Doing businessin Belgiumwww.lydian.be

LEGAL

INSIGHT.

BUSINESS

INSTINCT.

TABLE OF CONTENTS

• Introduction ........................................................................................................... 3

• 1. What is the most appropriate corporate entity for doing business? .................... 4

• 2. Tax perspective .................................................................................................. 6

• 3. Belgian corporate income tax ............................................................................ 7

• 4. VAT .................................................................................................................... 7

• 5. Incentives and subsidies available to your business ........................................... 7

• 6. Employing personnel in Belgium ........................................................................ 7

• 7. Commercial aspects of doing business in Belgium ............................................. 12

• 8. Purchasing or leasing real estate in Belgium ...................................................... 14

• Annex 1 ................................................................................................................. 16

LEGAL INSIGHT.

BUSINESS INSTINCT.

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DOING BUSINESSIN BELGIUM

Welcome to Belgium! We are happy to learn that you may have an interest in expandingyour business to Belgium. Belgium has – as you may know – a very open economy andoffers a reliable socio-economic environment for investors. Because of its federalstructure and its central location in the heart of Europe, decisions affecting potentialinvestors are taken at a variety of levels.

With this document, we provide you with a short introduction to the typical legal andtax issues that a company faces when starting its operations in Belgium. We have alsoincluded an overview of the various subsidies and other tax incentives that are offered.Some of them are granted at Federal (i.e. national) level while others are allocated bythe various Regions and as a result depend on the location of your business (i.e. theBrussels, Flemish or Walloon Region).

We hope that you will find this information of interest and we are at your disposal toanswer any questions you may have or to assist you in effectively setting up orexpanding your business in Belgium.

Jan HofkensManaging PartnerT +32 2 787 90 37E jan.hofkens@lydian.be

1. WHAT IS THE MOST APPROPRIATE CORPORATE ENTITY FOR DOING BUSINESS?

1.1 Belgian law provides for a variety of corporate entitieswhich benefit from some form of legal status. The choiceof form will often depend on the nature of your business,the objectives of the respective investors/shareholdersand the size of the investment at hand. Based thereon,you could envisage (a) the opening of a non-commercialrepresentation office, (b) the opening of a branch office(which will be subject to Belgian law but which will not bea separate legal entity), or (c) the incorporation of a separateBelgian entity.

1.2 Belgian Company Law distinguishes several forms ofcompanies with legal personality (implying inter alia that theycan own assets in their own name):

(a) NV/SA: public limited liability company(b) BVBA/SPRL: private limited liability company(c) CVBA/SCRL: cooperative limited liability company(d) CVA/SCA: partnership limited by shares(e) GCV/SCS: limited partnership(f) VOF/SNC: unlimited partnership

THE OPENING OF A BELGIAN REPRESENTATIONOFFICE

1.3 A non-commercial representation office is not a“recognised” entity, does not benefit from legal personalityand will not have to meet any publication or filingrequirements. Such representation office cannot issueinvoices and cannot be registered as such with officialauthorities (postal services, telephone company, etc.).It will be the legal representative of the non-commercialrepresentation office, acting on an individual basis, who willregister with these authorities (and becomes thereforepersonally liable towards these authorities).

THE OPENING OF A BELGIAN BRANCH

1.4 A branch of a foreign company can be established inBelgium and will be managed from the foreign companyconcerned. It is important to note that a branch does nothave a distinct legal personality and as a result all its assetsand liabilities are owned directly by the foreign company.All contracts signed by the branch will be deemed to havebeen entered into by the foreign company. Nevertheless,the established branch will be subject to the sameregulations as a Belgian company regarding its managementand operations.

It must file consolidated annual accounts of the foreignparent company with the National Bank of Belgium and file atax return. If the branch meets the conditions for registrationwith the VAT authorities, it is also required to register and willbe treated for VAT purposes in the same manner as aBelgian VAT-taxpayer would be. The branch must file VATreturns on a quarterly or monthly basis. In our experience,the opening of a branch usually requires more time than theincorporation of a subsidiary, since more work needs to beundertaken in the foreign country (gathering documents,securing legalisation and apostille, etc.).

