Belgium

Introduction

 

About Belgium

The foundation of Belgium’s economy is a widely diversified industrial base, which benefits from a highly developed transportation infrastructure and government support of open trade and investment. Belgium is heavily reliant on world trade, with the export of goods and services the largest contributor to GDP.

The regulatory environment in Belgium is highly efficient, and its unique tax regime offers several advantages, such as notional interest deductions. Belgium is also gradually reducing its corporate income tax rate to 25% by tax year 2021. Moreover, Belgium’s central geographical location and efficient transport infrastructure make it an ideal logistical base.

The Belgian banking system is highly sophisticated with minimal regulatory requirements. More than half of banking transactions are international due to the extent of foreign business conducted in Belgium. The country also has an extensive tax treaty network.

In recent years, Sino-Belgium bilateral ties have deepened, with China becoming Belgium's most important trading partner in Asia. Chinese insurer Anbang Insurance Group, which is the largest Chinese investor in Belgium, has also offered a "one million euro" loan programme to finance Chinese entrepreneurs doing business in Europe.

 

Belgium Treasury Management Market Profile Infographic_small

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.
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 26th in the world for financial market development in The Global Competitiveness Report 2017-2018.
  • It ranks Belgium 56th in the world for the soundness of its banks, while it rates it in the top 25 for the ease of access to loans, venture capital availability 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 are more than 100 banks operating in Belgium, of which 32 are under Belgium law. The majority of foreign banks are from the neighbouring countries of France, the Netherlands and Luxembourg. There are 20 representative offices of foreign banks in Belgium.
  • Belgium's foreign exchange market has an average daily turnover of USD23 billion (Bank for International Settlements triennial global survey 2016).
  • Belgium has a well-developed debt market with both government and corporate bonds widely available. Outstanding debt securities by resident issuers stood at USD757.2 billion at the end of 2017.

 

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 (CIT) rate is 29%, plus a 2% crisis tax, giving an effective rate of 29.58% for tax year 2019 (financial year ending 31 December 2018) onwards. CIT will be cut further to 25% in tax year 2021 (financial year ending 31 December 2020) onwards, and the crisis tax will be abolished.
  • In respect of small-medium enterprises (SMEs), for tax year 2019 and beyond, the first bracket of EUR100,000 of income is taxable at 20% plus 2% for crisis tax. For tax year 2021 onwards, the crisis tax of 2% will be abolished.
  • Under certain circumstances, large companies have to pay a fairness tax of 5.15% on their distributed dividends. This tax will be abolished from tax year 2019 onwards.
  • Resident companies are taxed on their worldwide income whilst non-resident companies are taxed on Belgium-sourced income. There is no branch profits remittance tax on the remittance of profits to the head office by the branch of a foreign company.
  • The standard rate for Value Added Tax (VAT) is 21% with certain goods and services qualifying for lower rates of 0%, 6%, 12% or are VAT-exempt.
  • From tax 2019 onwards, capital gains on the disposal of qualifying shares will be fully tax exempt, subject to meeting certain conditions. If the capital gains arise from the disposal of qualifying shares without meeting the one-year holding requirement, such gains shall be taxable at 25.5% (plus crisis tax). For non-qualifying shares, capital gains will be taxed at 29.58%, falling to 25% in tax year 2021.
  • Interest income is taxed as corporate income. Interest expenses are generally tax deductible. However, if the interest payment is in excess of a 5:1 debt-to-equity ratio, the excess of the interest will not be tax deductible. This rule shall exist until tax year 2020, but will continue to apply despite the sunset clause for interest payments made to tax havens. From tax year 2021 onwards, the capitalisation rules based on the EBITDA shall apply.
  • Stamp duty is applicable on transactions relating to public funds that are concluded or executed in Belgium, however, exemptions are available.
  • Withholding tax (WHT) is typically charged at 30% to both resident companies (with some exceptions) and non-resident countries where no tax treaty is in place. Where a tax treaty is in place and the non-resident can provide a Certificate of Residence, rates range from 0% to 20% on dividends and 0% to 25% on interest.
  • Belgium has tax treaties with more than 90 countries and territories.
  • Belgium is a signatory to the Organisation for Economic Co-operation and Development’s Multilateral Competent Authority Agreement, through which information is exchanged between tax administrations, to provide a single, global picture on some key indicators of economic activity within multinational enterprises.

