Belgium

Introduction

 

About Belgium

Belgium's economy is characterised by its private enterprises, central geographical location, highly developed transportation infrastructures and a widely-diversified industrial base. Belgium is heavily reliant on world trade, with two-thirds of its GDP driven by exports.

The regulatory environment in Belgium is highly efficient, making it the fastest place in Europe to set up a business. With its unique tax regime comprising several tax deductions such as notional interest, effectively Belgium's corporate tax rate is significantly lower than the nominal rate. Moreover, Belgium is widely connected with multimodal transportations, allowing an efficient and seamless logistics infrastructure around other European countries through Belgium.

The Belgian banking system is highly sophisticated with no restrictions towards movement of capital and minimal regulatory requirements. More than half of the banking transactions are international transactions due to the extent of international business conducted in Belgium.

In recent years, the Sino-Belgium bilateral ties have deepened as China becomes Belgium's most important trading partner in Asia. China has also offered a "one million euro" loan programme in Belgium, to finance Chinese entrepreneurs in doing business around Europe.

 

What solutions are available in Belgium?

Solution Description
Treasury Centres A centralised treasury is one way to reduce the tax burden, centralise risk management, improve liquidity and enhance yield on cash.
Interest Optimisation Maximise your interest yield from for your balances held with the bank.
Notional Pooling Cash balances in different accounts are notionally offset to derive the net balance, which is then used to calculate interest.
Sweeping/ Zero Balance Account (ZBA) ZBA are checking accounts with zero balances where funds are physically swept to eliminate excess balances and maintain greater control over disbursements.
In-house Banks (IHB) In-house banks provide corporate treasurers with another method of centralising and consolidating their business.
Intercompany loans Similar to bank loans, intercompany loans refer to lending between entities within the same group.

Corporate Treasury in Belgium

Belgium is ranked as one of the top 20 most competitive economies in the world and was one of the founding members of the European Union. Here, we highlight some of the key benefits relevant to treasury and cash management in Belgium.

 

Financial market development:

  • The World Economic Forum ranks Belgium 36th in the world for financial market development in The Global Competitiveness Report 2015-2016.
  • It ranks Belgium 65th in the world for the soundness of its banks. It rates it reasonably highly for the ease of access to loans, venture capital and financing through local equity markets.
  • Belgium has excellent business infrastructure, a highly educated multilingual workforce and a sound legal environment.
  • There are no foreign exchange controls in Belgium.

 

Sophistication of banking systems:

  • There more than 95 banks operating in Belgium, of which 60 are branches of foreign banks, the majority of which are from the neighboring countries of France, the Netherlands and Luxembourg. There are 21 representative offices of foreign banks in Belgium.
  • Belgium's foreign exchange market has an average daily turnover of US$23bn (Bank for International Settlements triennial global survey 2016).
  • Belgium has a well-developed debt market with both government and corporate bonds widely available.

 

Regulatory bodies:

  • The banking industry is regulated by the National Bank of Belgium and the Financial Services and Markets Authority. As a Eurozone country it is also covered by the Single Supervisory Mechanism.

 

Tax:

  • The Corporate Income Tax rate is 33%, plus a 3% crisis tax, giving an effective rate of 33.99%. Reduced rates are available for companies with incomes of up to EUR322,500 a year.
  • Under certain circumstances companies have to pay a fairness tax of 5.15% on their distributed dividends.
  • The Belgium government is in the process of reforming the CIT regime to make it more competitive.
  • Resident companies pay tax on their worldwide income. Non-resident companies are taxed on income deriving from Belgium.
  • VAT is charged at a standard rate of 21%. Certain goods and services qualify for lower rates of 6% and 12% or are VAT exempt.
  • Capital gains on shares is taxed at 0.412% providing certain conditions are met. If these conditions are not met the rate is 25.75%.
  • Interest income is taxed as corporate income. Interest expenses are tax deductible. Notional Interest Deduction can be claimed at a rate of 1.131% in 2017, and 0.237% in 2018.
  • Foreign tax credits may be provided where tax has been paid on certain foreign-sourced income.
  • Withholding tax of 0%, 15% or 25% is paid on interest and dividends for resident companies. Non-resident companies generally pay a rate of 27%. Where a tax treaty is in place, rates range from 0% to 25% on dividends and interest.
  • Belgium has tax treaties with more than 100 countries and territories.