THE INCORPORATION OF A BELGIAN SUBSIDIARY

1.5 A subsidiary of a foreign company is a legally distinct andindependent entity, which means that it will own its ownassets and incur its own liabilities. In most cases indeed,the liability of the foreign parent shareholder will be limitedto their capital contributions. Belgian Company Lawdistinguishes several forms of companies with legalpersonality, of which the public limited liability company(NV – naamloze vennootschap / SA – société anonyme)and the private limited liability company (BVBA – beslotenvennootschap met beperkte aansprakelijkheid / SPRL –société privée à responsabilité limitée) are among themost common forms. They both offer the advantage oflimited liability to their shareholders/partners, who areonly held liable up to the amount of their contribution to thecompany. Besides the NV and the BVBA several other formsof companies exist whereby always at least one of thepartners has unlimited liability: the unlimited partnership(VOF – vennootschap onder firma / SNC – sociétéen nom collectif), the limited partnership (Comm.V. –commanditaire vennootschap / SCS – société encommandite simple) and the limited partnership byshares (Comm.V.A. – commanditaire vennootschap opaandelen / SCA – société en commandite par actions).Finally, cooperative companies exist under the BelgianCompanies Code, whereby these can either offer limitedliability (CVBA – coöperatieve vennootschap metbeperkte aansprakelijkheid / SCRL – sociétécoopérative à responsabilité limitée) or unlimited liability(CVOA – coöperatieve vennootschap met onbeperkteaansprakelijkheid / SCRI – société coopérative àresponabilité illimitée)1 to the partners concerned.

1 For convenience reasons, we will hereinafter only refer to the Dutch

abbreviations of the respective company forms.

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The main advantage of the cooperative company is thatits capital can vary without modification of the articles ofassociation, allowing the partners to enter and exit thecompany more easily. A minimum of three partners is,however, always required in a Belgian cooperative company.

1.6 In this memorandum, we only focus on the incorporation ofan NV (public limited liability company) and a BVBA (privatelimited liability company), whereby we will primarily set outthe differences between these company forms. Should you,however, be interested in a more detailed commentary onany other company form described above, we will of coursebe more than happy to provide it.

DIFFERENCES BETWEEN AN “NV” AND A “BVBA”

1.7 Historically, the NV was designed for large undertakingsand the BVBA was rather intended for smaller undertakings(often family undertakings or at least private undertakings).The main differences remaining from this historicaldistinction can be summarised as follows:

(a) The minimum share capital of an NV is EUR 61,500;the capital needs to be paid up at least in the sameamount at incorporation.

The minimum share capital of a BVBA amounts toEUR 18,550 and needs to be paid up at least inthe amount of EUR 6,200 (or EUR 12,400 in caseof incorporation by one partner – see further).

(b) An NV requires at least two founders. After incorporation,the shares of the NV can be united in the hand of oneshareholder, but in that case the sole shareholder losesthe benefit of limited liability after one year.

A BVBA can be incorporated by one founder. If this solefounder is a company, it will not benefit from the limitedliability.

(c) An NV can have a so-called “authorised capital”.The share capital of the NV can be increased to thisamount by a decision of the board of directors and,as a result, an extraordinary general meeting ofshareholders is thus not required.

In a BVBA this option does not exist.

(d) With regard to the shares in both company forms,the following distinctions can be made:

(i) Form: shares of an NV can be nominal (registered inthe shareholders’ register) or dematerialised (bookedon an account, e.g. with a bank). The third form, i.e.bearer shares, has been abolished since 1 January2008. Shares of a BVBA are always nominal.

(ii) Transferability: shares of an NV are in principle freelytransferable, although the articles of association canprovide for limitations. For the transfer of shares ina BVBA the agreement of at least half of the otherpartners is needed (representing at least ¾ of theshare capital), although the articles of associationcan exempt certain acquirers.

(iii) Categories: in an NV, not all shares need to havethe same value and preferential shares can beissued. In a BVBA all shares need to have the samevalue and they cannot be preferential.

