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Recent Macroeconomic Developments
Belgian foreign direct investment in the U.S.
Belgium On Top in Logistics
Belgium Fifth Most Productive
New Medicine Agency to Improve Competitiveness
Brussels Best Airport in Europe
Biomedical Sector:  Steps to Improve Competitiveness
Belgium Remains Major Foreign Investment Player
Fewer Formalities for Foreign Employees, Professionals
New law introducing a tax deduction for risk capital
High profits, low effective tax rate for US companies

Recent Macroeconomic Developments

April 14, 2006

"In Belgium, the upswing of economic activity that started in mid- 2005 has remained on track up to now. According to the initial NAI estimate, quarter-on-quarter GDP growth amounted to 0.6% in the last quarter of 2005. In line with the pick-up in growth rates, the NBB business survey indicator began rising rapidly in June 2005 and reached a positive value in February 2006. In March, the indicator was almost stable at that high level, pointing again to strong GDP growth in the first part of 2006.

This combined with the improving economic conditions in the euroare a prompted the primary dealers, on average, to upgrade theirGDP growth forecast for 2006, from 2.1% in January to 2.2%. A slight deceleration, to 1,9%, is expected for 2007, in view of somewhat less supportive economic conditions both globally and in the euro area.

HICP inflation accelerated from 1.9% on average in 2004 to 2.5% in 2005, primarily as a result of energy price increases. This factor also explains most of the positive differential with the euro area, as inflation in Belgium is more sensitive to direct effects of energy price movements. A gradual normalisation of non-energy industrial goods inflation in the course of the year, from an unusual negative inflation observed at the beginning of the year, has also contributed to a limited acceleration in the underlying inflation trend during recent months.

However, overall domestic inflationary pressures are still expected to remain contained during the coming two years. Although there is considerable uncertainty surrounding oil prices and exchange rate prospects, the participants on average expect energy prices expressed in euro to ease somewhat. Therefore, the inflation forecast has been left unchanged at 2.1% in 2006 and 1.8% in 2007.

For the sixth year in a row, the Belgian government succeeded in closing its accounts with a small surplus or a balanced budget, as in 2005. At the current juncture, primary dealers expect a slight deterioration, forecasting on average a 0.5 and 0.4% GDP public deficit in 2006 and 2007, respectively. Public debt should drop below 90% of GDP in 2007. These forecasts don't take account of the measures adopted during the Spring budgetary control with a view to keeping the budget balanced."

National Bank of Belgium, Belgian Prime News March 2006

Belgian foreign direct investment in the U.S.

March 16th 2006

Data from the US Department of Commerce show that Belgian foreign direct investment amounted to $ 591 million in 2004, representing 0.6% of all foreign investment in the U.S. This means, for example, that Belgian investment was as important than investments from Middle Eastern countries ($ 508 million). Most foreign direct investment in the U.S. originated in the EU (37%), followed by Canada (33.2%) and Japan (16.8%).

When the historically accumulated value of foreign investment in the U.S. was measured, the data for 2004 became even more outspoken: the EU represents 61.7%, Japan 11.6%, and Canada 8.7%. Belgian total investment amounted to $ 11.2 bln. or 0.7% of the total.

Belgium On Top in Logistics  

March 16th 2006

Belgium tops the list of the 10 most desirable locations for semi-industrial and logistical buildings, the newest European Distribution Report of real estate company Cushman & Wakefield/ Healey & Baker concluded. Belgium’s assets are low rental costs, strategic location and optimal access to the most important European markets.


Belgium Fifth Most Productive

Belgium is the fifth most productive country in the world,
 according to The Conference Board’s figures for 2005.

March 16th 2006

The Conference Board is a global business research and membership organization.  Its productivity ranking, calculated on hours worked, is a leading indicator of economic activity as it provides an income per person in each country. According to the Board, Belgium created 40,000 new jobs last year, mainly in the service industry.


New Medicine Agency to Improve Competitiveness

March 16th 2006

On March 3, the Belgian government approved a plan by Federal Minister for Public Health and Social Affairs Rudy Demotte to create a new Federal Agency for Medications. The agency’s task will be twofold: to control the quality of medicines on the market, and to speed up the registration and reimbursement schemes for new medicines in Belgium so that pharmaceutical companies in the country can continue to compete in research and production activities with competitors abroad.