 

Benefits for regional treasury centres:

  • Belgium is growing in popularity as a location for shared service centres, with the government naming the development of this sector as a key priority.  
  • Cash concentration and notional pooling are available in Belgium on a domestic and cross-border basis, but each group within a company must be treated as a separate legal identity, which can have tax implications.
  • Belgium is a member of the pan-European TARGET2 real-time gross settlement system.
  • Belgium has one of the most extensive tax treaty networks in the world.
  • Belgium is a Eurozone country with trading hours that overlap with Asia, Europe and North America.

 

Banking

 

Banking System

  • There are 89 commercial banks, of which 63 are foreign banks and representative offices of foreign banks and 26 are local banks.
  • Due to its proximity and Brussels being the capital of the European Union (EU), Belgium's banking sector has a diverse, international presence of financial institutions.
  • The four leading banks are BNP Paribas Fortis, KBC Bank, Belfius Bank (state owned) and ING Bank Belgium, together taking up 58% of total banking assets (end of 2015).

 

Bank Accounts

  • Residents may hold foreign and domestic currency accounts both domestically and overseas. Domestic currency accounts are fully convertible into foreign currency.
  • Non-residents may hold foreign and domestic currency accounts both domestically and overseas. Domestic currency accounts are fully convertible into foreign currency.
  • Interest is available on current accounts and term deposits.

 

Legal and Regulatory

  • The National Bank of Belgium (NBB) is an autonomous institution and a member of the European System of Central Banks (ESCB).
  • The European Central Bank (ECB) supervises banks within the eurozone that are regarded as 'significant' through the Single Supervisory Mechanism (SSM), and other 'less significant' banks are supervised by the national central bank, such as the NBB.
  • Belgium is one of the founding members of the EU.
  • Belgium has anti-money laundering and counter terrorism financing legislation in place, and follows European Union (EU) anti-money laundering directives.
  • There are no foreign exchange controls in place.
  • A company is resident if it is registered in Belgium or its main management activity or location of effective management is carried out in Belgium.
  • Belgium has set up a financial intelligence unit, the Financial Information Processing Unit (CTIF-CFI), which is a member of the Egmont Group.

 

Payments

 

Payment Systems

TARGET2-BE

Belgium’s national pan-European TARGET2 Real-time Gross Settlement (RTGS) system

  • Operates on behalf of the Eurosystem.
  • Three Eurosystem central banks, Banca d’Italia, Banque de France and Deutsche Bundesbank, provide the Single Shared Platform (SSP) of TARGET2.
  • 25 direct and 31 indirect participants.
  • Processes high-value (no maximum value threshold) and urgent EUR-denominated domestic and cross-border credit transfers.
  • Activates final settlement of participants’ net balances from the CEC CSM (see below).
  • Settles transactions in real time and with immediate finality.
  • Final settlement done across participant banks’ correspondent accounts at the SSP.

 

CEC CSM

(Centre for the Exchange of Operations Clearing and Settlement Mechanism)

Automated multilateral net settlement system

  • Operated by Systèmes Technologiques d’Echange et de Traitement (STET) and accesses France’s CORE platform.
  • Processes Single Euro Payments Area (SEPA) payments, low-value, non-urgent and bulk retail transactions, cheque payments of less than EUR 25 million, bills of exchange, card payments and e-money transactions.
  • A new Clearing and Settlement Mechanism (CSM) is due to launch in November 2017, which will be an instant payments scheme with settlement done through TARGET2.
  • Cross-border, EUR-denominated transactions are done through EURO1 (supported by BNP Paribas Fortis, ING Belgium and KBC Bank), STEP1 or STEP2 payment systems.
  • A pan-European real-time infrastructure for EUR-denominated transactions is under development by EBA Clearing (which operates EURO1, STEP1 and STEP2) and Italy’s SIA Group (which is an operator for STEP2).
  •  Approximately 16 direct and 55 indirect participants

 

SEPA (Single Euro Payments Area)

EU integrated payment infrastructure

  • Pan-EU standardised electronic payment system, set up for settlement of EUR-denominated credit transfers and direct debits.
  • Not applicable to urgent, high-priority transactions. There is no value threshold.
  • Jurisdictional scope of SEPA is the 28 EU member states plus Iceland, Norway, Liechtenstein, Switzerland, Monaco and San Marino.

