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Branch vs. Subsidiary in Belgium

Branch vs. Subsidiary in Belgium

One of the first and most important things that foreign investors need to consider when choosing to invest in Belgium is the type of company they will establish.

According to the Belgian Company Code, there are nine different types of companies that can be established. There are different specifications for each of them and although some of them can prove to be advantageous for certain types of businesses, investors should take the time to decide what best suits their needs.

Branches and subsidiaries are the most common choice for foreign companies that wish to expand their activities abroad. There are certain advantages and disadvantages for both of them for investors who choose to incorporate in 2024.

We invite you to watch a video about the differences between branches and subsidiaries in Belgium

Particularities for branches and subsidiaries in Belgium

The main characteristics for Belgian branches are:

  • they are not a distinct legal entity: they are not perceived as a separate legal entity from the parent company abroad;
  • they have no board of directors: because it is an extension of the parent company, the Belgian branch will only have an appointed representative;
  • there are fewer formalities to set up a branch: this is also a consequence of the fact that the branch is not a separate legal entity, it does not require separate Articles of Association, an important step in traditional company formation;
  • it can benefit from the existing DTAs: the double tax agreements signed between Belgium and other countries can provide for tax reductions.

Compared to branches, subsidiaries have the following characteristics in Belgium:

  • they are independent Belgian companies: they are incorporated as a new and completely separate legal entity, usually in the form of a limited liability company;
  • they are owned and ruled by the parent company but can act in their own capacity: although the company abroad owns a percentage of the subsidiary, it does not control its activities in Belgium;
  • they have their own board of directors and their own internal rules: the subsidiary is managed as any other resident company in Belgium and functions according to the internal rules stated in its constitutive documents;
  • they must hold shareholder’s meetings and comply with corporate formalities: the subsidiary is subject to all of the corporate management regulations, as set forth in the Companies Code.

The advantages of a branch in Belgium

Despite the fact that they cannot act in their own capacity, but rather as an extension of the parent company, branches have some advantages:

  • there is no minimum capital;
  • the incorporation does not need notarized procedures;
  • except in certain cases, there is no need to establish a board of directors or to hold shareholder’s meetings and distribute profits
  • there are a number of tax advantages: transfers from the Belgian branch to the parent company can be made tax free, there is no dividend withholding tax on branch profits and generally, the parent company deals with the losses of the branch.

The advantages of a subsidiary in Belgium

The subsidiary acts independently from the parent company and its main advantage is that the parent company cannot be held liable for the losses of its subsidiary. Other advantages are:

  • a subsidiary will be considered a Belgian company, not a foreign company; this can prove advantageous when dealing with nationals;
  • a subsidiary also has some tax advantages: the double taxation treaties in Belgium gives them special conditions, they can repatriate or distribute net profits with little or no dividend withholding tax; in most cases, the provisions of the Parent-Subsidiary Directive will apply.

Our accountants in Belgium are the ones who are best equipped to answer questions about the tax and reporting differences between branches and subsidiaries in the country. when choosing between these two business forms, a prior discussion with our experts will be valuable for clarifying the requirements that apply to the branch and the subsidiary. You can reach out to us if you have any questions.

According to the type of company you choose to register in Belgium, there are necessary steps that need to be taken in order to incorporate the branch or subsidiary in 2024. The preparations are easier for branches, but other advantages and disadvantages should also be taken into consideration when making such a choice.

Trading companies in Belgium can open either a branch or a subsidiary. Non-EU companies will still be subject to EORI registration if they trade within the EU.

Investors who want to open a branch or a subsidiary in Belgium in 2024 should know that the following taxes apply to these business forms:

  • Corporate income tax rate: 25%; this applies to both resident companies and non-resident companies (i.e., the branch tax rate is the same);
  • Special corporate income tax: 20% for small and medium companies on the first EUR 100,000 of income; our team can give you more details if this exemption can apply to a subsidiary;
  • Withholding tax on dividends: 30%; this can be reduced under the EU parent-subsidiary directive;
  • Value added tax: the standard rate is 21% and the reduced rates are 12%, 6%, or 0% for some types of goods and services.

According to Statistics Belgium, the number of VAT-registered companies in the country grew by 0.3% in November 2023, compared to a month prior. Thus, in November last year, the number of companies registered for VAT purposes increased by 3,350 entities. Moreover, the number of first registrations for VAT increased by 4.1% in November 2023 across all business sectors, compared to the same month in 2022. There were two sectors in which most of the registration increased took place, that of professional, scientific, and technical activities, followed by the construction sector. The total number of companies registered for VAT purposes in Belgium amounted to 1,173,420 entities in November 2023. 

Our law firm in Belgium can provide personalized counseling and help you start your business in Belgium in 2024 fast and easy.