 

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 more than 100 banks operating in Belgium, of which 32 are under Belgium law. The majority of foreign banks are from the neighbouring countries of France, the Netherlands and Luxembourg. There are 20 representative offices of foreign banks in Belgium.
  • Due to its centralized location in Europe and with Brussels being the home for the main European Union (EU) institutions, Belgium's banking sector benefits from 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.
  • The National Bank of Belgium (NBB) designated eight banks as ‘domestically systematically important’, and this group accounted for 90% of total banking system assets in 2016.

 

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 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). 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 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

On 13 January 2018, the revised Payment Services Directive (PSD2) was scheduled to become law across all EU Member States. A revision of the initial PSD adopted in 2007, PSD2 updates and enhances the legal framework for payment systems across the European Economic Area (EEA) single market, to be supervised by the European Banking Authority. Supplemental regulatory technical standards are also being rolled out, from March 2018 to September 2019, to address issues of authentication, monitoring and API (application programming interface) standardisation

The main objective of PSD2 is to provide enhanced consumer security in the developing financial technology (fintech) environment i.e. for electronic payments such as mobile payments, credit transfers, online payments and direct debits. 

Measures include:

  • Prohibition of surcharges on credit/debit card payments.
  • Imposition of strict security requirements including the protection of financial data.
  • Increased competition between European payment service providers.
  • Greater consumer rights such as ‘no questions asked’ refunds on direct debits in euros.

 

Payment Systems

TARGET2-BE

(Trans-European Automated Real-time Gross Settlement Express Transfer system)

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

 
  • Operates on behalf of the Eurosystem, the monetary authority of the eurozone.
  • Three Eurosystem central banks – Banca d’Italia, Banque de France and Deutsche Bundesbank – provide the Single Shared Platform (SSP) of TARGET2.
  • Processes high value and urgent EUR-denominated domestic and cross-border credit transfers.
  • Activates final settlement of participants’ net balances from STEP2 (pan-European Automated Clearing House).
  • Settles transactions in real time and with immediate finality.
  • Transactions are processed electronically using SWIFT.
  • Final settlement is done across participant banks’ correspondent accounts held at the SSP.
STEP1 Pan-European net settlement system
  • Operated by the Euro Banking Authority (EBA) Clearing.
  • Processes low-value (no minimum value threshold) and non-urgent euro-denominated commercial payments.
  • STEP1 is open to all banks in the EU and has access to EURO1 platform.
  • Operates SWIFT messaging.
STEP2 Pan-European Automated Clearing House (ACH)
  • Operated by EBA Clearing.
  • Processes low-value, non-urgent and bulk euro-denominated retail payments.
  • Provides straight-through processing for interbank transactions.
  • Settlement done same or next day, depending on time of submission.
  • A pan-European real-time infrastructure for EUR-denominated transactions is under development by EBA Clearing and Italy's SIA Group (one of the operators of STEP2).
  • Cross-border transactions can be processed through SWIFT and overseas correspondent banks.

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 EUR25 million; bills of exchange; card payments; and e-money transactions.
  • 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.
  • A new instant-payments clearing and settlement system is due to launch in November 2018. It is being developed by STET and the Belgian Interbank Standards Association. Settlement will be done through TARGET2.

SEPA

(Single Euro Payments Area)

Pan-European payment infrastructure
  • Initiated by the European Payments Council (EPC).
  • Operates a common set of payment instruments, infrastructures, procedures and standards for euro transactions within Europe. 
  • Electronic retail payments within SEPA are regarded as domestic payments.
  • SEPA is not applicable to urgent, high-priority payments or cheques.
  • SEPA countries include 28 EU member states and four European Free Trade Association member states (Iceland, Liechtenstein, Norway and Switzerland).
  • A Europe-wide legal framework for payments, PSD2, was launched in 2016, which essentially provides security for electronic payments inside and outside of the EEA.
  • There are two SEPA payment instruments: SCT Inst and SDD (see below).

