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(c) APPORTIONMENT OF PROFITS BETWEEN BRANCH AND PARENT ENTERPRISE

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.

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