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Gateway to EuropeInvestments in Belgium

Gateway to Europe - Investment in Belgium

If you know your counterparts and know yourself, youcan win a hundred battles without a single loss.Quote from Art of War

Gateway to Europe - Investment in Belgium

Welcome to Gateway to Europe Investment in the Belgium

We have seen European companies investing in China since the late 1980s. When the Chinese government launched their GoingAbroad policy in 2001, Chinese companies started to look abroad for investments. Belgium is proved to be among the mostattractive countries and is considered as a gateway to Europe. Currently important Chinese companies have established theirpresence in Belgium and the number continues to increase.

In Belgium, we have focussed on investment from China to Belgium with a skilled and multicultural Greater China Business Servicesteam. This team is not a stand-alone team but part of a Greater China Business Services team working hand-in-hand with Ernst &Young China located in Europe, Middle-East, India and Africa (EMEIA). Through this specialized network, the service provided byErnst & Young in Belgium facilitates Chinese investors to expand to the rest of these countries.

This booklet provides the busy executive with a quick overview of the countrys investment climate, taxation, forms of businessorganization and accounting practices, as well as other aspects concerned with initiating and developing business in Belgium.

However, a guide of this nature can only ever provide a cursory overview. To address specific issues, we invite you to contact ourprofessionals and specialists listed at the end of this publication.

We look forward to hearing from you and wish you success in your European ventures.

Jan Lambrechts Ronghui XuOperational Leader, China Desk Belgium China Desk BelgiumPartner Tax, Ernst & Young Senior Consultant, Ernst & Young

Gateway to Europe - Investment in Belgium

Gateway to Europe - Investment in Belgium 5

Table of contents1. Why invest in Belgium? 6

2. Legal forms 72.1. Overview 7

2.2. Public Limited Liability Company (NV/SA) 7

2.3. Private Limited Liability Company (BVBA/SPRL) 9

2.4. Branch 10

3. Immigration 123.1. Work permit application 12

3.2. European Blue Card project 12

3.3. Professional card 12

4. Social security system 134.1. National social insurance for employees 13

4.2. Exemption of social security 13

4.3. Self employed social security 13

4.4. Limosa declaration 14

5. Tax 155.1. Corporate income tax 15

5.2. Transfer pricing 22

5.3. VAT 26

5.4. Customs duty 32

5.5. Individual tax (HC) 34

6. Accounting principles and requirements 396.1. Overall organisation 39

6.2. Financial Statements 39

7. China Overseas Investment Network 42

Gateway to Europe - Investment in Belgium6

Belgium has a long tradition of being one of the most attractivelocations to establish a business presence in Europe. Belgium isattractive because of a unique combination of:

A society, which is open to many nationalities and cultures;

An open and stable economy;

An excellent infrastructure;

A highly educated and multilingual workforce;

A modern, flexible law system; and

Tax advantages.

As a consequence Belgium is most often selected as a base for:

European headquarters;

Trading companies and branches;

Distribution centres;

Holding companies;

Finance companies; and

Royalty companies.

Traditionally, the Belgian economy has been an open one,favouring foreign investments and trade by imposing as littlebarriers or tariffs as possible. Inflation is almost non existent andthe Euro has proven to be a strong currency. A number of thelargest multinationals in the world are of Belgian origin or haveestablished a regional headquarter or distribution center in Belgium(Bekaert, Nike, General Electric, etc.).

Belgium is often called the gateway to Europe, which makes senseif one looks at Antwerp, one of the largest ports in Europe, and atBrussels, which is the center of the European Union, hostingnumerous international organizations and public authorities. Thiscombined with the available expertise in such areas as distribution,international trade and freight forwarding, makes Belgium one ofthe most attractive locations for establishing Europeanheadquarters and branches dealing with trade and distributionthroughout Europe. Through its efficient tax system and financialinfrastructure, it is an ideal location to establish a holding,acquisition or finance company. In addition, the Belgian populationis multilingual and is more internationally oriented than that ofmany of its neighbouring countries. A large portion of theworkforce and the Administration speaks French and English andhas no difficulty in meeting and working with foreign colleagues.

