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D. TREATY PROVISIONS

I. NATIONAL ENTERPRISES OPERATING ABROAD

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.

II. FOREIGN ENTERPRISES DERIVING INCOME FROM BELGIAN SOURCES

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.

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