If you are interested in commencing commercial operations or establishing a business presence in Flanders, or Belgium as a whole, one of the first matters to consider is the type of business entity to establish and how to structure your activities.
Most foreign companies starting business in Belgium choose between:
ESTABLISHING A BRANCH OFFICE
FORMING A LIMITED COMPANY / SUBSIDIARY
SETTING UP A REPRESENTATIVE OFFICE
Coventis Business Center can help you to establish a legal entity, branch or representative office in Belgium.
What is the legal difference between a branch office, a subsidiary company, and a representative office?
A branch is not a legal corporate entity separate from the foreign company, whereas a subsidiary is considered a separate Belgian company. Practically speaking, a branch is merely an extension of the parent company; it does not have its own stock or its own board of directors, and its establishment generally involves fewer corporate formalities. However, in practice, filing a branch is a demanding process that requires the execution of formal duties and the translation of documents, which in some case may represent a bigger contstraint than those applicable to incorporating a company.
A subsidiary is a separate legal entity. It will have its own stock, articles of incorporation and bylaws. The subsidiary must hold shareholders' meetings and observe other corporate formalities. Usually, the subsidiary will be owned and controlled by the parent company.
A representative office does not need to register in Belgium, however, can engage only in activities which do not amount to carrying on a business. A representative office does not require major investments and is oftentimes used to test the Belgian market before making the decision to form a subsidiary or establish a branch office.
What are the considerations in choosing between establishing a branch, a subsidiary, and a representative office?
Establishing a subsidiary has the following advantages:
- Because the subsidiary and the parent company are separate legal entities, the parent company is not exposed to any liabilities of the subsidiary: indeed, the liability of the Belgian subsidiary is limited to its own assets. In contrast, a foreign company remains fully liable for all the commitsments of its branch office in Belgium: as a consequence, obligations incurred through such a branch can be enforced on the assets of the foreign company, even if they are situated abroad.
- From a marketing point of view, a subsidiary will be regarded as a Belgian or European company, rather than a foreign entity;
- A subsidiary can benefit from several tax advantages:
- The ability to repatriate or distribute net profits with little or no dividend withholding tax;
- Subsidiaries can benefit from the advantages given under the double tax treaties concluded by Belgium;
- In most cases, qualification as a "parent company" under the EU Parent-Subsidiary Directive.
- Annual filing requirements are less stringent for subsidiaries than for branches. A branch's annual filing will reveal financial information about the foreign entity that it may prefer to keep confidential.
Establishing a branch has the following advantages:
- There is no minimum assigned capital requirement for setting up a Belgian branch;
- The opening of the branch does not require the intervention of a Belgian notary;
- Belgian corporate law, with a few exceptions, does not impose requiremnts such as a board of directors, distribution of profits or shareholders' meetings. However, Belgian corporate law does require the appointment of a legal representative;
- There are certain tax advantages related to setting up a branch operation, including:
- No dividend withholding tax on branch profits;
- In most cases, losses made by the branch can be offset immediately against foreign profits of the head office;
- Transfer of profits from the Belgian branch to its foreign head office can be made tax free.
Establishing a representative office has the following advantages:
- A representative office can be opened immediately and does not require any registration in Belgium;
- A local representative / contact agent is provided on your company's behalf;
- It can perform virtual office services on your company's behalf (mail and phone forwarding, secretarial services, etc.) ;
- It can act as a base to gather market intelligence, identify possible partners, and conduct negotiations;
- Clients will feel more comfortable when dealing with a foreign company if it has an established presence in Belgium;
- A representative office is the lowest cost solution to establish a presence in Belgium;
- A rep office can be combined with a "commercial agency" if you wish to engage in commercial transactions (in or via Belgium).
Coventis Corporate Services
Coventis is one of the foremost and most economical providers of limited companies formation and new business entity registration services in Belgium. Coventis is a leading company set-up agent that has expertise in tailored-made company formation as well as company search, and corporate administration. Coventis offers a range of services for business, including company, branch office and representative office set-up, registered office facilities, virtual office services, mailing address, and company secretarial services.
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