» Advance decision in tax matters (ruling)

The advance decision in tax matters (“tax ruling”) is a unilateral written declaration by the Belgian Tax Authorities at the request of a (potential) taxpayer about the application of the fiscal law in a specific situation, which has not yet occurred, and as described by the taxpayer.

Such a ruling gives the investor legal security regarding the tax treatment of its investment project and facilitates the planning.

The advance tax rulings are of particular importance in evaluating possible net profits of a planned investment project.

An advance ruling is notified to the applicant within a period of three months of the application being made. This timeframe, however, is merely indicative and thus not enforced by law.  The tax authorities and the applicant may agree to change the deadline.

The tax authorities inform the applicant of the deadline set within 15 business days after the application is complete.

As the advance decision is a possibility offered to the taxpayer and under no circumstance an obligation, the requesting party may, at all times, withdraw its request during the procedure.

Except in cases justified by the subject-matter of the ruling, the ruling remains valid for a maximum of five years.

» Notional interest deduction

Under the so-called ‘notional interest deduction’, companies can deduct from their taxable income an amount equal to the interest they would have paid on their capital in the case of long-term debt financing.

The notional interest deduction applies to all Belgian or foreign resident companies, whose profits are subject to the common corporate income tax regime in Belgium.

The deduction equals a percentage ( 4,807% for tax year 2008) of the equity determined according to Belgian accounting law.

Certain items, such as participations in other companies and real estate used by directors have to be deducted from the equity.

If there is insufficient tax capacity in the year of deduction, the tax benefit resulting from the notional interest deduction can be carried forward for seven years,

» Foreign executives

Foreign executives who are temporarily assigned to work in Belgium within an international group of companies or who have been recruited directly abroad by a Belgian company belonging to such an international group in order to render services in Belgium temporarily can benefit from a special tax regime

In order to be recognised as an “expatriate”, the following conditions must be fulfilled:

• the executive must have a foreign nationalityy
• expatriatees who apply for the special tax regime are mainly management personnel, research personnel, and foreign personnel without managerial responsibilities who are highly specialised.
• the employment in Belgium must be temporary

The special expatriate tax regime offers two important tax advantages to foreign executives:

• reimbursements made by the employer to cover the additional expenses incurred as a direct result of the  assignment or employment in Belgium are treated as costs proper to the employer, which are, within certain limits, non-taxable for the expatriate (the “tax-free expatriation allowances”);
• the executive benefits from an exemption for the part of his/her compensation that relates to business duties carried out abroad (the “travel exclusion”).