If the Raad van State/Conseil d’Etat gives a positive advice, the proposal can be approved by Parliament in time for the agency to become operational next year.

The plan is the latest step by the Belgian government in a series of initiatives to improve Belgium’s ability to compete in the biomedical sciences.  Recently a platform for dialogue with the biomedical industry was created to discuss on a regular basis new proposals in the area of public health, and innovation and employment issues in the sector such as registration and reimbursement of medicines. In addition, the requirement for certain non-EU researchers to obtain work permits has been abolished, and the current reduction of payroll taxes by 50% on researchers will be expanded to all employees with PhD’s.

Brussels Best Airport in Europe

March 16th 2006

The Airport Council International (ACI) has given the award for best European airport to Brussels-National. Brussels was tied for first place with Copenhagen, followed by Zurich and Helsinki.

ACI’s Airports Excellence Award is based on a survey among 100,000 travelers across more than 70 airports in the world.

According to the passenger survey programme jointly administered by ACI and IATA in 2005, Korea’s Incheon International Airport was the best airport worldwide. Second place honors were awarded to Hong Kong International Airport and Singapore Changi Airport, with Kuala Lumpur International Airport taking the third place title – a remarkable performance for Asia Pacific airports. In the Americas, Halifax came out on top, followed by Ottawa and Denver.

In the category ‘airports with 15-25 million customers’, Brussels and Copenhagen were tied for third place worldwide.

Biomedical Sector:  Steps to Improve Competitiveness

January 20th 2006

In the context of the recent Invest in Belgium tour in the U.S., Prime Minister Verhofstadt announced several steps to improve Belgium’s ability to compete in the biomedical sciences.

Recently a platform for dialogue with the biomedical industry was created to discuss on a regular basis new proposals in the area of public health, and innovation and employment issues in the sector such as registration and reimbursement of medicines. As reported in the previous Business Memo, the requirement for certain non-EU researchers to obtain work permits has already been abolished.

n the future, applications for approval of new medicines in Belgium could be introduced locally before the European Medicines Agency (EMEA) has given its European approval. This would allow medicines to become immediately available on the Belgian market after the European approval. To speed up the registration process, a new medicine registration agency will be created.  In addition, the system of early rulings by the tax authorities on new investments will be fully utilized, and the current reduction of payroll taxes by 50% on researchers will be expanded to all employees with PhD’s.

Belgium Remains Major Foreign Investment Player

December 22nd 2005

Belgium remains a major world player on the Foreign Direct Investment (FDI) scene. According to the latest World Investment Report by the UN Trade and Development organization UNCTAD,  Belgium was the 6th recipient of FDI (34.4 $billion) in 2004 worldwide. The U.S. saw the largest influx of FDI ($ 95.9 billion), followed by the UK, China, Luxembourg, Australia, and Belgium.

Belgium’s achievement is all the more remarkable since investments in the E.U. overall were at their lowest level since 1998, whereas FDI in Belgium was up 7.1%. Belgium recorded 99 new ‘greenfield' investments in 2004, a 50% increase over 2003 and 3.5% of the EU total. The total foreign investment stock in Belgium represented $ 259 billion, about 73% of Belgian GDP.

Belgium was also the 13th country in the world where foreign companies perform R&D operations.

On the other hand, Belgium companies invested 26 billion $ abroad, which made Belgium the 9th largest outward investor in 2004.


Fewer Formalities for Foreign Employees, Professionals

December 22nd 2005

In a further effort to stimulate innovation and economic growth, the Belgian government  announced on November 21 that it intends to abolish work permits for foreign scientists and foreign managers of international companies in Belgium. As of the beginning of 2006, the new regulations will apply to scientists from outside the EU who earn a gross salary of more than € 32,000 and work at a scientific institution or recognized private research facility. They are expected to speed up the entry of scientists by one to two months. It is widely accepted that the recruitment of senior scientists often generates dozens of new jobs. 

The government plans similar exemptions to executives of multinational companies from the middle of 2006.  The managers have to earn more than € 42,000 gross a year. At the same time, foreign business travelers and employees who come to work in Belgium for a short time, e.g. for a congress, training, or maintenance work, will for the duration of their stay also be exempt from the work permit requirement.

