OF TAX AND DEDUCTIONS

The tax rate is fixed at 7 per cent.4 The provinces and communes may levy “additional centimes” on the tax thus computed.

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Reductions1

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Reductions of tax are allowed, on request, to heads of families numbering at least three children; this reduction amounts to 7 per cent for each child dependent upon the taxpayer on January 1st of the fiscal year, but it may not exceed 200 francs per child.

Further, seriously disabled ex-servicemen may obtain a reduction of one-fifth of the tax levied on the house or part of the house they are occupying.

Finally, a reduction of one-quarter is allowed, on request and under certain specified conditions, in respect of houses occupied solely by the owner.2

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An exemption or reduction of this tax may also be granted in proportion to the difference between the cadastral income of buildings and the actual income derived from them during the fiscal year, provided this difference amounts to at least 10 per cent of the real annual income.

4. COLLECTION OF TAX

The tax is paid direct by the taxpayers concerned within two months3 of receiving the assessment notice. On request of the assessee, the tax may be charged to the tenants of the taxable property, on payment of a two francs fee for each extra notice sent out. In default of payment within the prescribed time-limit, the Treasury is entitled to interest on the sum due at 6 per cent per annum.

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II. TAX ON INCOME FROM MOVABLE CAPITAL

(Articles 14 to 24, 34, 50 (paragraphs 2 and 3), 51 to 59, 61 (paragraphs 3 and 5), 62 to 80 of co-ordinated laws.)

The tax on income from movable capital makes up the second schedule. In 1933, it yielded almost 37 per cent of the yield from schedular taxation.

1. TAXPAYERS

This tax is an impersonal tax payable irrespective of the status, nationality and social or family circumstances of the individual, partnership or company that pays or receives income in Belgium. It is imposed upon all income from personal property — except such as is expressly exempted by special provisions enacted in the public interest — whenever that income actually materialises. Nevertheless, although the tax is applied without discrimination to all personal income and even to income from real property received abroad, its rate differs substantially according to the kind and origin of the income.

2. TAXABLE INCOME

This tax is levied upon dividends, interest, annuities, and upon all other products of invested capital of whatever kind. These are divided into four main categories.

The tax is in the first place on income from shares of all kinds (actions or parts), bonds or other loans payable by commercial or non-commercial share companies having their head office or principal administrative establishment in Belgium.

Income from shares of all kinds includes dividends, interest, partners’ shares, founder shares and all other profits distributed in any form and for any consideration whatsoever, also total or partial repayments of a company’s capital as the result of profits.

If the company is wound up in consequence of liquidation or for some other reason, the tax is based on the total amount distributed in cash, bonds or otherwise, after deducting fully paid-up capital remaining to be refunded.

This capital is, if necessary, multiplied by a co-efficient fixed by Royal Decree,1 account being taken of the average rate of exchange in the year of payment.

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When a company is dissolved without any distribution, the tax is payable on the real value of the company’s property, subject to deduction as above.

This tax, however, will not be collected from share companies which are liquidated by way of merger before July 1st, 1935.2

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The second category of income assessable to personal property tax includes income from bonds issued by the State, provinces and communes and other public institutions or bodies, except as exempted by special legal provisions.3

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The third category of income liable to personal property tax is made up as follows:

(1) Capital invested in any commercial, industrial or agricultural, concern, operated otherwise than by the companies in the first category, and excluding capital invested either by an owner in his own business or by managing partners in partnerships having legal entity.

The collection of personal property tax is therefore limited to the income from capital invested in any commercial, industrial or agricultural enterprise by non-active partners, especially sleeping partners, who only contribute funds, securities or property, even though they may intervene from time to time as legal or technical advisers, etc., to the association.

(2) All loans and debts to the charge of individuals and companies other than share companies, resident or domiciled in Belgium.

The income from debts and loans includes income:

(3) Sums of money deposited in Belgium with banks, exchange, credit, deposit or savings institutions, or with bankers, notaries, business agents or other depositaries.

The tax is payable on the income from these deposits whoever the depositaries may be, and irrespective of the domicile or residence of the depositor and of the duration and nature of the deposit (guarantee, surety, or consignment).

