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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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