Israel – Belgium Tax Treaty

Business Activity in Belgium

Belgium has a well-educated workforce, world-class research centers, and strong infrastructure to support various industries. The country thrives on stable governance and a strong legal framework, creating an ideal environment for enterprises. Belgium’s economy thrives with diverse industries such as manufacturing, services, and international trade. The manufacturing sector, including chemicals, pharmaceuticals, automobiles, and machinery, benefits from a skilled workforce and technological advancements.

Meanwhile, the services sector, encompassing finance, telecommunications, logistics, and information technology, thrives due to Belgium’s central position within the European Union. Belgium’s international trade relations and strategic ports drive its economic growth. As a founding member of the European Union, Belgium enjoys seamless access to the European single market, facilitating trade and investment opportunities. Ports like Antwerp are vital logistics hubs, enhancing Belgium’s global connectivity and boosting international commerce. Belgium’s commitment to sustainability and responsible practices further strengthens its appeal as a business destination.

Bilateral Agreements Between Belgium and Israel

• Double Taxation Agreement

Convention on the Prevention of Double Taxation

The agreement between the Governments of Israel and Belgium regarding the avoidance of double taxation was signed on July 12, 1972, and entered into force on the first of March 31, 1975.

To read the agreement in English click here.

Applicability of the MLI

Both Belgium and the state of Israel have signed have signed the Multilateral Convention, commonly known as the MLI. The MLI is a convention that is meant to fix double taxation treaties according to the BEPS framework.

Israel signed the MLI on the 7th of June 2017, with its provisions entering into force on the 1st of January 2019. Belgium, as well, affixed its signature to the MLI on the 7^th of June, 2017 and its provisions became effective as of the 1^st of October, 2019.

Residency for Tax Purposes in Belgium

Residence of an Individual

In Belgium, you are considered a resident for tax purposes if you live there permanently or have your main economic ties there. If you are married or in a legal partnership, your residence is based on where your family lives.

For international workers, you are a Belgian resident if:

• You move to Belgium with your family, or
• As a single person, you make Belgium your permanent home and main economic base.

To read about how an individual is considered a resident of Israel, click here.

Residency of a Company

A company is considered a Belgian tax resident if its main business location or management center is in Belgium. The “seat of management” refers to the place where key decisions and central administration occur.

To learn about how a company is considered a resident of Israel, click here.

The Tax System in Belgium

Belgium Tax Authority is called the Federal Public Service (FPS) Finance

Income Taxation: 25%, 40%, 45%, 50%

Taxation of Companies and Branches: 25%

VAT: 21%

Capital Gains Tax: 25%

Withholding Tax

Inheritance Tax Belgium

Inheritance tax is what heirs pay when they receive property or money from someone who has passed away. The amount is based on the value of the inheritance after debts are subtracted. The tax rate depends on where the deceased person lived:

• In Flanders, the Flemish Tax Administration handles it.
• In Brussels and Wallonia, the regional authorities decide the rates, but the Federal Public Service Finance still manages the process for now.

The rules and rates vary by region.

To read more about inheritance tax in Belgium click here.

Relocation to Belgium

Belgium offers satisfying advantages for businesses considering investing in the country, particularly from a business perspective. Its central location in Europe provides easy access to major cities and markets, making it an ideal base for expanding into the wider European market. With well-developed transportation networks and advanced logistics facilities, Belgium offers efficient connectivity for businesses to transport goods and connect with customers. Additionally, Belgium enjoys a skilled and multilingual workforce, providing businesses with access to diverse talent and the ability to engage with international clients.

The country’s strong infrastructure and modern communication systems facilitate smooth business operations. Moreover, Belgium’s stable legal and regulatory frameworks offer a favorable business environment, ensuring reliable protections for intellectual property and commercial transactions. Belgium’s strategic location, robust infrastructure, talented workforce, and supportive business climate make it an attractive destination for companies seeking growth and success in Europe.

In 2022, Belgium had around 29,000 self-identified Jews, making up 0.25% of the population. Most live in Brussels and Antwerp. In Brussels, the Jewish community is mainly secular, while Antwerp is home to one of Europe’s largest ultra-Orthodox Jewish communities, including the world’s largest Hasidic population.

Real Estate Taxation in Belgium

Local property tax in Belgium is based on the “cadastral income,” which is the estimated annual rental value of a property as determined by the authorities. The tax rate is typically 20% to 50% of the adjusted cadastral income.

If you own property abroad, you must report it in your Belgian tax return. Since 2021, you must also declare it to the Administration of Measurement and Valuations, which calculates its estimated rental value for tax purposes.

Transfer of Funds from Israel to Belgium

According to section 170(a) of the Israeli Income Tax Ordinance, all payments transferred to non-Israeli residents are subject to a 25% withholding tax. However, this tax can be reduced or even waived if certain conditions are met.

As mentioned above, the countries have signed a tax treaty, that allows taxpayers to submit a 2513/2 form – Statement regarding a payment to a foreign resident that is exempt from withholding tax, to potentially transfer the payments without paying the withholding tax.

In addition to assisting with withholding tax matters, our firm also helps with other issues related to transferring funds abroad. This includes providing an accountant’s approval regarding the payment of taxes, reviewing additional actions required under the CRS standard, and more.

Moreover, banks often raise many difficulties and charge high fees for converting shekels into other currencies. Therefore, consulting with a specialist before transferring the funds is highly recommended, click here to contact us.

For more information on money transfers abroad, click here.

Types of Business Entities in Belgium

• Sole Proprietor – A single natural person holds the individual entrepreneur and the liability that comes with it. There is no separation of assets of the proprietor.
• Partnership – Formed by at least two individuals who will run the business together and are both liable for the debt and obligations incurred.
• Public Limited Company – At least two shareholders, the amount of shares are divided before incorporation. Shareholders are liable for the amount contributed.
• Cooperative Company with Limited Liability – There are different minimums of capital required for registration. There must also be at least three members who decide upon establishing this type of structure.
• Private Limited Company – More than one shareholder; the amount of share capital is €61,500, paid by at least two shareholders. Can be formed by individuals or legal entities, and liability is still limited for the shareholders.

Incentive Laws in Belgium

Belgium provides foreign tax credits (FTCs) to avoid double taxation on foreign income. This can include exemptions, credits, or tax reductions, depending on the type of income. For foreign dividends, generally, no FTC is available. For royalties and interest income, FTCs apply if the income was taxed in the source country, with specific rules and calculations to determine the credit.

The Notional Interest Deduction (NID), which allowed companies to deduct a simulated interest cost on their equity, has been abolished for tax periods after 2023. Previously, unused NID could be carried forward with restrictions, but this is no longer possible.

Investment deductions allow companies to reduce taxable income for qualifying investments, such as R&D or eco-friendly projects. A new regime starting in 2025 simplifies and categorizes these deductions into three tracks: general, targeted (specific themes), and technology-related.

The Innovation Income Deduction (IID) gives a tax advantage for income derived from intellectual property (IP), reducing taxable income by 85% of net innovation income. From 2025, taxpayers can convert unused IID into a tax credit.

Belgium Double Tax Treaties