Nevertheless, debts or deposits of a professional character are exempt, if it is duly shown that the interest thereon is included in the accounts of the beneficiary enterprises situated in Belgium (Article 18, last clause of co-ordinated laws).

The fourth category includes income from foreign debentures and securities, foreign debts, cashed or received in Belgium by any person whatever or cashed or received abroad by individuals or legal entities domiciled or resident in Belgium.

Under certain conditions fixed by the Minister of Finance, the tax is not payable on income from foreign securities deposited in Belgium by individuals or legal entities having in Belgium no domicile, residence or establishment.

The tax also applies to the yield from the lease, use and concession of any personal property and to income from real property situated abroad.

Income from Colonial Enterprises

The Law of June 21st, 1927, created a special regime in favour of enterprises operating in the Belgian Congo.

In principle, enterprises — whether they have or not the form of companies — which have their head office or principal administrative establishment in Belgium and their centres of operation in the colony, are liable to taxes on income, regardless of whether the taxable income is of Belgian or colonial origin.

The tax is imposed: (a) in the case of share companies, on the income from share and on profits placed to reserve or on one-twentieth of the annual net profit in the case of Congo private companies (sociétés àresponsabilité limitée); (b) in the case of other taxable enterprises, on income distributed to members or partners or on other income from invested capital.

The rate of the tax is 17 per cent for the incomes enumerated above; it is reduced to 13 per cent on income from bonds.

The Colonial Treasury receives the whole of the tax on the interest on colonial loans and on dividends accruing to the Government of the Belgian Congo from securities in its portfolio, and four-fifths of the capital yield of the other taxes on securities, including the tax on income from bonds; the remaining fifth goes to the Belgian State.

3. ASSESSMENT OF TAX

This tax, being an impersonal tax, is levied on all income without regard to the person who pays or receives it (see page 52); consequently no deduction is allowed, either from the taxable basis or from the amount of tax, by reason of family charges or other considerations based on the status, nationality or social circumstances of the person who pays or receives such income.

If income is fixed in a foreign currency or is payable abroad, the amount is converted into francs at the rate of exchange at the time of payment, prior to assessment (Article 19).

Further, any tax paid by the debtor in discharge of the beneficiary of the income is added to the latter, for purposes of tax assessment (Article 14, paragraph 2).

The rate of the tax varies between 2 and 22 per cent, according to the table of tariffs (see Annex).1

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4. COLLECTION OF TAX

As a rule, tax is collected by deduction at the source at the time when the income is paid. It is paid into the Treasury within a fortnight of the attribution or payment of the income; in default of payment within this time-limit, the Treasury is entitled to charge interest on the sum due at the rate of 6 per cent per annum.

The provinces and communes may only levy additional tax (centimes additionnels) on income from capital invested in Belgium.

III. TAX ON PROFESSIONAL INCOME

(Articles 25 to 32, 35, 50 (paragraphs 4 and 5), 51 to 59, 61 (paragraphs 3 and 5), 62 to 80 of co-ordinated laws; Article 5 of the Law of July 23rd, 1932;1 Articles 7 and 8 of the Royal Decree of January 13th, 1933.2)

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The tax on professional income, or professional tax, forms the third schedule. Although, in 1933, its yield was equal to that of the tax on income from personal property (37 per cent of all schedular tax yield), it is of more importance for the purposes of the present study.

The professional tax is partly impersonal and partly personal, for, while it is imposed upon income whenever earned, deductions both from the taxable basis and the amount of tax depend upon the status of the beneficiary.

1. TAXPAYERS

Professional tax is payable by all individuals or legal entities, associations without legal entity and de facto associations:

The professional tax on the different payments under (b) is collected at the source and therefore raises no difficulty. The treatment of the taxpayers referred to under (a), however, calls for certain explanations.

It was said at the beginning of this chapter that, in Belgium, the fiscal regime applying to the Belgian taxpayer domiciled or resident in Belgium is applied ipso facto to a foreigner engaged in business in Belgium, whether an individual or a company other than a share company. Foreign share companies operating in Belgium are expressly taxable at the fixed rate of 10 per cent (plus provincial and communal additions) on all profits earned by their Belgian establishments.

