Under existing fiscal law, foreign firms are taxable on profits resulting from any operations conducted by or through their Belgian establishments.

Subsidiaries are generally regarded as separate and independent legal entities and are therefore subject to the fiscal regime of the Belgian companies whose form they have adopted. They are thus liable to income-tax in accordance with the statements in their own accounts, which have to mention separately the results of their Belgian and foreign operations, for the purpose, more particularly, of applying a reduced rate of taxation to profits earned and taxed abroad (see page 56).

The question of allocation arises therefore only as regards branches of foreign enterprises.


In principle, a foreign firm which has a branch in Belgium must itself declare the income earned by the establishment and in support of its annual return must produce the separate accounts of that establishment referred to in Article 27, paragraph 4, second sub-section.

These accounts are not specified in detail in the fiscal law; they may consist of the day-book and other books commonly used in business and the use of which is prescribed in Article 16 of the Law of December 15th, 1872 (Commercial Code).1


In any event, the separate accounts must permit of the drawing up and checking of the separate balance-sheet and profit-and-loss account relating to business done by the establishments, or a summarised statement showing by classes the various operations conducted by these establishments and the total profits resulting therefrom.2


Should such accounts not be kept or should the results not be produced, or if the revenue authorities have serious reason to believe that the accounts do not reveal the real results of operations, the profits of the foreign establishment may be determined either empirically or by the method of comparison provided for in Article 28 of the co-ordinated laws.


1. Method of Separate Accounting

The separate accounts of the branch must include all operations transacted in Belgium by or through the branch. It does not matter whether the business is done with persons in the country or with foreigners. Nor does it matter whether the operations are initiated by the Belgian establishments or are simply conducted through their agency. The operations will in both cases be entered to their account for purposes of determining the profits earned in Belgium.

The accounts will include, for instance, interest received in Belgium and profits from the investment of money by the Belgian branches at the direct orders of the head office.

On the other hand, the only deductions allowed under general or administrative costs of the Belgian establishments are expenses of this kind incurred by the said establishments.

Deductible expenses do not include interest, premiums or prizes paid by the said establishments to bond-holders, nor fees paid to directors and auditors out of the profits earned in Belgium — except when schedular taxes have been paid under this head in Belgium.

2. Empirical Methods

In the absence of exact allocation evidence derived from accounts kept in accordance with the Commercial Code, or documents confirming with sufficient accuracy the income declared, foreign firms operating in Belgium are taxed on a certain minimum profit, fixed as explained below, the tax, however, being not less than 10,000 francs (Royal Decree of October 8th, 1930,1 issued in execution of Article 28 of the co-ordinated laws):


The separate accounts can, of course, be checked by the revenue authorities, who are in no way bound by the information in them. As in the case of the balance-sheets of Belgian enterprises,2 this control may consist in demanding explanations and further evidence whenever the fiscal agents think fit. This applies especially to the prices at which goods have been invoiced by the parent enterprise to its branch or subsidiary. If the Controller has reason to believe that these prices are higher than those invoiced by similar enterprises or those officially quoted, he may disregard the figures in the accounts. In this case, the presumed additional profit is added to that shown in the accounts; or, if the figures are altogether unreliable, the authorities may wholly disregard them and assess tax ex-officio.3

note note

The same care is needed when the separate accounts contain mention of interest on loans and advances paid to the parent enterprise, or of sums due for management or engineering service, use of patents, etc.

As regards interest on loans and advances, the only deduction allowed under the heading of professional charges (Article 26, paragraph 2, of the co-ordinated laws) is interest on capital borrowed from third parties and invested in the business; since the branch does not constitute a third party vis-à -vis the parent firm — the head office and Belgian branch being two parts of one organisation — the revenue authorities include this interest among the profits of the Belgian establishment.

Sums paid for management and engineering service imply the exercise by the parent enterprise of activities in Belgium, and the revenue authorities levy professional tax on the foreign enterprises in respect of the net profit from these activities.1


Lastly, royalties paid to the parent enterprise for the lease, concession or use of patents come under Article 14, paragraph 4, of the co-ordinated laws, by which the total amount is assessable to personal property income tax.

