From Brussels to Luxembourg City, entrepreneurs and investors benefit from a long-standing tax treaty that avoids double taxation and secures clear allocation of taxing rights. Belgium applies a robust corporate tax system under the Code des Impôts sur les Revenus 1992 (CIR 92), offering a standard 25% rate with reduced incentives for small and medium enterprises. Luxembourg, in turn, provides the Société de Participations Financières (SOPARFI) regime as an internationally recognized holding platform. Together, both jurisdictions enable efficient profit repatriation, dividend structuring, and legal certainty under OECD Model Convention and EU Directive principles.
Corporate Income Tax in Belgium
Belgium’s corporate tax rules, anchored in the CIR 92, apply to resident companies and Belgian permanent establishments of foreign companies.
Belgium levies corporate income tax at a 25% standard rate, with qualifying SMEs eligible for a 20% rate on the first €100,000 of taxable profit. This statutory framework ensures compliance with EU state aid limitations while offering smaller enterprises proportionate relief.
Belgian Company Forms and Share Capital
Selecting the appropriate Belgian legal form requires aligning liability, governance, and capitalization with the Companies and Associations Code (CSA/WVV) and your business purpose.
SRL / BV — Private Limited Company
The SRL/BV is the default limited-liability vehicle for privately held businesses under Book 5 CSA.
Share capital: No statutory minimum capital for the Belgian SRL. Founders must provide “sufficient initial equity” evidenced by a founders’ financial plan; contributions may be cash or in-kind. Distributions are subject to net-assets and liquidity tests; directors must confirm solvency post-distribution.
SA / NV — Public Limited Company
The SA/NV is designed for larger enterprises and listings, with flexible one-tier or two-tier boards (Book 7 CSA).
Share capital: €61,500 minimum, fully subscribed; for cash contributions at least 25% must be paid up at incorporation (in-kind contributions generally fully paid). Shares may carry different classes and rights.
SE — Societas Europaea (European Company)
The SE offers a pan-EU public company format with cross-border mobility.
Share capital: €120,000 minimum per EU Regulation 2157/2001 (Belgian seat governed by CSA rules on governance, disclosure, and accounts).
Branch of a Foreign Company
A Belgian branch allows a foreign company to operate locally without incorporating a separate legal entity.
Share capital: None at branch level (the parent’s capital supports the branch). Registration with the Crossroads Bank for Enterprises and publication formalities apply; branch profits are taxed in Belgium under CIR 92 and applicable treaties.
Scope of Taxable Income
Under Belgian law, corporate taxation applies to worldwide income of resident entities, while non-residents are subject only to Belgian-source income.
The OECD Model Convention and domestic law define taxable income to include profits, distributed dividends, interest, royalties, and capital gains. Exemptions and treaty relief mechanisms reduce the risk of juridical or economic double taxation, providing predictability to cross-border investors.
Deductible Business Expenses
The deductibility of business expenses in Belgium follows a strict nexus test under Article 49 CIR 92, requiring that expenses are incurred to acquire or preserve taxable income and are substantiated by appropriate documentation.
Typical deductible expenses include staff costs, professional fees, depreciation of business assets, and financing charges. Limitations apply under the Anti-Tax Avoidance Directive (ATAD) framework, particularly for interest deductibility.
Interest Limitation Rules
Belgium implements the ATAD interest limitation rule, restricting net borrowing costs to 30% of EBITDA or €3 million, whichever is higher.
This provision, transposed into Belgian law, ensures consistency with EU-wide standards while preventing excessive base erosion. Disallowed interest may be carried forward, subject to statutory limits.
Notional Interest Deduction
Belgium maintains a Notional Interest Deduction (NID) on the incremental equity of a company.
Introduced under Article 205quater CIR 92, the deduction encourages equity financing by allowing companies to deduct a notional return based on the average yield of Belgian government bonds. This incentive reduces the tax bias between debt and equity.
Innovation Income Deduction
Belgium grants an Innovation Income Deduction (IID) of up to 85% of qualifying net innovation income.
Pursuant to Article 205/1 CIR 92, the IID applies to patents, copyrighted software, and similar intellectual property. The effective tax rate on qualifying income may thus be reduced to approximately 3.75%, aligning Belgium with the OECD nexus approach for IP regimes.