The regime applicable to Belgian share companies and foreign share companies differs therefore as follows. Belgian companies owe the tax on income from personal property on distributed income, and professional tax on a graduated scale (maximum of 9.9 per cent, plus provincial and communal additions) on other profits, while foreign companies are only liable to professional tax at the fixed rate of 10 per cent3 (plus provincial and communal additions) on all profits from Belgian sources.

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Colonial Companies

The Law of June 21st, 1927, as was seen (page 54), created a special system in favour of enterprises operating in the Belgian Congo. That law lumps together profits earned in Belgium and the Congo and subjects them to a combined tax, the yield from which is divided between the colony and the home country.

After the collection of the tax on income from personal property on income liable thereto, the professional tax is levied at the ordinary rates on remaining profits, except on reserves invested in the colony within the previous five years.

When colonial enterprises have operating centres abroad or work up Congo products in Belgium, the profits earned by these centres or establishments are subject to the ordinary rules of taxation. One-fifth of the State’s share in the taxes on profits of the said establishments earned in Belgium accrues to the Colonial Treasury.

National Enterprises operating abroad

When a taxpayer has his head office or principal establishment in Belgium and establishments abroad, he is taxed on all profits realised both in Belgium and abroad.1 Nevertheless, the results of the Belgian and foreign operations must be considered separately, although with due regard for the results of the general balance-sheet. For this purpose, the taxpayer concerned must attach to his annual declaration, not only the general accounts, but a copy of the separate balance-sheet and profit-and-loss account relating to the business of the separate foreign establishment (Article 54, paragraph 1, (3)). These last profits are taxed in Belgium at a reduced rate, if they have already been taxed abroad (Article 35, paragraph 7).

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It does not matter whether or not the foreign establishments are de facto dependent upon the centre of management in Belgium.

In the case of an individual, the whole of the profit is liable to professional tax, subject to a reduction of rate for income earned and taxed abroad.

On the other hand, in the case of a company or partnership, professional tax on total profits is subject to the deduction of distributed income or of income liable to personal property tax as income from invested capital; both taxes, moreover, are levied at reduced rates on profits earned and taxed abroad.

Foreign Enterprises deriving Income from Belgian Sources

In principle, foreign enterprises are only taxable in Belgium if they have one or more establishments in the country, at whose head office they are bound to keep separate accounts of the business transacted by or through these establishments. The only deductions allowed under the head of general or administrative expenses are expenses of this kind incurred by the said Belgian establishments (Article 27, paragraph 4).2

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The word establishment must be understood in its broadest sense: a place of business, an agency and a branch constitute establishments within the meaning of the law. The existence of a board of management and staff is not essential. This definition covers industrial and commercial establishments and insurance companies, which are, by common knowledge, publicly represented in Belgium by authorised agents.

A foreign enterprise operating in Belgium through an establishment is liable to professional tax at the rate, and according to the rules, applying to Belgian taxpayers of the same class. Only the profits of the Belgian establishment of a foreign share company pay the uniform rate of 10 per cent.3

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A special regime applies to representatives of foreign firms, foreign bargemen, itinerant vendors, etc.

Subject to any exceptions provided for in international conventions, the professional tax is fixed at a minimum of 200 francs in respect of representatives of foreign firms, foreign bargemen, itinerant vendors, hawkers and other persons who carry on their business in Belgium, without having any domicile, residence or establishment in the country. The tax is paid before engaging in the business in Belgium. If, however, the resultant income justifies a higher tax, a proportionate supplement may be demanded (Article 27, paragraph 4).

Foreign Shipping Companies

In principle, foreign shipping companies whose vessels land in Belgium are liable to income-tax. The Government, however, is empowered1 to conclude international conventions granting on a basis of reciprocity full exemption from income-tax to foreign shipping enterprises not domiciled in Belgium.

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Conventions of the kind have been concluded with Norway, Denmark and Iceland, Finland, Ecuador, Sweden and France.

Negotiations are proceeding with other countries.

2. TAXABLE INCOME

The following is deemed to be taxable income:

(a) Profits of any Industrial, Commercial or Agricultural Enterprise, including Profits from the Individual Work of Members of Commercial or Non-commercial Companies having Legal Entity. — The profits of industrial, commercial or agricultural enterprises are those resulting from any operations conducted by or through their establishments.