1. Why invest in Belgium?

Gateway to Europe - Investment in Belgium 7

2.1. Overview

Belgium offers a choice between various types of legal entities forforeign investors intending to invest in Belgium, for example:

Private limited liability company (BVBA/SPRL);

Public limited liability company (NV/SA);

Branch office;

Cooperative;

Partnership;

European company;

European cooperative;

European economic interest group.

Among these types of companies, the most commonly used formsadopted by Chinese investors are the public limited liabilitycompany (NV/SA), the private limited liability company(BVBA/SPRL), and the establishment of a branch office.

2.2. Public Limited Liability Company(NV/SA)

2.2.1. IntroductionThe NV/SA is, together with the private limited liability company(BVBA/SPRL), one of the most commonly used form of companyin Belgium.

A NV/SA must be incorporated by at least two persons. If during itsexistence a person or corporation becomes the sole shareholder ofa NV/SA then a second shareholder should join the company withinone year or otherwise the sole shareholder will be considered ajoint and several guarantor of all of the obligations of the companyand this until a second shareholder has joined the company or untilthe company has been converted into a BVBA/SPRL.

2.2.2. Registration requirementsThe following documents are required for the incorporation of aNV/SA:

1. A notarial deed of incorporation;

2. A financial plan;

3. A bank statement (if in cash) or auditors statement (if inkind).

A NV/SA is incorporated by means of the execution by a Belgiannotary of a notarial deed of incorporation. The NV/SA will acquireseparate legal personality as soon as the notarial deed is being filedwith the Commercial Court. The company and its directors must beregistered with the Crossroad Bank of Enterprises. In case of asmall company (i.e. not being part of a big group) proof ofmanagement knowledge must thereto be given.

2.2.3. Share capitalA NV/SA has a capital dividend into shares and must have aminimum (issued and) paid-up share capital of EUR 61,500. Atleast 25% of the share capital must be paid up with a minimum ofEUR 61,500. The management can call up the remaining 75% on alater date. Every share shall confer an equal right to the allocationof profits and liquidation surplus. A NV/SA can also issue shareshaving no voting rights, preferred shares, (convertible) bonds andwarrants.

Shares can be easily transferred and do not require specificprocedures unless otherwise provided in the by-laws.

2. Legal forms

2.2.4. Capital contributionShares may be paid up either in cash or in kind. Specific formalitiesapply for the different ways of payment. Cash payments in Eurosmust be evidenced by a bank statement. If a payment is made in aforeign currency, the bank statement must also disclose theexchange rate at the date of incorporation of the company. Undercertain conditions, the capital can also be expressed in foreigncurrency.

If a payment on shares is made in kind, either upon incorporationor thereafter, a Belgian independent auditor must issue a reportstating that the value of the agreed contribution, determined inaccordance with generally accepted accounting principles, is atleast equal to the amount to be paid up on the shares issued.

2.2.5. Distribution of profits reserves The general meeting decides on the distribution of a dividend out ofthe earnings realized. The general meeting may decide to pay adividend or to add the earnings to the companys reserves.Dividends can only be paid to the extent that the shareholdersequity exceeds the share capital together with reserves that mustbe maintained based upon the Belgian Company code or the by-laws. Unlike practice in some countries, share premium (paid-upsurplus on shares) may be distributed as dividend although by-lawswill prohibit it. The general meeting can at any time declare also anintermediary dividend (tussentijds dividend) out of the retainedearnings. Earnings of the current financial year however cannot bedistributed through an intermediary dividend.

The board of directors can, insofar authorized by the by-laws,declare an interim dividend out of the retained earnings and theearnings of the current year. A financial statement of assets andliabilities must thereto be established proofing that the earnings aresufficient to declare an interim dividend. The statement must becontrolled by the statutory auditor. Interim distributions cannot bedeclared during the first six months of the financial year. A secondinterim dividend can only be declared three months after the firstinterim dividend distribution.

2.2.6. Corporate structureT