SCT Inst

(SEPA Instant Credit Transfers)		 Pan-European instant payments system
  • Operated by the EPC.
  • 585 participants.
  • Launched in November 2017, this scheme provides EUR-denominated credit transfers up to a maximum of EUR15,000 within ten seconds. Available 24/7, year-round.
  • Currently there are eight participating countries: Austria, Estonia, Germany, Italy, Latvia, Lithuania, the Netherlands and Spain. The network will progressively cover all 34 European countries with access to SEPA.
  • Corresponding national systems were phased out in 2016.

SDD

(SEPA Direct Debits)		 Pan-European direct debit system
  • Operated by the EPC.
  • 585 participants.
  • There are two types of SDD: SDD Core for consumers and SDD B2B for businesses.
  • Operates whereby the payer has to give approval via a mandate provided by the biller electronically or on paper. Otherwise known as creditor-driven mandate flow.
  • Corresponding national systems were phased out in 2016.
RT1 Pan-European real-time EUR credit transfer system
  • Operated by EBA Clearing, which also operates EURO1, STEP1, STEP2 and Italy's SIA Group (one of the STEP2 operators).
  • Launched in 2017.
  • 28 participants.
  • A pan-European real-time infrastructure for EUR-denominated SEPA transactions.
  • Supports transactions compliant with SCT Inst scheme.
  • Messaging is in line with ISO 20022 or SWIFT FIN standard.
EURO1 Pan-European RTGS-equivalent net settlement system
  • Operated by EBA Clearing.
  • Processes high-value (no maximum value threshold) and urgent EUR-denominated domestic and cross-border payments.
  • Payments processed with immediate finality and are irrevocable.
  • Operates SWIFT messaging.

 

Payment Instruments

 

Credit Transfers

  • Credit transfers are all automated in Belgium and are the most important form of cashless payment in terms of volume and value.
  • 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 (auto debits)

  • 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. High value transactions of more than EUR500,000 can be processed through TARGET2.

 

Card Payments

  • Payment cards are the most popular form of cashless payment, especially debit cards used with contactless (touch-and-go) systems.
  • Mister Cash (Bancontact) is the most common debit card in use (accounting for 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.
  • Charges are no longer incurred for card payments made through Bancontact, Mastercard and Visa.
  • Reloadable prepaid payment cards are available and are offered by many of the banks such as the Hello prepaid card and Moneytrans.

 

Online Payments

  • The financial technology (fintech) sector is dominated by services linked to digital payments, due to Belgium’s established presence in the payment industry (SWIFT and Euroclear are headquartered there) and the fast adoption of online transactions. 
  • The government does not have regulation in place specifically focused on the fintech sector. However, the NBB and the Financial Services and Markets Authority (FSMA) is supportive of developments in technology innovation and the financial sector, and manages applications within the existing regulatory framework.
  • The FSMA has launched a fintech portal on its website as a networking platform for fintech companies to interface with the authorities and other industry players.  
  • The EU launched an ‘action plan on Fintech’ in 2018 that broadly sets out its approach, to be rolled out in due course. The areas of focus are: to encourage innovative business models; to support technological development in blockchain, artificial intelligence and cloud services; and to increase cybersecurity and protect the integrity of the financial system.
  • Online transactions have been widely adopted, with payments mainly done using payment cards or online banking. A popular local payment platform, Ogone, offers a variety of payment methods, such as online banking or credit cards. Other global digital payment systems with a market presence are PayPal, Android Pay and Sofort.
  • Mobile wallets have had a relatively slow uptake. Bancontact, the most popular mobile payment app, has merged with another popular mobile app, Payconiq, with the aim of producing a unique, unified payment app.