For purposes of professional tax, the law expressly considers as profits:

Nevertheless, tax is only imposed upon the half of profits actually employed, within the country and within twelve months of the close of the trading year, on the building of workmen’s houses or installations on behalf of the staff of the enterprise.

Taxable income further includes personal expenditure, such as the rent of premises used for living purposes, the upkeep of the taxpayer’s household, cost of education and any other expenses not necessitated by the exercise of the profession or occupation.

The income enumerated above is taxable on its net amount — that is, on the gross amount less only such professional expenses as have been incurred, during the fiscal period, for the purpose of acquiring and maintaining that income.

The following, inter alia, are regarded as professional charges:

Depreciation allowances are based upon investment value or cost price.

Nevertheless, as regards business premises and industrial, commercial or agricultural plant acquired or constituted before July 1st, 1926, depreciation allowances may be based upon a cost price re-assessed under conditions and within limits to be fixed by Royal Decree; this re-assessment must be entered in the closed accounts or balance-sheets of 1931 at the latest.1

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(b) Miscellaneous Remunerations. — The co-ordinated laws of Belgium concerning income-taxes also subject the following miscellaneous remunerations to professional tax:

Advantages in kind are added to remunerations or wages; they are computed at their actual value or are re-assessed at a flat-rate, according to circumstances.

From these remunerations it is permissible to deduct sums withheld as contributions to pensions or insurance funds, and professional expenses. In the absence of evidence — and generally there is none — these charges are fixed at one-quarter if the emoluments are less than 15,000 francs and at one-fifth if they exceed that amount (with a minimum of 3,500 francs). This fixed sum, which includes the taxes deductible as professional expense, may not exceed the amount of such taxes by more than 30,000 francs.

Taxable emoluments do not include:

(c) Profits from the Liberal Professions, etc. — Lastly, the Belgian fiscal regulations subject to professional tax the profits of any kind whatever from the liberal professions, functions and offices and any lucrative employment.

These profits consist of the difference between total receipts and expenses attaching to the exercise of the calling.

Failing proof to the contrary, these expenses are fixed at one-fifth of the said receipts, but this amount may not exceed by more than 30,000 francs the taxes deductible as professional expenses.

Persons engaged in the liberal professions or fulfilling functions or offices are required, under penalty of a fine of 500 francs for each infringement, to furnish a signed and dated receipt of their fees, commissions or other emoluments.

This receipt is taken from a book with counterfoils, the model for which is prescribed by the Minister of Finance. The latter may demand that entry be made in the counterfoils and leaves of this book only of the total amount of fees, commissions or emoluments and the name of the person from whom they were due.

Any person making a payment of this kind without demanding the receipt is liable to the fine jointly with the person concerned.

The issue of a receipt is not compulsory for professional persons if they keep a classified daily record of their professional receipts and expenses. Any omission to do this makes them liable to the fine mentioned above.

3. ASSESSMENT OF TAX

(a) COMPUTATION OF TAXABLE INCOME

General Rules

The Belgian fiscal system is based upon the principle of an annual declaration of income.

Generally speaking, all those liable to the three classes of professional tax have to submit, during the first three months of the year, the return required under Article 53 of the law to the Tax Controller within whose jurisdiction they have their principal establishment or are domiciled or resident.

But taxpayers whose accounts do not cover the calendar year, and also all share companies, have to forward to the Controller of Taxes, within a fortnight of the approval of the balance-sheet and profit-and-loss account and, at the latest, within six months of the close of the trading year, a return containing, according to categories, the total income liable to the tax on income from personal property and professional tax. This return must be accompanied by a copy of the balance-sheet and profit-and-loss account, of the resolutions approving them and the Minutes or reports $$$relaing thereto; further, by a list showing the number and amount of shares and bonds issued and of securities of one kind or another bought or sold during the past financial period, and by a copy of the separate balance-sheets and profit-and-loss accounts of any separate foreign or colonial establishments.

Failing documentary evidence furnished either by the taxpayer or by the Administration, taxable profits are determined for each taxpayer by comparison with the normal profits of persons similarly placed and with due regard, according to the circumstances, for capital invested, turnover, number of workmen, motor-power used, rental value of exploited land and any other useful information. The Administration may, for this purpose, agree upon empirical bases of taxation with the professional associations concerned.

