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Branch vs. Subsidiary in Belgium

Branch vs. Subsidiary in Belgium

Updated on Tuesday 04th April 2017

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One of the first and most important things that foreign investors need to consider when choosing to invest in Belgium is the type of company they will establish.

According to the Belgian Company Code there are nine different types of companies that can be established. There are different specifications for each of them and although some of them can prove to be advantageous for certain types of businesses, investors should take time to decide what best suits their needs.

Branches and subsidiaries are the most common choice for foreign companies that wish to expand their activities abroad. There are certain advantages and disadvantages for both of them.

We invite you to watch a video about the differences between branches and subsidiaries in Belgium

Particularities for branches and subsidiaries in Belgium

The main characteristics for Belagian branches are:

  • -       they are not a distinct legal entity from the foreign company but an extension of it;
  • -       they have no board of directors;
  • -       there are fewer formalities to set up a branch.

In comparison to branches, subsidiaries have the following characteristics in Belgium:

  • -       they are independent Belgian companies;
  • -       they are owned and ruled by the parent company but can act in their own capacity;
  • -       they have their own board of directors and their own internal rules;
  • -       they must hold shareholder’s meetings and comply with corporate formalities.


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The advantages of a branch in Belgium

Despite the fact that they cannot act in their own capacity, but rather as an extension of the parent company, branches have some advantages:

  • -       there is no minimum capital;
  • -       the incorporation does not need notarized procedures;
  • -       except certain cases, there is no need to establish a board of directors or to hold shareholder’s meetings and distribute profits
  • -       there are a number of tax advantages: transfers from the Belgian branch to the parent company can be made tax free, there is no dividend withholding tax on branch profits and generally the parent company deals with the losses of the branch.

The advantages of a subsidiary in Belgium

The subsidiary acts independently from the parent company and its main advantage is that the parent company cannot be held liable for the losses of its subsidiary. Other advantages are:

  • -       a subsidiary will be considered a Belgian company, not a foreign company; this can prove advantageous when dealing with nationals;
  • -       a subsidiary also has some tax advantages: the double taxation treaties in Belgium gives them special conditions, they can repatriate or distribute net profits with little or no dividend withholding tax;
  • -       annual tax filing requirements are less demanding for subsidiaries.

 

According to the type of company you choose to register in Belgium, there are necessary steps that need to be taken in order to incorporate the branch or subsidiary. The preparations are easier for branches, but other advantages and disadvantages should also be taken into consideration when making such a choice.

Our law firm in Belgium can provide personalized counselling and help you create the best business plan for your company in Belgium

 

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