Tax Payable by a Company

Details on corporation tax and lump sum social security contributions...

A company's profits are subject to corporation tax, which is levied on the company's taxable income less any allowable deductible expenses.

Company's taxable income

The items that make up the tax base for a company are:

  • Retained earnings (reserves)
  • Dividends allocated or distributed to members (private limited liability companies, limited liability partnerships, unlimited liability cooperative societies) or shareholders (companies limited by shares)
  • Non-deductible expenditure
  • Excess interest paid on interest-bearing advances. If this interest is treated as dividends for tax purposes, this must be included in the tax base

Deductible expenses

Deductible items are:

  • All remuneration (of any kind) paid to company directors
  • Employers' social security contributions
  • Workers' pay
  • Expenses relating to benefits of any kind
  • Group insurance premiums

Losses

For tax purposes, a company that sustains losses can recover them without limitation in time or amount. In the event of a takeover or change in control of the company during the tax period, this possibility ceases to exist, unless the takeover or change in control meets legitimate needs of a financial or economic nature.

The Basic Rate of Corporation Tax

The basic rate applies as long as one of the following conditions is met:

  • Taxable income is over €322,500
  • The company distributes dividends in excess of 13 percent of paid up capital at the start of the tax period
  • At least 50 percent of the certificates representing the share capital are held by one or more other companies (as long as the company itself is not approved partnership (CV/SC)
  • The company is other than an approved partnership and has paid a minimum of €33,000 in the tax period to at least one company director. For companies whose taxable income does not exceed €33,000, the reduced rate of tax continues to apply if the highest remuneration paid to a company director in the tax period is equal to or exceeds the company's taxable income
  • The company forms part of a group which includes an approved coordination centre
  • The company is one of the following:
    • an approved coordination centre
    • located in an employment zone
    • an open-end investment fund (beleggingsvennootschap met veranderlijk kapitaal/société d`investissement à capital variable, BEVEK/SICAV)
    • a closed-end investment fund (beleggingsmaatschappij met vast kapitaal/ société d`investissement à capital fixe, BEVAK/SICAF
    • a loan investment fund (vennootschap voor beleggining in schuldvoreringen/société d'investissement en créances, VBS/SIC)
  • The company is other than an approved partnership and has equity holdings with an investment value of more than half of the revaluation value of the paid-up capital, or of the paid-up capital plus taxed reserves and capital gains booked (with the exception of active, permanent participating interests representing at least 75 percent of the paid up capital of the company issuing the shares is concerned)
Prepared using information supplied by ING Bank SA/NV www.ing.be