No division of profits from joint operations is allowed between members of the same family living together or between the members of any company, association or community. However, the emoluments of members of the family of an entrepreneur working with him are included among general costs, provided they do not exceed a normal wage or salary and provided they have been assessed as such to professional tax (Article 27, paragraph 3).

The tax is payable by the head of the family or by the director of the company, association or community.

Professional tax, in the case of share companies, is levied upon their profits less income distributed or liable to personal property tax as income from invested capital (Article 35, paragraph 2).

In order that the same income may not be taxed twice, Article 52 of the co-ordinated laws provides for the deduction from schedular taxes of all direct or additional taxes which the taxpayer may already have paid in Belgium on taxed income, or which share companies with their head office or principal establishment in Belgium may have already paid there on sums distributed as shares.

As regards companies other than share companies, including partnerships, having a legal entity, each member is liable separately, in respect of sums allotted or distributed to him, to professional tax if he is an active partner, or to personal property tax in other cases.

The company or partnership is liable to professional tax in respect of profits placed to reserve, the provisions of Article 52 being applicable to this case also.

The professional tax is on income, actually determined or presumed, either for the previous year, in the case of taxpayers whose accounts coincide with the calendar year, or, in the case of other taxpayers, for the twelve months covered by the accounts of the current year.

The income for the year or taxable period, as the case may be, is subject to deduction of any professional losses incurred during the two preceding years or financial periods. Thus a taxpayer, whether an individual, a partnership or a company, who keeps regular accounts and suffers professional losses during the past two years or financial periods may deduct these losses from the profits of the year following.

National Enterprises operating abroad

In determining profits earned abroad, the only deductions are the overhead expenses of the establishment and the taxes paid in the country where it is situated.

The general or administrative expenses of the head office in Belgium, even when incurred on behalf of a foreign establishment, must be placed to the account of Belgian operations. This applies to directors’ and auditors’ fees and to bond coupons; however, the amount of the coupons must be accounted to the foreign establishments if the bonds are issued abroad and for the requirements of the foreign establishments.

Profits derived from operations directed by the taxpayer from the head office in Belgium without the intervention of agents or establishments abroad are not regarded as having been earned abroad. Thus, profits from reinsurances contracted by a Belgian firm with a foreign insurance business are regarded as Belgian profits; so are the profits from speculations figuring in the head office’s portfolio and consisting in the repurchase of bonds below par.

Foreign Enterprises deriving Income from Belgian Sources

In principle, foreign enterprises which derive income from operations in Belgium are taxed on the results of their specifically Belgian operations as shown by the separate accounts they have to keep, even when the general balance-sheet reveals a loss. If the accounts fail to supply the necessary evidence,1 the enterprise is taxed on a minimum profit fixed by the Royal Decree of October 8th, 1930.2

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It is therefore necessary to separate from the results of the balance-sheet, the profits (dividends, increases of capital, reserves, writings-off of foreign losses, etc.) realised by the Belgian establishment, which constitute the taxable basis.

If specific capital is set aside for the establishment in Belgium and the latter has a special account and a separate balance-sheet in the enterprise’s accounts, that special account and separate balance-sheet, duly checked, form the basis for determining the taxable profits.

Profits expressed in foreign currency are converted, if necessary, into Belgian money at the official rate of exchange at the date on which the accounts in question were closed.

Foreign Insurance Companies. — Foreign insurance companies operating in Belgium are not required to apportion their profits according to the class of policy (life insurance, temporary, mixed, etc.), but only according to the branch of insurance (life, fire, etc.).

These companies must include in their accounts:

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The accounts of foreign insurance companies must also mention any reinsurance business relating to policies concluded by the Belgian agencies or contracted in Belgium by agents domiciled abroad, if those agencies intervene in any way in the surrender of premiums to reinsurance companies, the payment of that part of losses refunded by the latter, the collection of reinsurance commissions, etc.

In order to ensure the requisite uniformity in the taxation of foreign insurance companies, the Administration has ordered the use of a standard profit-and-loss account containing all the information required.