Significantly, the procedure for foreign independent professionals to obtain a professional card in Belgium, for example to set up a business, will be initiated in the future through one of the ‘One Stop Shops’ for businesses, created in 2003. Previously businessmen had to start the procedure to obtain a professional card at the local town hall, whereas the ‘One Stop Shops’ would see if the foreign business person had the required skills and experience to start the envisioned business in Belgium. The procedure for entrepreneurs residing abroad will remain unchanged.


New law introducing a tax deduction for risk capital

Law Introducing a Tax Deduction for Risk Capital
(Notional Interest Deduction)

July 5th, 2005


Recent studies have shown that Belgium has become one of the most profitable countries for US companies to do business in the world. US tax magazines (like Tax Notes) pointed out that, in the period from 1999 to 2002, the effective tax rate for US companies in Belgium decreased to 12%, while US profits in Belgium increased by 84%.

Dedicated to reinforce opportunities for local and international investors, Belgium significantly reduced its corporate tax rate in 2003, and has now amended its tax law to provide Belgian companies and Belgian branches of foreign companies a tax deduction based on their equity as of January 1, 2006.

What is it?

Under the so-called ‘notional interest deduction’, a new and innovative measure in international tax law, all companies subject to Belgian corporate tax will be able to 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.

At the same time, the 0.5% registration duty on capital contributions will be abolished.


The new rules are intended to ensure equal treatment of loan and equity capital. They will have the following positive effects:

1. A general reduction of the effective corporate tax rate for all companies, and a higher after-tax return on investment.

2. Encouragement of capital intensive investments in Belgium, and an incentive for multinationals to examine the possibility of allocating such activities as intra-group financing, central procurement and factoring, to a Belgian group entity.

3. Continuing opportunities for tax-efficient, equity-funded, inter-company financing from Belgian companies, such as the Belgian Coordination Centers (BCC) already present in the country.


The bill implementing the notional interest deduction for companies was adopted by the Belgian Parliament on 2 June 2005, and was published in the Belgian Official Gazette.

The notional interest deduction will enter into force as from assessment year 2007 (this means, for companies that keep their books on a calendar year basis, as from 1 January 2006). The equity capital on 31 December 2005 will, in principle, serve as the basis for the calculation of the first deduction.

How Does It Work?

• The calculation of the tax deduction will begin with the ‘equity capital’ as stated in the company’s opening balance sheet of the taxable period.
• Based on Belgian accounting law, ‘equity capital’ includes capital, share premiums, revaluation gains, reserves, carry-forward of profits or losses and capital investment subsidies.
• Increases or decreases of the capital during the taxable period will be taken into account on a pro rata basis.
• The equity capital will be adjusted by eliminating, among others, the following items:

-The net book value of the shares the company holds in its own share capital;
-Shareholdings recorded as financial fixed assets;
-The net book value of real estate (or entitlements in real estate), or assets of permanent establishments, income of which would be tax-exempt in Belgium based on double taxation treaties;
-Capital grants (subsidies)

2. The notional interest rate will be set each year and will follow the average annual 10-year government bond rate. Currently, that rate is around 3.5%.
The law sets a maximum deviation of 1% from one year to the next and a maximum percentage of 6.5%. The government may change these percentages by Royal Decree.

3. Small- and medium-sized companies may in some cases apply a 0.5% higher deduction rate.

4. To the extent that the interest deduction does not have a direct tax effect (e.g. in loss situations), the interest deduction can be carried forward for the next seven years.

Legal Certainty for Investors

The notional interest deduction does not discriminate between companies and complies fully with existing Belgian and EU law.

Discussions with EU authorities have taken place and the measure is compatible with EU State Aid rules and the Code of Conduct.

High profits, low effective tax rate for US companies in Belgium

March 25th, 2005

Recently the US tax magazines Tax Notes pointed out that US profits in Belgium increased by 84% to 6.7 billion $ between 1999 and 2002, making Belgium one of the most profitable countries for US companies to do business in the world.

The magazine sees a correlation with the decline of the effective tax rate for US companies in Belgium from 26% to 12% during the same period, one of the lowest rates in the world and only slightly higher than the rate in low-tax Ireland (8%). On that basis Belgium was designated as an ‘emerging tax haven’ for US companies.




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