Participation Exemption for Dividends
Belgium offers a full dividends-received deduction (DRD) under Article 202 CIR 92.
Qualifying dividends are exempt if the parent holds at least 10% of the subsidiary or has an acquisition value of €2.5 million, and maintains a 12-month holding period, provided the subsidiary is subject to normal taxation. This implements the EU Parent–Subsidiary Directive and ensures the avoidance of economic double taxation.
Capital Gains on Shares
Belgian corporate law exempts capital gains on qualifying shareholdings.
Under Article 192 CIR 92, capital gains on shares enjoy exemption where the DRD requirements are met. Otherwise, gains are taxed at the ordinary corporate rate. This rule complements Belgium’s treaty obligations under the Belgium–Luxembourg Double Tax Treaty.
Withholding Tax Framework
Belgium imposes a 30% withholding tax on dividends, interest, and royalties, with exemptions available under treaties and EU directives.
The Belgium–Luxembourg treaty, last amended in line with the OECD Multilateral Instrument (MLI), reduces withholding rates to 0% or 15% depending on participation thresholds. This creates clear pathways for profit repatriation through holding structures.
Minimum Taxation and Carry-Forwards
Belgium limits the use of deductions through a minimum taxation rule.
Since Assessment Year 2025, only the first €1 million of taxable income may be fully offset by deductions. For income above that threshold, deductions such as loss carry-forwards are limited to 70%, ensuring a minimum effective tax base of 30%.
The Belgium–Luxembourg Double Tax Treaty
The double tax treaty between Belgium and Luxembourg, originally signed in 1970 and subsequently amended, follows the OECD Model Convention framework.
The treaty ensures that business profits are taxed only in the state of residence unless attributable to a permanent establishment in the other state. It also establishes reduced withholding tax rates on dividends, interest, and royalties, supporting cross-border investment flows.
Luxembourg SOPARFI in Treaty Context
Luxembourg offers the Société de Participations Financières (SOPARFI), a fully taxable company under the Loi de l’Impôt sur le Revenu (LIR).
Although subject to corporate income tax in Luxembourg, SOPARFIs benefit from full participation exemptions on qualifying dividends and capital gains, as well as broad access to Luxembourg’s treaty network. When combined with the Belgium–Luxembourg treaty, SOPARFIs serve as effective holding platforms for Belgian investments.
Practical Advantages of SOPARFI Structures
Entrepreneurs and investors often establish SOPARFIs to centralize shareholdings in Belgian subsidiaries.
Through the Dividends-Received Deduction (Definitief Belaste Inkomsten-aftrek in Dutch) rule in Belgium and the Luxembourg participation exemption, profits may be repatriated with minimal or no taxation. This dual framework provides legal certainty, ensures compliance with EU rules, and enables efficient structuring for private equity, family offices, and multinational groups.
Compliance and Anti-Abuse Provisions
Both Belgium and Luxembourg enforce general anti-abuse rules (GAAR) consistent with the EU Anti-Tax Avoidance Directive.
The Belgium–Luxembourg treaty also incorporates Principal Purpose Test (PPT) provisions under the MLI, ensuring that treaty benefits apply only where genuine commercial justifications exist. This enhances treaty integrity and legal stability for compliant investors.
Belgium offers a competitive and legally robust corporate tax system, reinforced by incentives such as the Notional Interest Deduction and Innovation Income Deduction. Luxembourg complements this with the SOPARFI regime, which benefits from participation exemptions and treaty protections. Together, these jurisdictions provide investors with predictable outcomes under EU and OECD principles. For entrepreneurs seeking legal certainty, fiscal optimization, and cross-border structuring, the Belgium–Luxembourg corridor remains a secure and tested route.
Damalion Company Formation Services
Damalion supports entrepreneurs and investors with fast and compliant company setup in Belgium and Luxembourg:
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Belgium: Incorporation of Belgian SRL/BV, SA/NV, and other forms, notary coordination, registration with the Crossroads Bank for Enterprises.
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Luxembourg: Formation of SOPARFIs and S.à r.l., capital structuring, substance services and full tax registration support.
Our accredited experts ensure legal certainty, proper governance, and efficient cross-border structuring in both jurisdictions. Please contact your Damalion expert now.