Foreign Firms selling Imported Goods in Belgium, or re-exporting them abroad. — The profits from these operations are determined in Belgian francs, after deducting from the price of sale or re-consignment:

(b) COMPUTATION OF TAX AND DEDUCTIONS

Professional tax is levied on the total annual income of each taxpayer or, for periods of less or more than one year, on any proportionately equivalent sum.

It is not due when the taxable income is below the following minima:

4,800 francs in communes with fewer than 5,000 inhabitants;

5,600 francs in communes with from 5,000 to 30,000 inhabitants;

7,200 francs in communes with 30,000 or more inhabitants.

The commune taken into consideration is either that in which the calling is exercised or that in which the taxpayer is domiciled or resident, whichever he prefers.

The above minima are increased to take account of a taxpayer’s dependents.1

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In the case of taxpayers whose professional income does not amount to 50,000 francs, the tax varies from 12 francs to 2,256 francs, according to the size of the income and on a sliding scale fixed by Royal Decree according to the class of commune.2

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In the case of taxpayers with a professional income of 50,000 francs or more, the tax is computed on the following scale1:

                   
Net income of:  Percentage of tax 
50,000 and less than 60,000  5. 
60,000 and less than 70,000  5.5 
70,000 and less than 90,000 
90,000 and less than 110,000  6.5 
110,000 and less than 130,000 
130,000 and less than 150,000  7.5 
150,000 and less than 175,000 
175,000 and less than 200,000  8.5 
200,000 and over 

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On the tax thus computed, reductions are granted in respect of family charges.2

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In the case of industrial, commercial and agricultural profits exceeding 50,000 francs net, the professional tax is increased by one-tenth, with a minimum increase of 18 francs.

When these profits are between two-thirds of the exempted minimum and the minimum mentioned above, tax is collected at a flat rate between 10 and 25 francs on a scale fixed by Royal Decree.3

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By way of exceptions to the above rates, the tax is uniformly fixed at:

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Nevertheless, as regards directors, etc., who actually exercise, by election or appointment, real and permanent functions in the same company, the ordinary regime of the law remains applicable to all fixed or determinable remuneration paid to them by the said company, in so far as this remuneration exceeds the fees paid to their colleagues not vested with special functions. The part so subject to the ordinary regime of the law may not exceed for each taxpayer and company either 100 per cent of the net profit on which the statutory percentages have been computed or 100,000 francs if the application of the said percentages gives an amount less than 100,000 francs.

If all the directors, as well as those officers who can be assimilated to directors, exercise special functions in the same company, that part of the remuneration susceptible to the regime of ordinary law may not exceed for each taxpayer and company either 0.75 per cent of the above-mentioned net profit, or 75,000 francs if the application of the said percentages gives an amount less than 75,000 francs.

The remuneration is reckoned at its gross amount — i.e., without deduction of the amount allowable as actual or estimated professional expenses.

The possible exception of the 100 “additional centimes” may not be granted in connection with more than two companies to be designated by the interested parties in their annual returns.

The withholding of the tax, and the “additional centimes” connected therewith, at the source is regulated by Royal Decree.5

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The tax, computed according to the ordinary scales, is reduced to one-fourth for that part of the taxable income which is earned and taxed abroad.

The provinces and communes are allowed to levy “additional centimes” tax on the professional tax on industrial, commercial, agricultural and similar profits and on profits from the liberal professions, functions or offices realised in Belgium; these “additional centimes” may not be added to the tax on profits earned and taxed abroad or in the Belgian Congo.

The communes only may levy a special tax on wages, salaries and pensions.

No provincial or communal tax may be levied upon the fees of directors, auditors, liquidators, etc., of share companies already liable to the 100 “additional centimes” imposed in favour of the State.1

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4. COLLECTION OF TAX

(a) BY DIRECT PAYMENT

Professional tax on industrial, commercial and agricultural profits and on profits from the liberal professions, functions and offices is payable within two months2 of receiving the assessment notice or demand note. The Treasury is entitled to charge interest on sums due at 6 per cent per annum.