 

 

Payment Instruments

 

Credit transfers:

  • Credit transfers are all automated in Belgium.
  • High value and urgent credit transfers are settled through TARGET2_BE in real time.
  • Low value and non-urgent SEPA transactions are cleared same or next day through CEC CSM.
  • Used for payroll, supplier and third-party payments.
  • The SEPA Credit Transfers (SCT) scheme is used for retail transactions and is available for urgent and high priority payments (no maximum threshold) within the SEPA. 

 

Direct debit (autodebits):

  • Used for low-value, regular transactions such as utility bills.
  • CEC CSM clears all SEPA direct debits.
  • The SEPA Direct Debit (SDD) scheme is used for urgent and high priority retail payments (no maximum threshold) within the SEPA. It is mandatory for all banks in the eurozone to offer SDD facilities and banks outside of the eurozone are required to accept SDD transactions.

 

Cheques:

  • Cheques usage is in rapid decline, being fast outpaced by electronic transactions and also due to the costs incurred from cheque collection.
  • If they are used, it is usually for one-off, high value payments such as for property purchases.
  • For high value (over EUR 25 million), irregular and foreign cheques, they are truncated into electronic images and exchanged between banks and processed as credit transfers.
  • Low value cheques are cleared through CEC CSM.

 

Card payments:

  • Payment cards are becoming increasingly popular, especially debit cards.
  • Mister Cash (Bancontact) is the most common debit card in use (about 95% of debit cards in circulation). The card is linked to the user's Belgian bank account and also has a Maestro function.
  • The main payment card brands (excluding Mister Cash) are Visa and MasterCard, with American Express and Diners Club credit cards also in circulation. All payment cards are SEPA and EMV compliant.
  • Card payments are usually processed through Atos Worldline card processing centre, which is linked to the CEC CSM system.
  • There are approximately 188,080 POS terminals (2015) and 7,000 ATM terminals (2016), which are run by Atos Worldline. All ATM and POS terminals are EMV compliant.

 

Other payment schemes

  • Reloadable prepaid payment cards are available and are offered by many of the banks such as the Hello prepaid card and Moneytrans.
  • Mobile and online payment methods are becoming more popular and there are growing number of providers, some of which are Europe or world-wide such as Mobiano, Sofort and ecoPayz.

 

Demographics

 

Recent developments

 

KBC Launches Unmanned Branches

KBC is launching 66 unmanned bank branches, while it is closing eight branches altogether, as customers continue to migrate to digital channels. Customers will be able to conduct transactions such as cash withdrawals and money transfers through self-service terminals at the newly-configured staff-free branches. For customers with more complex needs, KBC is extending the opening hours of 145 of its full-service branches, where people can receive specialist advice.

Read more about the development here.

 

Payconiq Merges with Bancontact

Mobile payments app Payconiq, which is supported by a number of Belgian banks, is merging with Belgium electronic payments firm Bancontact. The move is part of Bancontact’s strategy to create a multi-functional, pan-European mobile wallet. In 2017, Payconiq and Bancontact collectively processed 15 million mobile payments – four times the number handled in 2016.

Read more about the development here

 

Reduction to Cross-border Payment Fees

Banks in the European Union but outside of the eurozone may have to cut the fees they charge on cross-border payments made in euros. EU rules mean banks within the single currency block already charge low or no fees for cross-border transactions in euros, but charges are much higher for transactions from countries outside of the eurozone. The European Commission, which has its headquarters in Brussels, is proposing that banks in non-euro countries match the low fees of eurozone ones for euro-denominated transactions.

Read more about the development here.  

 

 

This Market Profile is brought to you by DBS. Get in touch with us for further insights on doing treasury in Belgium and take advantage of our innovative solutions to empower your business. Click here to find out more.

 

 

Sources: IMF World Economic Outlook database, October 2016; CIA World Factbook; Trading Economics; PwC

Please note that the information contained in this document, assembled based on information available and accurate as at July 2017, is of a general nature only and is subject to change whether for economic, political, social or other reasons.

 

Last updated on 07 Jun 2018