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(f) INCOME FROM THE CARRYING-ON OF A BUSINESS OR INDUSTRY

National Enterprises operating abroad

According to Belgian law, a national enterprise which has establishments abroad is liable to tax in respect of all its Belgian and foreign profits, but profits earned and taxed abroad are taxed in Belgium at a reduced rate.

Under the Conventions, industrial, mining, commercial and agricultural enterprises are taxable in each State only in proportion to the income earned by permanent establishments therein.

This is a modification of the Belgian regime, since it exempts from tax in Belgium profits realised in the Grand-Duchy, France and Italy by Belgium enterprises which have establishments in those countries.

Foreign Enterprises deriving Income from Belgian Sources

It was explained on page 56 that a foreign enterprise is taxable in Belgium if it has any kind of “establishment” in that country, the term “establishment” being interpreted in a very wide sense to cover anything between a centre of operations and some recognised public representation by authorised agents.

The Convention concluded by Belgium with the Grand-Duchy of Luxemburg restricts the term to somewhat narrower limits. By permanent establishment are to be understood centres of effective management, branches, factories, workshops, agencies, shops, offices and depôts. The fact that an enterprise established in one of the two contracting States maintains business relations with the other country through a really independent agent or company (broker, commission agent, subsidiary, etc.), does not imply that the enterprise has a permanent establishment in the latter country.

Subject to this same reservation, the Conventions concluded with France and Italy define the term “permanent establishment” so as to include purchase and sales offices and any other fixed installation of a productive character. On the other hand, the Convention with France provides that offices which merely buy goods to supply them to one or more selling or processing establishments of the enterprise in the other country shall not be taxable — subject, of course, to reciprocity.

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