 

Digital Currencies

  • There is an active market in cryptocurrency, although the FSMA has not issued any regulations, other than advising extreme caution.
  • A recent court ruling in Belgium classified bitcoin activities as ‘speculative’, and thus any profits earned were liable to 33% capital gains tax.
  • The EU’s overall view of bitcoin is that “no member state can introduce its own currency”. Cryptocurrency exchanges are legal, depending on the country, and should be operated under the Anti-Money Laundering Directive, according to the European Commission.

 

Cash, Cheques and Money Orders

  • Cash continues to be the predominant form of payment, due to a combination of an overabundance of ATM machines in Belgium and a lack of digital payment systems at smaller shops and other service providers.
  • Cheques usage is in rapid decline, in line with the phasing out of Eurocheques and the rapid increase in electronic transactions.
  • Belgian banks are imposing charges to discourage cheque usage as the payment system will not be part of SEPA.
  • If cheques are used, it is usually for one-off, high-value payments such as property purchases.
  • Irregular cheques are truncated into electronic images and processed as credit transfers. Foreign or high-value cheques (of more than EUR25 million) are processed manually and cleared bilaterally between banks.
  • Low-value cheques are cleared through CEC CSM.
  • Money orders are available through postal orders, for domestic or international transfers, or Western Union and Moneygram for international services.

 

Demographics

Belgium Treasury Management Market Profile_Infographic

1 (Main) reduced and zero-rated VAT for certain goods and services

2 (Progressive) max rate on incomes over EUR322,500, due to fall to 29% in 2019

3 (Progressive) max rate on incomes over EUR39,660

 

Recent developments

 

Digital Bond Platform to launch

Financial services group Belfius is launching a digital platform to connect investors with semi-public entities and companies of all sizes that are looking to raise funds. Dot-Capital will offer investors direct and fully secure access to primary market bond issues set up on behalf of these organisations. The platform, which is the first of its kind in Belgium, will enable users to create personalised and real-time alerts for when issues become available, as well as offering online document storage and transaction tracking.

Read more.

 

Belgium Emerging as Fintech Hub

Brussels is cementing its place as a fintech hub and is well positioned to act as a smart gateway to Europe as companies in the sector look for new bases outside of London due to the threat of Brexit, according to KPMG’s Pulse of Fintech report. The city offers easy access to London and the major European financial centres of Paris, Frankfurt and Amsterdam, and is located within a 500-mile radius of 80% of Europe’s purchasing power.

Read more.

 

ESMA Chairman Backs Regulation of Digital Assets

The chairman of financial market supervisor the European Securities and Markets Authority has told a conference in Brussels that he supports further regulation of digital assets. Speaking at the FinTech Conference 2019, Steven Maijoor said he supported extending Europe’s Anti-Money Laundering requirements to include the exchange of crypto assets for both other crypto assets and for fiat currency. He warned that without new rules, digital assets were likely to fall outside of the regulation of Europe’s security laws.

Read more.

 

Moneytrans Building Neobank for Migrants

Brussels-based money transfer service Moneytrans is in the process of building the first neobank for migrants, according to comments from its founder Francisco Sanchez-Apellaniz. The company, which also has operations in Spain, is currently hiring for developer roles in Malaga. Moneytrans offers a range of services including remittances, cross-border payments, currency exchange and pre-paid cards. It is understood that the neobank would build on the company’s money transfer technology and services.

Read more.

 

SWIFT Launches PoC with R3

Belgium-based international payments network SWIFT plans to launch a proof of concept for a gateway that would enable blockchain software firm R3 to connect to its Global Payments Innovation (GPI) platform. The move would enable payments to be initiated using R3’s platform. They would then automatically move on to SWIFT’s GPI platform. The proof of concept will eventually expand to include other distribution ledger technology platforms and e-commerce trading platforms.

Read more.

 

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: World Economic Forum, PwC, Bank for International Settlements, the National Bank of Belgium, The Heritage Foundation, OECD.

The information herein is published by DBS Bank Ltd. (“DBS Bank”) and is for information only. The information is assembled based on information available and accurate as at Aug 2018.

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