Belgium has a strong record of promotion and support of foreign investment. This tradition, although substantially curbed during the last years as a result of the tougher EC and now EU policies on subsidies, still exists in a multitude of forms. Incentives are mainly granted at the regional level, but some tax incentives are still granted by the federal authorities.

a) Incentives in General

"Large" enterprises (i.e., employing more than 250 persons or with a turnover of more than 20 million ECU) which are established in "development areas" may be granted the following:

- interest reduction subsidies on the funds borrowed from Belgian lending institutions by the investor in the form of a percentage of the investment, up to 6%;

- capital grants - payable in installments - if the investor uses its own funds, amounting to the interest subsidy which otherwise would have been granted;

- public guaranties for the reimbursement of loans.

In the Walloon region, the "investment subsidy" has replaced the interest subsidies and the capital grants since July 1, 1992. It is calculated as a percentage of the investment.

"Small and medium enterprises" (i.e., employing 250 persons or less, or with a turnover not exceeding 20 million ECU) are afforded a similar set of incentives but are not subject to geographic restrictions.

b) Tax Incentives

Eligible investments may be exempt for five years from real estate tax, provided that the number of persons employed increases by a percentage of 30% in the Flemish region and 20% in the Walloon region. Capital contributions to the newly created company may be exempt from registration tax. The investor may also be authorised to use an accelerated depreciation scheme.

The investor may deduct from its taxable income a percentage of qualifying investments (such as R&D or energy-saving projects), called the "investment deduction".

Furthermore, large multinationals are offered a number of special status entities, such as coordination and distribution centers. Coordination center legislation provides major tax incentives for international groups which centralise coordination activities in Belgium, namely financial and management services, carried out in a virtually tax-free environment.

Distribution centers benefit from a cost-plus 5% taxation on the operating expenses for foreign-based multinationals which perform activities such as storage, packaging and delivery in Belgium.

c) R&D Incentives

Specific incentives in the form of interest-free loans, direct subsidies and investment deductions are available for a variety of R&D projects.

d) Export Incentives

The Belgian ExIm Bank (Nationale Delcrederedienst/Office National du Ducroire) is a state-owned insurer providing coverage to exporters, and partially to investors, from political and other risks abroad. Copromex is a governmental agency which grants subsidies applicable to the interest paid by Belgian enterprises on loans financing equipment exports to non-EU countries. There are a number of other institutions aiming to facilitate Belgian exports, including the Belgian national and regional foreign trade offices.

e) Investment Restrictions

Currently there are no restrictions on the foreign ownership of assets in Belgium, except for the usual limitations in areas essential to national security, such as nuclear power plants, TV broadcasting stations and voice telecommunications.

f) Exchange Controls

There are no restrictions on exchange in Belgium. Funds in BEF or foreign currencies may be repatriated freely. Transactions exceeding a certain amount must be reported for statistical purposes only to the Belgian-Luxembourg Institute of Exchange.

The content of this article is intended to provide general information on the subject matter. It is therefore not a substitute for specialist advice.

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