(e) An NV can, besides shares, also issue profit sharingcertificates, (convertible) bonds or warrants.

A BVBA can, besides shares, only issue debentures,which may not be convertible into shares.

(f) The management of an NV is overseen by a board ofdirectors, i.e. a collegiate body composed of at leastthree directors. In the event the NV only has twoshareholders, the board of directors can be composedof only two members. If the articles of association donot provide otherwise, the NV will be validly representedby two directors acting jointly. The mandate grantedto the directors is at all times revocable by theshareholders. Besides a board of directors, two otherfacultative bodies may be installed within the board ofdirectors: an executive committee and a managingdirector.

(g) In a BVBA the management is overseen by one or moremanagers. The articles of association can provide that– in the event several managers are appointed – theymust act in a collegiate manner (as is the case in the NV).If the articles of association do not provide thus,each manager will be solely authorised to representthe company. The possibility to revoke managers fromoffice can be limited in the articles of association of theBVBA. Other management bodies cannot be installedin the BVBA.

The members of the management of a Belgiancompany do not necessarily have to be Belgianresidents. Furthermore, companies can also beappointed as directors or managers in a Belgiancompany, provided that such company appointsin its turn a physical person as its permanentrepresentative.

FORMALITIES AFTER INCORPORATION

1.8 After the incorporation, the company must apply through arecognized counter for undertakings for its registration asa commercial enterprise. The company is not allowedto start its business before it completes this registration.Depending on its activities, the company might also have toregister with the VAT authorities and obtain a VAT registrationnumber which is to be mentioned on all outgoing invoices.This registration can take three to six weeks. Thereafter,the Belgian subsidiary must file annual accounts with theNational Bank of Belgium and file a tax return annually.

We can of course assist you with these registrationsand filings.

2. TAX PERSPECTIVE

THE ESTABLISHMENT OF A BELGIAN SUBSIDIARY

2.1 No registration or capital duties will be levied on a capitalcontribution in a Belgian company, be it a capitalcontribution in cash or a capital contribution in kind(i.e. 0% registration duties).

2.2 For financing the operational activities, the Belgiansubsidiary can opt for either equity or debt financing.Here follows some general observations as to the taxconsequences related to equity and debt funding.

• Equity financing

2.3 Belgian tax law introduced a couple of years ago a uniquetax incentive, i.e. the so-called “notional interest deduction(hereafter: NID). The NID regime provides for an off balancededuction for tax purposes, calculated by applying anotional interest rate (based on the 10-year long term lineargovernment bonds (“OLO bonds”) interest rate) on the“accounting net equity” (see paragraph 2.4 below) ascorrected for tax purposes. The deductible amount is equalto a company’s accounting net equity as corrected for taxpurposes multiplied by the NID interest rate. The NID is alsofurther elaborated in Annex 1 to this Memorandum underthe title “State and Regional incentives available tobusinesses”.

2.4 A company’s “accounting net equity” corresponds – ingeneral terms – to its equity as it appears in its consolidatedannual accounts of the preceding accounting year. In orderto avoid a double counting, this amount has to be reduced,inter alia, by the fiscal net value of “financial fixed assets”consisting of participations and other shares.

Changes of the accounting net equity occurring duringthe accounting year (e.g. capital increases) are taken intoaccount on a pro rata (i.e. weighed average) basis.For tax assessment year 2012, the NID is, in principle, 3%.

2.5 Taking into account the NID tax benefit, investors in aBelgian subsidiary should consider to (partially) invest equityin the Belgian subsidiary. However, please be aware thatthere are a number of anti-abuse provisions that may beapplicable.

