Belgium has economic, geographical and political advantages that make it an attractive destination for investors
This article was first published in the November/December 2019 UK edition of Accounting and Business magazine.
There are good reasons why Belgium is often described as the gateway to Europe. Its geographical location means it is ideally situated to serve the European Union’s (EU’s) market of more than 500 million consumers, who live within a 500-mile radius of the country. In addition, Belgium’s capital, Brussels, is the de facto capital of the EU and is home to some of its most significant institutions, including the European Commission and the European Council. It also hosts a seat of the European Parliament.
Belgium’s population is over 11.3 million and the country is bordered by four other EU countries: France, Germany, Luxembourg and the Netherlands. As an economy, it is very open to exporters and it is quick and easy to open a business there. Belgium is also culturally diverse, which makes it an ideal market to launch new products in, and a large proportion of the population can converse fluently in three languages: Dutch, French and English. The country has excellent infrastructure – including airports, sea ports, railways and roads – as well as a good telecommunications network. Meanwhile, many multinational companies have offices in Brussels due to the economic and political significance of the city.
‘Brussels is the beating heart of Europe,’ says Thierry Legrain, an accountant with business services firm TMF Group. ‘It is an important financial centre, it is home to the EU headquarters, and it is easily accessible from across Europe. Many foreign investors are attracted to Belgium because of its multicultural population and the fact that several languages can easily be used in the workplace.’
Good for business
A range of industries operate in Belgium. The country is particularly known for its skills in vehicle-making, pharmaceuticals, petrochemical production and the manufacture of medical equipment. Many fast-moving consumer goods groups have operations there, while transport and logistics companies are attracted by the country’s location, which makes it an excellent base from a logistical point of view. Belgium is also considered to be a knowledge centre. Its universities and hospitals are renowned as research and development (R&D) centres and innovation hubs.
‘We have a strong reputation for R&D and innovation due to the high quality of our education and research facilities, the availability of skilled workers and our tax incentives for R&D ventures,’ explains Legrain. ‘The government has introduced R&D tax incentives, which aim to encourage companies to invest in research and innovation. Among these incentives are withholding tax exemptions for researchers’ salaries, as well as tax relief on investment in patents and R&D.’
In 2017, Belgium enacted a reform of its corporate tax rate, which should increase the country’s attractiveness to foreign investors. The standard corporate tax rate fell from 33.99% to 29.58% in 2018 and is set to fall further to 25% from 2020. Small and medium-sized enterprises have seen their tax rate reduced to 20.4% on the first €100,000 of net taxable income, provided that a minimum salary is paid to a least one of the company’s directors. This rate will go down further to 20% in 2020. ‘It’s good for companies,’ notes Legrain.
Issues to consider
While there are many advantages to doing business in Belgium, the market presents some challenges that companies should bear in mind. Traffic congestion is a problem, especially in Antwerp and Brussels. Furthermore, as Belgium is a federal state, a lot of political decision-making power rests with its local communities and regions, which can make the country’s rules hard to navigate. At the same time, Belgium is a bureaucratic country that requires businesses to comply with a lot of regulation. The legal system can also be a frustration for companies due to its slow decision-making processes.
When operating in Belgium, there are a number of important accounting and tax obligations that companies must comply with. For example, as well as preparing their corporate tax returns, they need to compile their financial statements in a predefined format and file them with the National Bank of Belgium on an annual basis. Depending on their activities, they might also need to file a withholding tax return, a social balance sheet that provides information about the workforce and VAT returns, or provide statistical reporting to the National Bank of Belgium. If a branch of a company is incorporated in Belgium, the financial statements of the parent company need to be translated into one of the country’s official languages and filed with the National Bank of Belgium.
Belgium offers many exciting opportunities for companies that want to tap the large and prosperous European market. To get the most out of these opportunities, however, they will probably need support from local experts who can help them to get to know the market and navigate the country’s rules and cultural mores. These experts can also help companies on a practical level – for example, in setting up bank accounts and providing insight into how business is conducted.
‘When entering the Belgian market, it is important for companies to have the guidance of a local business services adviser,’ Legrain recommends. ‘On the one hand, the provider should understand the needs of international business. On the other, it should have local expertise in order to guide companies through the administrative maze.’
Sally Percy, journalist