DEFINITION OF A BELGIAN PERMANENT ESTABLISHMENT FOR INCOME TAX PURPOSES UNDER  ON BELGIAN INTERNAL LAW

Material Belgian establishment

The term ‘material Belgian establishment’ means: ‘any fixed place of business through which the professional activities of the foreign company are wholly or partially carried out in Belgium’.

A fixed place of business is, in particular:

• a place where management is exercised;
• a branch;
• an office;
• a factory;
• a workshop;
• an agency;
• a mine, a quarry, or any other place where natural resources are extracted
• a warehouse;
• a stock of goods

Construction Belgian establishment

The term “construction Belgian establishment” refers to: “a building or construction project with a duration exceeding 30 days.”

Personal Belgian establishment

The term “personal Belgian establishment” is understood to mean: “an agent or other intermediary acting in Belgium on behalf of a foreign company, even if that person is not authorized to conclude agreements on behalf of that company.”

The requirement of signing authority does not apply in the Belgian definition.

Services Belgian establishment

The term “services Belgian establishment” refers to: “a foreign company that provides services in Belgium for the same or related projects through one or more natural persons who are present in Belgium and provide those services for a period or periods totaling more than 30 days during any twelve-month period.”

 

DEFINITION OF A PERMANENT ESTABLISHMENT FOR INCOME TAX PURPOSES UNDER  A DOUBLE TAXATION TREATY

Material permanent establishment

Based on the double taxation treaty with the home country of the company in question, a taxable material permanent establishment will arise in Belgium if the company has a physical space in Belgium (as owner, tenant, or has any other right of disposal) and the business activities of the foreign company are carried out wholly or partly from this space.

The term “material permanent establishment” includes especially:

• a place of management;
• a branch;
• an office;
• a factory;
• a workshop; and
• a mine, an oil or gas well, a quarry or any other place of extraction of natural resources.

INCREASED ATTENTION FROM THE BELGIAN TAX AUTHORITIES

We note that the Belgian tax authorities have increased their investigative activities with respect to foreign companies performing activities/projects over a long period of time (longer than 6 months) or on a recurrent basis over a longer period of time for the same client or at the same geographical location in Belgium. In such cases, the Belgian tax authorities may decide that the company has a taxable material permanent establishment in Belgium.

Thus, the mere fact that your company uses a certain space in Belgium—for example, a workshop at a customer’s premises—may be sufficient for it to be considered a material permanent establishment. In this context, it is not necessary for the space in question (such as buildings, installations, or other facilities) to be owned, leased, or contractually available to your company.

Please note that a home office can also qualify as a material permanent establishment. However, this assessment depends to a large extent on the specific facts and circumstances.

If desired, we can verify whether there is an actual risk that the activities carried out could give rise to a taxable permanent establishment in Belgium.

Construction sites or construction works or installation works

Based on the double taxation treaty with the home country of the company in question, a taxable permanent establishment will arise in Belgium when building, construction, or installation work is carried out over a certain period of time (e.g., 12 months).

The construction or installation work must be interpreted broadly. This includes, for example, on-site planning work and the management or supervision of the construction work. Excavation work is also explicitly included in the definition.

Belgium is only entitled to levy tax if the work exceeds a certain duration. In most double taxation treaties, a period of 12 months applies, but as an exception, a number of double taxation treaties also mention a shorter period (e.g., 9 or 6 months).

The duration of the work does not have to be considered per calendar year. It may also concern work that either exceeded the 12-month period during the course of 2024 or started during the course of 2024 and will exceed the 12-month period at a later date (e.g., in 2025).

For the calculation of the duration of a construction site or of construction works or installation works, the following rules have to be taken into account:

• the period starts from the moment the first preparatory works take place on Belgian territory;
• separate construction sites or separate construction works or installations works should not be added together for the calculation of the minimum duration according to the treaty in question (for example 12 months);
• in principle, different projects will be deemed to be ‘separate works’ if they are carried out on behalf of different clients, unless the projects form a coherent whole from an economic point of view;
• different projects carried out for the same client based on one single contract will be treated as one project (unless the projects are not carried out coherently);
• different projects carried out on behalf of the same client based on several contracts, will form one project if the different projects, although performed in different locations, form a part of a bigger whole and if there is no substantial interruption between the different projects;
• the execution of coherent activities that are carried out by group companies for the same construction site, construction work or installation work, whether or not during different periods of time, must be motivated by commercial motives.

Please note that, in the light of recent international developments, it has once again been confirmed that where there is a tax-motivated division of projects or contracts between group companies (i.e. contract splitting), a permanent establishment may arise. This is the case even if the minimum duration for a permanent establishment is not exceeded on an individual basis.

Personal permanent establishment

Based on the double taxation treaty with the home country of the company in question, a taxable personal permanent establishment will arise in Belgium if your company has a (dependent) agent in Belgium who has the authority (= power of signature) to conclude agreements on behalf of the company and who also usually exercises this right.

This includes account managers and commercial job profiles.

A (dependent) agent is defined as: ‘any person who identifies himself as a representative of a company and speaks and/or contracts in the name and on behalf of that company.’ Please note that the term agent does not refer to a representative liable for VAT purposes.

RECENT DEVELOPMENTS

In the context of recent international fiscal developments, the agent can also create a permanent establishment even if he is not authorised to conclude contracts, but does have an important role in the negotiating and/or concluding of contracts, where there are no subsequent material contractual changes made by the foreign head office afterwards (i.e. rubber stamping). In other words, the economic reality will be decisive.

Based on the exact facts and the applicable double tax treaty, if desired, we can check if there is an actual (future) risk that the agent(s) may give rise to a taxable permanent establishment in Belgium.

 

DEFINITION OF PERMANENT ESTABLISHMENT DEFINITION OF VAT PERMANENT ESTABLISHMENT FOR VAT PURPOSES UNDER ON BELGIAN LAW

A foreign taxpayer may also form a permanent establishment in Belgium for VAT purposes.

A foreign taxpayer has a permanent establishment for VAT purposes in Belgium for its outgoing transactions (supply of goods and/or services) when the following conditions are met jointly:

• The taxpayer has a place of management, a branch, a factory, a workshop, an agency, a warehouse, an office, a laboratory, a purchasing or sales office, a depot or any other fixed establishment in Belgium.
• This establishment is characterised by a sufficient degree of permanence and an appropriate structure in terms of human and technical resources.
• The aforementioned human and technical resources enable the establishment to regularly supply goods or provide services within the scope of the Belgian VAT Code, wherever this activity takes place and without distinction as to whether these transactions are actually subject to VAT or exempt.

A foreign taxpayer with a VAT permanent establishment in Belgium is treated for Belgian VAT purposes, with regard to transactions carried out through this establishment, as a taxpayer with a registered office or statutory seat in Belgium.

This entails various VAT obligations in Belgium, including the need for Belgian VAT registration and the submission of periodic VAT returns.

A taxpayer whose place of business, domicile or habitual residence is not situated in Belgium and who does not meet the conditions set out above is, for the purposes of the VAT Code, regarded as a taxpayer not established in Belgium.

Please note that carrying out construction work on a construction site will not, in principle, give rise to a VAT permanent establishment, regardless of the duration of the work.