• Debt financing

2.6 Belgian tax legislation does not impose an overall debt-to-equity ratio for Belgian companies.

2.7 However, Belgian tax law contains certain “thin”capitalization rules but these generally only apply to loansgranted by certain “tainted” lenders. There are two thincapitalization rules for such loans:

(a) a debt-equity ratio of 1:1 applies if the lender is a non-European based company acting as a member of theboard of directors, a liquidator, or a person exercisingsimilar functions in the Belgian company. Belgian taxlaw states that interest payments on loans which aregranted by a member of the board of directors,the liquidator, or a person exercising similar functions inthe company will, for tax purposes, be re-characterizedas “dividends” to the extent that the interest paymentsexceed a certain threshold. The threshold is exceededwhen the interest rate is higher than the market interestrate, or, when the amount of the loan is higher thanthe sum of the taxed reserves at the beginning of thetaxable period and the paid up capital at the end ofthe taxable period. In such case, the amount of interestexceeding the thresholds will be considered as adividend and will not be deductible from the taxableincome of the Belgian company; and

(b) a debt-equity ratio of 5:1 applies if interest is paid orattributed to a related company or to a beneficial ownerthat is not subject to an income tax regime or is subjectto a tax regime which is considerably more favourablethan the Belgian tax regime (e.g. tax haven companies,tax exempt holding companies). This debt-equity ratioapplies only to the extent that the total principal amountof the loans granted by such beneficiary (i.e. “taintedloans”) exceeds five times the sum of the taxedreserves at the beginning of the taxable period andthe paid-up capital at the end of the taxable period.

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2.8 In case of debt financing, the Belgian subsidiary could,as a matter of principle, deduct any interest payments paidon loans, provided that the following conditions are met:

(a) the interest payments should relate to the taxableperiod;

(b) the interest payments should be made in orderto obtain or preserve taxable income;

(c) the interest payments should be proven by supportingdocumentation;

(d) the interest rate has to be at arm’s length.

3. BELGIAN CORPORATEINCOME TAX

AT THE LEVEL OF A BELGIAN SUBSIDIARY

• Tax rate

3.1 Belgian companies are normally subject to Belgiancorporate income tax and the standard rate is 33.99%.The nominal corporate income tax rate is applied to acompany’s taxable income, which differs from its BelgianGAAP statutory net profit (the company’s net profit isadjusted to take account of, for example, disallowedexpenses, increase/decrease of taxable reserves, specifictax deductions, exempt capital gains on qualifying shares,etc.).

• Withholding tax on dividend payments

3.2 Upon request, we can provide you with a detailed overviewof the withholding taxes which in principle are due ondividend payments or attributions by the Belgian subsidiaryto its shareholders. The general withholding tax rate ondividends is 25%, although many reductions or exemptionsexist by virtue of international and domestic legislation(such as exemptions resulting from the EU Parent-Subsidiary Directive).

AT THE LEVEL OF A BELGIAN BRANCH

3.3 The branch is subject to Belgian non-residents corporateincome tax, which is nearly identical to the corporate incometax applying to domestic companies or subsidiaries.Upon your request, we can provide you with an in-depth taxanalysis for a Belgian branch of your foreign company.

4. VAT

4.1 Upon request, we can provide you with tailored advice onany Belgian VAT due on the specific goods and/or servicesyou wish to supply on the Belgian market. The Belgianstandard VAT rate is 21%

5. INCENTIVES AND SUBSIDIESAVAILABLE TO YOURBUSINESS

5.1 In Belgium, the power to grant public financial support liesmainly with the Regional authorities. It will, therefore, be aninteresting exercise for any investor, wanting to access theBelgian market, to carefully choose whether he shall set uphis business in the Flemish Region, the Walloon Region orthe Brussels Region. For general information about investingin Belgium, see www.invest.belgium.be.

We attach as Annex 1 to this Memorandum, a generaloverview of a number of subsidies, tax and employmentincentives in the different Belgian Regions.

6. EMPLOYING PERSONNELIN BELGIUM

GENERAL

6.1 Belgium is a federal state divided into three semi-autonomous Regions: Flanders (Flemish speaking),Wallonia (French and German speaking) and Brussels(mixed linguistic Communities). The federal parliamentis competent for approving employment laws(www.employment.belgium.be). Employer/employeerelations are mainly governed by labour law, collective labouragreements, work regulations (company level) and individualemployment contracts. They aim in particular at definingemployees’ and employers’ rights and obligations.They lay down rules on matters such as hiring anddismissing employees, pay protection, working time,working conditions, minimum holidays and equal payfor men and women.

