The way in which a foreign company can carry out its activities in Belgium can be organised in various different ways. There is a possibility to establish a subsidiary in Belgium, but a foreign company can also choose to establish a branch on Belgian soil. We will discuss both approaches below.

Considerations regarding corporate law

  1. The subsidiary: standing on their own two feet

A subsidiary must be seen as a separate legal entity, with its own legal personality, which has some consequences.

Firstly, the parent company can only be held liable for its investment in the subsidiary in principle, which is good to know if one wants to carry out a perilous activity on Belgian soil. This risk can be diminished even further in case one establishes a limited liability company under Belgian law: since the implementation of the new Belgian Company Code, this company form does not require a minimum capital anymore, an ‘adequate capital’ suffices. For a joint-stock company, the capital stock is set at 61.500 euros. For the establishment of a subsidiary, one needs to call upon a Belgian notary public in principle.

Secondly, the subsidiary must have its own board of directors or manager, depending on if it’s a joint-stock company or a limited liability company respectively. The subsidiary will thus be managed as a separate entity.

When the parent company seeks to shut down its subsidiary, it will have to follow the liquidation procedure established under Belgian law in order to do so.

  1. A branch: like two peas in a pod

Contrary to a subsidiary, a branch will not be regarded as being a different legal entity. A branch is deemed to be an integral part of the foreign company.

This of course has consequences for the risk that the foreign company has: a foreign company can be held fully accountable for a branch and its activities.

A branch doesn’t need capital, as it is a part of the foreign company. It must be noted that the formalities involving the establishment of a branch in Belgium are not easily fulfilled in practice. A considerable amount of documents need to be filed, each with its own technicalities. A notary public doesn’t need to step in in case of the establishment of a branch however.

Important to notice is that Belgian law requires that the annual accounts of the foreign company need to be made public in Belgium and that the branch has to pass on certain financial information regarding the foreign company on a yearly basis.

Regarding management of a branch, it suffices to appoint a legal representative.

If one wants to close down a branch, a simple decision of the foreign company suffices. The liquidation procedure under Belgian law does not need to be followed.

What about taxes?

Besides the considerations under corporate law one must take into account in expanding ones economic activities to Belgium and establishing a subsidiary or branch for this purpose, it is best to also take some considerations of a fiscal nature into account before making a choice between the two.

In the event that a subsidiary is established in Belgium, it will be subject to Belgian tax rules. The profit the subsidiary makes, will be taxable in Belgium as the subsidiary is deemed to be a Belgian company. The subsidiary can however also benefit from all tax advantages the Belgian tax regime has to offer because of this. However, if the subsidiary has a foreign permanent establishment, it is now no longer possible to set off any losses of this foreign permanent establishment against the profits of the subsidiary in order to reduce the taxable base in Belgium.

A branch will in most cases constitute a (taxable) permanent establishment. There are exceptions to this, but the applicable double tax treaty must always be considered in a specific case. However, on the basis of the OECD Model Tax Convention, which forms the basis for most double tax treaties, two conditions must be met before a branch does not constitute a permanent establishment, which are set out in Article 5(4). In order to fulfil the first condition, the branch must engage in one of the following activities:

  1. The use of a facility for the storage, display or delivery of goods belonging to the company;
  2. The maintenance of a stock consisting of goods belonging to the company, but exclusively for storage, exhibition or delivery purposes;
  3. The maintenance of a stock consisting of goods belonging to the company, but exclusively for the processing thereof by another company;
  4. The maintenance of a fixed place of business, but solely for the purpose of purchasing goods or collecting information for the company;
  5. The maintenance of a fixed place of business for the purpose of carrying on any other activity for the company;
  6. The maintenance of a fixed place of business solely for a combination of the preceding activities.

The second condition includes the fact that the activity, or in the case of 6. the general activity of the fixed place of business, has a preparatory or auxiliary character to the principal activity or activities of the company. This second condition is new and not yet included in most double tax treaties. Belgium has opted not to add this condition in any case in its double tax treaties. Therefore, the specific double tax treaty must always be examined in order to assess whether or not this condition needs to be met.

If a branch that constitutes a permanent establishment is established, profit allocation has to be done, as the branch cannot be seen as being a different legal entity as has been explained above. One has to look at the total amount of profit a foreign company has made, including all profit stemming from its branches, and subsequently one needs to establish where which profit has been generated. In doing this, it is important to look where the value of the produced goods and/or services has been created exactly, as well as where the relevant functions, assets and risks are located. When it comes to intangible assets, the place where the so called ‘DEMPE’ functions (development, enhancement, maintenance, protection and exploitation) are performed will be decisive for an accurate profit allocation. If such important functions, assets or risks can be found at the branch in question, an important part of the profit needs to be allocated to it. In order to do this profit allocation correctly, a thorough transfer pricing analysis is required, which comes with certain costs.

Seeing that a branch is not deemed to be a Belgian company, the foreign company cannot invoke any tax advantages under the Belgian tax regime.


In deciding whether to either establish a subsidiary or a branch, a foreign company needs to essentially take into account the risk the economic activity it wants to carry out in Belgium holds.

When the company wants to carry out a perilous activity on Belgian soil, establishing a subsidiary is a good option, certainly when establishing a limited liability company under Belgian law is possible. The liability that the foreign company carries is namely limited to the capital the subsidiary has.

In carrying out a fairly riskless activity, a foreign company may look to establish a branch. A separate allocation of capital is not required in this case.

Regarding taxation, one needs to consider whether or not it is desirable to fall under the Belgian tax regime or under the tax regime in the state where the foreign company is situated. The Belgian tax regime is known for its relatively high tariffs with regard to corporate tax, but also has it advantages, just think about the deduction for notional interest or the vast amount of possible deductions. If one wants to fall under the Belgian tax regime, it is best to establish a subsidiary. If, on the other hand, this is not desirable, one can opt to establish a branch.