The revenue authorities are not, however, bound exclusively to the empirical method; they may also fix the taxable income by a method of comparison, regard being had to the normal profits of taxpayers similarly situated and, as the case may be, to invested capital, turnover, number of workmen, motor-power used, rental value of exploited land and any other useful information (Article 28 of the co-ordinated laws), should this method seem more likely to reveal the true facts. In practice, however, the empirical method is the normal substitute for accounts; recourse to the comparative method is exceptional.

The criteria on which the latter method is based are the bona-fide declarations of taxpayers who keep regular accounts and operate under similar conditions. The law does not prescribe any particular element of comparison (invested capital, turnover figure, number of workmen, etc.). This is left to the discretion of the fiscal agents, provided only that the method employed shall succeed in fixing as closely as possible the presumed profits on which tax is to be assessed.

3. Method of Fractional Apportionment

If the company fails to produce reliable accounts and should the application of the empirical or comparative method not be thought satisfactory, the taxable income may also be determined as a fraction of the total income of the foreign company. In this case, the latter is required to furnish the revenue authorities with the general accounts of the enterprise and all other information necessary to assess tax on an equitable basis. There are no express administrative provisions to this effect, but the general purpose is to harmonise as closely as possible the various documentary evidence at the disposal of the fiscal agents.

The question really only affects foreign companies operating in Belgium through a branch, as subsidiaries mostly have a separate legal existence involving taxation on their own account.

4. Requirements for Selection of Methods and Relative Value of the Various Methods

In principle, allocation is based upon the taxpayer’s declaration, supported by the separate accounts2 and subject to checking by the revenue authorities. If there are no special accounts or if they are not sufficiently trustworthy, allocation may be made empirically. The empirical or comparative method is only used if there are special reasons for doing so and if the taxpayer agrees to it.


The most practical and satisfactory method is taxation in accordance with accounts susceptible of being verified by the Administration. If it cannot be employed, an empirical method offers an alternative solution, although it is not always in accordance with the facts.1


In actual practice, however, the revenue authorities are satisfied with any method of assessment which will furnish as exact an estimate as possible of the profits earned by a foreign firm in Belgium.


1. Apportionment of Gross Profit of Local Branch to Real Centre of Management abroad

When assessing the profits derived from operations carried on in Belgium, no fraction of these profits is attributed to the real centre of management abroad.

As explained above (page 78), tax is assessed in Belgium upon the profit from all operations conducted in the country by or through the Belgian establishments, the only deduction allowed being the professional expenses of the Belgian office. The Belgian establishment is considered separately for the purpose of determining profits and therefore none of these are ascribed to the real centre of management abroad.

2. Apportionment of Expenses of Real Centre of Management to Branch

Interest Charges

Jurisprudence has decided that, in the case of Belgian enterprises which earn profits abroad, interest charges are ascribed to the head office. The only exception is when the debt has been contracted abroad on behalf of establishments situated abroad.

Applying this jurisprudence, the revenue authorities consider that the interest payable on a general debt of a foreign enterprise is ascribed to the real centre of management, unless it is clearly established in law that the debt was contracted in Belgium by the Belgian establishment for its own requirements; in the latter case, the interest is liable to personal property income tax in Belgium.

General Overhead

As regards foreigners operating in Belgium, the only general overhead or administrative expenses which may be deducted are expenses of this kind incurred by the Belgian establishments (Article 27, paragraph 4, of co-ordinated laws).

Deductible expenses — subject to what was said above about interest charges — do not include interest or premiums paid by these establishments to bond-holders, or fees paid to directors and auditors out of profits earned in Belgium.

If there is any doubt as to the accuracy of general overhead or administrative expenses as shown in the accounts, details are asked for.

3. Apportionment of Net Profit of Branch to Deficitary Parent and vice versa

Foreign enterprises are taxed on the profits from all operations conducted by or through their establishments in Belgium. No regard need therefore be had to any loss in the results of the entire enterprise; none of this loss can likewise be ascribed to the separate accounts of the Belgian branch.

Applying the above principles, the taxable basis is fixed with exclusive regard to the results of the Belgian establishment. If the separate accounts reveal a loss and are found by the fiscal agents to be in order, no tax will be levied in Belgium, even though the entire enterprise should realise a profit.