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Taxpayers may appeal against their assessments to the provincial or district Director of Taxes.2

The Controller assesses tax on the declared income unless he deems it an incorrect figure. In this case, he may correct it on informing the taxpayer, before assessment, of the figure he proposes to substitute for the figure declared and giving the reasons for the alteration. The taxpayer is given twenty days in which to submit observations. If the parties still disagree, the dispute may be submitted to a Committee which sits in the chief town of each control area, and whose composition and functions are determined by Royal Decree.3

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The Committee’s opinion, with reasons for it, is notified to the taxpayer by the Controller, who also informs him of the income figure upon which he proposes to assess tax.

If this figure coincides with the opinion of the Committee, the taxpayer can only obtain a reduction by furnishing proof of the exact amount of his taxable income.

In the contrary event, the burden of proof is upon the Administration, if the income taxed is in excess of the Committee’s estimate.

The Committee must also be consulted before any ex-officio assessment is made.

(b) BY DEDUCTION AT THE SOURCE

Professional tax on the various remunerations is collected by withholding the amount due at the time of payment; the law prescribes that the persons responsible for paying the income may deduct therefrom the tax due, subject to no appeal by the beneficiaries, whatever their nationality. This deduction is effected on a scale fixed by Royal Decree;4 the tax thus withheld must be paid to the receivers of taxes within a fortnight of the end of the month in which the income was paid. The control of payments and any adjustment of the fiscal position of the taxpayers concerned are effected by means of individual forms filled up by the employer. These forms are issued to the person in receipt of the salary, wage, etc., and attached by him to his annual declaration.

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In the case of persons who receive professional income of different kinds, tax is computed on the total income for the previous year after deduction of any taxes collected at the time the income was paid.

IV. COMPLEMENTARY PERSONAL TAX

(Article 37 and following of co-ordinated laws; Articles 6 and 7 of the Law of July 23rd, 1932; Articles 1 to 6 of Royal Decree of January 13th, 1933, in execution of Article 1 of the Law of December 30th, 1932.)

Until 1930, the income-tax system included, in addition to the schedular or impersonal taxes, a personal tax called complementary income-tax or super-tax, payable by the taxpayer in respect of his total income — i.e., the total income directly or indirectly subject to schedular taxes and income exempt from these taxes.

The Law of July 13th, 1930,1 modified by Articles 6 and 7 of the Law of July 23rd, 1932, and by Articles 1 to 6 of the Royal Decree of January 13th, 1933, issued in execution of the Law of December 30th, 1932, replaced the super-tax on total actual income by the complementary personal tax, based in principle on a number of expenditure indices common to the majority of taxpayers and indicating the apparent station in life — rental value of house and furniture, number of servants, horses, motor-cars. Nevertheless, when the total amount received by the taxpayer as income from real property, capital investments, mortgage debts and the exercise of a profession exceeds 100,000 francs, the tax is assessed on the total of the income from these sources, provided such total exceeds the basic amount of taxation as determined by the application of the indices.

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1. TAXPAYERS

Any individual domiciled or resident in Belgium during the first three months of the year is liable to complementary personal tax if the taxable basis exceeds a legal minimum, varying according to communes and due regard being paid to family circumstances. The tax is payable by anyone who, as owner or tenant, occupies houses or reserves houses for partial or total occupation by his family or servants (seaside villa, country house, shooting-box, etc.).

The tax is not payable by companies, partnerships or legal entities.

2. BASIS OF TAXATION

The complementary personal tax is assessed on the following bases:

Houses. — By houses are meant premises or parts thereof for the private use of taxpayers, including commons, parks or gardens belonging to them, but not including buildings used exclusively for the exercise of some profession, trade or industry. The tax is payable by any person who occupies houses or reserves them for occupation, even partially or temporarily, by his family or servants.

The rental value of these houses is the gross income on which the cadastral income is based, or the actual or presumed income when occupation is limited to part of a house not included separately in the cadastral survey.

Furniture. — The rental value of furniture is fixed at 5 per cent of its capital value as determined by the Law of August 28th, 1921,2 establishing a tax on furniture.

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When houses are let furnished, account must be taken of rental value both of the house and of the furniture.

Domestic Servants. — The expenditure index representing the services of domestics and other persons is fixed at:

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Horses. — The index figure in respect of horses used for riding and driving4 is fixed at 12,000 francs per horse.

