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Belgium’s Tax Haven for Non-Profit Organizations

As non-profit organizations continue to play a vital role in supporting education, social welfare, and cultural activities in Belgium’s “privileged areas,” the country’s tax laws provide special incentives to encourage donations.

Tax Exemptions and Incentives

Under the current system, non-profit organizations are exempt from corporate tax, but they are subject to a tax on income derived from specific sources such as real estate, movable assets, and capital gains. This tax is levied at a rate of 25% for individuals and 33.99% for companies.

Income Tax Deductions

Donors can claim income tax deductions for gifts made to approved social, scientific, or cultural institutions, provided that each gift exceeds €30. The aggregate value of gifts cannot exceed:

  • 10% of the taxpayer’s taxable income, with an absolute maximum of €346,100 (individuals)
  • 5% of their taxable income, up to a maximum of €500,000 (companies)

Inheritance and Gift Tax

Non-profit organizations are liable for inheritance or gift tax on legacies or formal donations, depending on the testator’s or donor’s place of residence. If the testator resided in Belgium at the time of death:

  • Inheritance tax is levied on worldwide net property
  • Informal donations of movable assets are not subject to gift tax

Regional Legislation

The competency for determining tax rates and fixing conditions for tax reductions or exemptions has been devolved to the Belgian regions. The applicable regional legislation depends on the donor’s domicile or the testator’s domicile at the time of death.

Each region has foreseen reduced rates for donations or legacies to charities, ranging from 5.5% to 25%.

International Organizations

International organizations seeking to establish offices in Belgium can benefit from a simplified procedure, provided they meet certain conditions. Foreign foundations established under the law of another state can also form an operations center in Belgium.

Cross-Border Giving

Belgium has strengthened its ties with European Economic Area (EEA) countries by introducing income tax deductions for gifts made to charities located within these countries. The new law requires foreign institutions to be licensed and recognized in their country of residence, and donors must provide evidence of this recognition to claim the deduction.

Transnational Giving Europe (TGE)

To facilitate cross-border giving, Belgium has established a TGE network, which allows donors to make gifts to overseas charities while still benefiting from tax relief. A fee of 5% is deducted from each gift.

Alternative Options

Legacies and donations to charities located in non-EEA countries are subject to a full-rate tax, but donors can consider alternative options such as making donations in movable assets, which is taxed at a flat rate of 7%.

Conclusion

Overall, Belgium’s tax laws provide a unique opportunity for non-profit organizations to support charitable causes while benefiting from special incentives. As philanthropy continues to play a vital role in the country’s development, these incentives are likely to remain an attractive option for donors and charities alike.

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