There is no apportionment of profits between parent branch and subsidiary, the latter being regarded in Belgium as independent and liable in respect of all its profits to fiscal rules of its own.



1. Selling Establishments

Local Establishments selling in National Markets

In principle, a foreign establishment in Belgium has to keep separate accounts of its Belgian operations. If the results shown by these accounts are accepted, assessment is on this basis, but, if not, recourse will be had to one of the methods referred to under “General Questions and Methods of Apportionment”.1


The profit from sales may be determined (in Belgian francs) by deducting from the sale price: (a) the value of the goods at the time they were consigned to Belgium; (b) the cost of transport to Belgium including insurance and import duties; (c) costs of handling, storage, warehousing or packing in Belgium prior to sale; (d) other general expenses in Belgium in connection with these operations.

In principle, the production of the original sales invoices allows the fiscal agent to satisfy himself that these prices are normal having regard to the prices of the same goods produced in Belgium. In the case of special articles without any known current price, the Controller may refuse to accept the accounts if he has reason to doubt their accuracy; in this case assessment will be on an empirical basis.

Local Establishments selling abroad

Profits derived from sales to customers abroad are all ascribed to the branch in Belgium, when the sales were effected through that branch. The law does not prescribe what part the Belgian establishment must play in order that it may be regarded as the agent of sale. In practice, all operations are ascribed to the branch which are concluded by it with the third State, even if they required the authorisation of the real centre of management.

2 and 3. Manufacturing and Processing Establishments

No legal provision ascribes to a manufacturing establishment a given part of profits from the sale abroad of goods manufactured in the country. The revenue authorities have to examine in each case whether and to what extent the manufacturing establishment is to be regarded as having earned profits in Belgium.

4. Buying Establishments2


In principle, a permanent establishment situated in Belgium has to keep separate accounts of all operations conducted in the country, including purchases made on behalf of the principal enterprise. Assessment is based either on these accounts or on one of the methods already mentioned.

The foreign enterprise is not taxable if purchases are made from a local subsidiary, which, being regarded as an independent company, is taxed on the whole of its profits.

5. Research or Statistical Establishments, Display Rooms, etc

Profits could be ascribed to establishments of this kind in Belgium, on the principle that a foreign enterprise is taxable if it has an establishment in Belgium. The revenue authorities have decided that a foreign company wishing to establish an office for supervision and control in Belgium shall be deemed to have an establishment there. If, however, the separate accounts show no profits and, on being produced, are accepted as being in order, no tax is levied.


No special method of assessment is used for these institutions. Their income is determined either on the basis of their separate accounts, if approved, or empirically; the latter method prescribes for these enterprises a minimum taxable profit of 15,000 francs per employee, taking the average number of employees for the year in question.

The revenue authorities are not aware of any case in which the comparative method has had to be used.


In principle, profits are determined from the separate accounts. It may be remembered (see page 60) that these accounts are not required to show profits separately according to the class of contract (life insurance, temporary, mixed, etc.), but only according to the branch of insurance (life, fire). On the other hand, the separate accounts must include: the gross premiums (see note 3 on page 60) collected by the Belgian agencies without deducting premiums surrendered to reinsurance companies; the reserves corresponding to policies concluded by these agencies or contracted in Belgium by agents domiciled abroad; interest on these premiums and reserves; compensation paid by the Belgian agencies; the latters’ general expenses; and, lastly, reinsurance operations relating to policies concluded by the Belgian agents or contracted in Belgium by agents domiciled abroad, etc.

For purposes of uniformity, the Administration has prescribed the production of a standard profit-and-loss account containing all the information required.

In the absence of properly kept accounts, or if such are not produced, the empirical method is employed, with the following minimum profits:

Life insurance: 20 francs per 1,000 francs of paid premiums;

Maritime insurance: 25 francs per 1,000 francs of paid premiums;

Other insurance: 60 francs per 1,000 francs of paid premiums;

The comparative method has not as yet had to be applied.


