TRADE & INVESTMENT
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
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
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
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
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
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
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.
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
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.
In 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.
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’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.
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
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.
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
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
• 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
-The net book value of the shares the company holds in its own
-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
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.
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.