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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.

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