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Carriages, Motor-cars, Canoes and Steamboats, Motor-boats and Sailing Vessels, Aircraft. — The expenditure index applying to these means of transport varies from 2,000 to 50,000 francs, according to rules to be fixed by Royal Decree.5

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Division of Indices. — Since the object of the complementary personal tax is that each taxpayer shall pay according to his standard of living, measures have had to be taken to prevent persons dividing their indices with one another and thus unduly benefiting by a reduction of or even exemption from tax. The law therefore lays down that persons living together so as to form one household may not divide their indices. The tax is assessed on all the taxable elements and is payable by the head of the family or the person who occupies the position of head of the household.

Division, however, is allowed between persons who constitute associations having civil personality and not formed for purposes of gain.

3. ASSESSMENT OF TAX

(a) COMPUTATION OF TAXABLE BASIS AND ABATEMENTS

Expenditure indices are computed, having regard to the normal situation of the taxpayer on January 1st of the fiscal year.

In the case of persons who become liable to the tax after this date, account is taken of the indices existing on March 31st of the fiscal year.

The indices once fixed, the taxable basis for complementary personal tax is determined by applying the following coefficients to the total expenditure indices:

2 if the total is less than 25,000 francs;

2.2 if the total is from 25,000 to 50,000 francs;

2.4 if the total is from 50,000 to 75,000 francs;

2.6 if the total is from 75,000 to 100,000 francs;

2.8 if the total is from 100,000 to 125,000 francs;

3 if the total is 125,000 francs or more.

Nevertheless, when the total amount received by the taxpayer as income from real property, capital investments,1 mortgage debts and professional activities exceeds 100,000 francs, the tax is assessed on the total of the income from these sources, provided such total exceeds the basic amount of taxation as determined by the application of the indices.

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For the purposes of carrying out this provision, the income from real property situated in Belgium must correspond to the cadastral income attributed, for the period to which the complementary personal tax refers, to the property which the taxpayer holds on January 1st of the year to which the assessment relates; as regards income from other sources, the term “income” means that which has been realised during the previous year.

Exempted Minimum.2 — The tax is not due when the taxable basis thus obtained does not exceed:

15,000 francs in communes with fewer than 5,000 inhabitants;

20,000 francs in communes from 5,000 to 30,000 inhabitants;

25,000 francs in communes with 30,000 inhabitants or more.

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In families with three or more children, this minimum is raised per child dependent upon the taxpayer on January 1st of the fiscal year as follows:

2,000 francs in communes with fewer than 5,000 inhabitants;

2,400 francs in communes from 5,000 to 30,000 inhabitants;

3,000 francs in communes with 30,000 inhabitants or more.

Further, the number of out-door workers (ouvriers-domestiques) or maids is reduced by one or by two units according as there are, on January 1st of the fiscal year, at least three or at least seven children dependent upon the taxpayer.

As regards seriously disabled ex-servicemen entitled to benefit by the Law of May 13th, 1929, the minima and increases fixed above are further raised up to the amount of the invalidity pension of the person concerned.

(b) COMPUTATION OF TAX AND DEDUCTIONS

If the minima given above are exceeded, tax is computed on the whole taxable basis.

If the basis does not amount to 25,000 francs, the tax is 1 per cent; above 25,000 francs, the rate gradually increases for every 25,000 francs or fraction of such amount by 1/2 per cent up to 125,000 francs, by 1 per cent from 125,000 up to 200,000 francs and by 2 per cent from 200,000 francs up to a maximum of 20 per cent for the part of the taxable basis in excess of 350,000 francs.1

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The complementary tax payable by the head of a family including three children is reduced by 7 per cent for each of these children dependent upon the taxpayer on January 1st of the fiscal year.2

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The provinces and communes are not allowed to levy “additional centimes” tax on the complementary personal tax or any similar taxes on the basis or amount of that tax.

4. COLLECTION OF TAX

The tax is collected on the basis of an annual declaration by the taxpayer and is payable according to the tax list within two months3 of receipt of the assessment notice.

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As with schedular taxes on income, persons liable to complementary personal tax may appeal against their assessment to the Director of Taxes (see note 1 on page 51).

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