Reduced corporate tax rate in Belgium explained

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Have you just set up a company in Belgium? Or maybe you switched from being a self-employed sole trader to a company structure? As soon as you exceed a certain amount of profit, having a company is more advantageous from a tax perspective. That profit will be subject to a fixed corporate tax rate of 25%, which is significantly more attractive than personal income tax.

Are you entitled to a reduced rate? In that case, you'll only pay 20% on the first €100,000. Here are the conditions.

Conditions for the reduced corporate tax rate

In Belgium, the corporate income tax rate refers to the tax rate applied to your company's profits. While the standard rate is 25%, under certain conditions, it’s possible to benefit from a reduced corporate tax rate of 20%. 

First of all, this reduced rate of 20% only applies to small or medium-sized enterprises (SMEs). Next, the SME need to meet the following conditions: 

• turnover of less than €9,000,000 ✅
• fewer than 50 employees ✅
• balance sheet of less than €4,500,000 ✅

Companies in which at least half of the shares are held by another company are excluded from the corporate tax reduction. This means that at least 50% of the shares of the SME must be held by individuals.

Minimum director’s remuneration

Another important condition is the minimum annual director’s remuneration. At least one director must receive at least €45,000. This amount can be interpreted more broadly than just salary; it can include other kinds of compensation, extra-legal benefits, and benefits in kind.

This rule is there to prevent you from paying yourself a low or zero salary, and therefore paying virtually no personal income tax. Personal income tax, with its maximum tax bracket of 50%, is much higher than corporate income tax.

That said, this mandatory minimum director’s remuneration does not apply during the first four years following the incorporation of your company. However, if you or one of your co-founders were self-employed before this period, these years are taken into account.

What if your company doesn’t yet have the means to pay out €45,000 in remuneration, and you would have no profit left if you did so? In this case, you can allocate yourself a lower remuneration. However, this minimum remuneration needs to be as high as the final taxable profit. To calculate the minimum remuneration, you therefore take the operating profit before deduction of the remuneration and divide it by two.

Get advice from an accountant

Be careful with this calculation, because "taxable profit" doesn’t always correspond to the profit shown on your income statement. Sometimes it will be slightly higher, for example, if the tax authorities disallow a particular business expense.

Have you set your remuneration to match your profit exactly, with the aim of taking full advantage of the reduced corporate tax rate? Watch out! The slightest increase in your taxable profit will mean you’re no longer entitled to the reduced rate, and that would be a shame.

It's also a good idea to carefully assess your personal situation and determine what tax-free rates and other tax benefits you might be entitled to. This will let you estimate the amount of personal income tax and corporate tax you'll have to pay for each remuneration.

Our key message? Seek the advice of an experienced accountant for this kind of tax planning. Typically, if you have a company, you already do. This way, you won't miss out on any tax benefits or tax breaks.

Accountable: also useful for companies

Most entrepreneurs want to keep a good overview of their accounting, even when their business grows and they’ve started a company. Because keeping on top of the financial side of things is a key factor in any company's success.

Accountable can help you keep an eye on your accounting, even as a company director. You can use the app to manage your invoices, while your accountant will have more time to provide valuable advice. Advice about your remuneration as a director, for example, so you can take full advantage of the reduced corporate tax rate while enjoying complete peace of mind.

Good luck to your company!

Author - Artyom Ghazaryan

Artyom is Head of Accounting at Accountable, and a chartered Accountant & Tax Specialist.

Who is Artyom ?