Same as for (b). Under the empirical method, however, the minimum taxable profit is 150 francs per 1,000 francs of receipts, but not less than 10,000 francs per employee and workman; in the case of railways, the minimum is 3,000 francs per employee and workman (average number for year in question).

The Government is authorised to conclude international agreements granting, subject to reciprocity, complete fiscal exemption to the income of foreign shipping enterprises domiciled in Belgium. Agreements of the kind have been concluded with Norway, Denmark and Iceland, Finland, Ecuador, Sweden and France, and negotiations are proceeding with other countries.


Same as for (b); if the empirical method is used, the minimum profit is 150 per 1,000 francs of receipts, but the taxable income must be not less than 10,000 francs per workman and employee.


In Belgium, telegraphs and telephones are operated by a Government monopoly, which is not taxable.


Same as for (b); the empirical method assumes a minimum profit of 3,000 francs per employee and workman (average number for year in question).


Same as for (b); the empirical method presupposes a minimum profit of 150 francs per 1,000 francs of receipts, with a minimum taxable income of 10,000 francs per workman and employee.



National enterprises which make profits from separate establishments abroad have to attach to their annual declaration a copy of the separate balance-sheets and profit-and-loss accounts of these establishments (Article 54, paragraphs 1, (3), 2).

For the rest, reference may be made to page 60 “National Enterprises operating abroad”.


In this matter, the revenue authorities rely upon the accounts, if these appear to be in order, and if the accounts show that all the profits are of foreign origin, the law forbids any part of them being ascribed to the real centre of management.



Holding companies, like companies with their head office or principal administrative establishment in Belgium and separate establishments abroad, have to keep accounts of the income they derive from both Belgian and foreign sources. Dividends and interest paid in Belgium are liable to deduction of personal property income tax at the source at full or reduced rate, according as the income is of Belgian or foreign origin. In the case of foreign income paid abroad, the holding company has to declare it and pay personal property income tax on it at reduced rate.

Since such income, both Belgian and foreign, must not be taxed twice, the profits of these companies corresponding to the net dividends they receive may be used to build up or add to their reserves, or may be distributed to the shareholders of the company, without payment of any further tax.

The same rule applies to debenture interest and coupons on bonds or to other interests. If this income has paid personal property income tax, its net amount is not liable to further tax when included among profits placed to reserve or distributed.


In conformity with the principles explained in Part I, local subsidiary companies are taxed on their total profits both Belgian and foreign, those earned in Belgium being taxed at full rate, those made abroad at a reduced rate. The local company pays the personal property income tax for which it is liable when it pays its dividend, so that the foreign holding company receives income on which Belgian tax has been duly paid. At the same time, the holding company itself is not regarded as liable to tax in Belgium, since it has neither its head office nor its chief administrative establishment in the country.



In principle, a taxpayer who has his head office or principal establishment in Belgium and other establishments abroad is taxed on the whole of the profits earned in Belgium and abroad. Tax is assessed on the basis of the general balance-sheet and of the special profit-and-loss accounts relating to the business of the separate foreign establishments, the foreign profits being taxed in Belgium at a reduced rate if already taxed abroad.

According to the Conventions concluded with the Grand-Duchy of Luxemburg, France and Italy, industrial, mining, commercial and agricultural enterprises are taxable in each country in proportion to the income earned by the permanent establishments therein.

This procedure constitutes a departure from the normal rule. The Belgian authorities will therefore no longer tax the profits of establishments in the Grand-Duchy, France and Italy, but the profits of establishments situated in other non-contracting States will continue to be subject to ordinary Belgian law.

Allocation will be based on regular accounts. If there are no regular accounts showing the income separately and accurately, the competent authorities of the contracting States will, if need be, agree upon certain rules of apportionment.


In this matter, the Conventions make little change in Belgian fiscal law: the foreign enterprises will be taxable in Belgium only if they have a permanent establishment there. The tax will be assessed exclusively on profits earned in Belgium by or through the said establishment, and these profits will not be taxed in the other country.

The Convention with Italy, however, prescribes that the profits of shipping and air navigation companies, including profits from the sale of tickets, shall be taxable only in the country in which the enterprise has its real head office, provided that the vessels or aeroplanes belong to that State.