6.2 Collective bargaining is the key mechanism through whichlabour standards are established and maintained in Belgium.A multi-industry agreement creates a formal framework forall collective labour agreements (CLA) and is concludedevery two years. A number of CLAs are concluded withinthe National Labour Council. They apply to all Belgianemployers and employees.

6.3 The CLAs at industry level are negotiated and concludedwithin so-called Joint Labour Committees (“Paritair comité /Comité paritaire”). This is a committee for a certain industrysector composed of an equal number of representativesof the Employers’ Associations and Trade Unions. It ispresided by a government appointed social mediator.Many CLAs are extended by royal decree to becomegenerally binding to all employers in a particular sectoror geographical area. The main business of the employerdetermines which industry sector it belongs to. Lydian canadvise you on the appropriate industry sector (Joint LabourCommittee) for your company, which is important forcompliance with the relevant collective bargainingagreements.

EMPLOYMENT CONTRACT OR INDEPENDENTCONTRACTOR?

6.4 In Belgium work can be carried out either as an employee oras a self-employed person. Whilst an employee works underthe authority of his/her employer, a self-employed workerkeeps all freedom and autonomy in organizing the provisionof his/her services. As the self-employed status is moreflexible (the strict and protective rules of labour law do notapply) and financially more attractive (lower social securitycosts), parties sometimes prefer to work on an independentbasis rather than under an employment contract.

6.5 It should, however, be noted that there is no free choicebetween an employment contract and a self-employedstatus; the status of the service provider will depend on theway the contract is carried out in reality. Thus, if the personinvolved works under the strict supervision of an employer,he/she will be deemed to be an employee irrespective ofthe wording of the actual contract.

FORMALITIES TO MEET PRIOR TO EMPLOYINGPERSONNEL IN BELGIUM

6.6 Companies wishing to employ personnel in Belgium mustfirst meet certain labour law formalities:

(a) The employer must register with the National Officefor Social Security (NOSS)2, either (i) by submittinga so-called immediate declaration of employment(“déclaration immédiate de l’emploi”, “onmiddellijkeaangifte van tewerkstelling”, DIMONA) when recruitinghis first employee, or (ii) where the employer intendshiring an employee in the (near) future, by downloadingand filling out the forms himself and sending themto the NOSS.

Once the relevant declaration is made, the employerreceives an NOSS registration number.The immediatedeclaration of employment must be made no laterthan the moment the employee starts work under theBelgian social security regime. The end of employmentdeclaration must be made no later than the dayfollowing the end of employment. These electronicdeclarations are linked to the electronic personnelregister, in which each employee is given a sequentialnumber according to the chronological order in whichhe/she is hired.

For more information: www.socialsecurity.be

(b) The employer must subscribe to an industrialaccidents insurance with an insurance companyof his choice, recognized in Belgium. An industrialaccident is an accident that happens while anemployee is executing the agreed work, or travelling toor from work. The insurance covers medical costs andthe employee's income if the employee becomes unfitfor work as a result of the accident. This obligationapplies as from the first day of employing the firstemployee. Retroactive coverage is not permissible.If the employer does not choose an insurancecompany, he will automatically be registered withthe State Industrial Accidents Fund.3

(c) The employer must set up an internal health andsafety service. The purpose of this service is to ensureemployees’ health and safety at the workplace.The employer must also appoint a minimum of onehealth and safety advisor (for companies with lessthan 20 employees, this role can be taken on by theemployer himself). Employers must also affiliate witha medical service which advises employers on healthand safety with respect to working conditions.

2 National Office for Social Security (Office National de Sécurité Sociale -

Rijksdienst voor Sociale Zekerheid (ONSS - RSZ)): Victor Hortaplein 11,

1050 Brussels.

3 State Industrial Accidents Fund (Fonds des accidents du travail - Fonds voor

arbeidsongevallen): 100 Troonstraat, 1050 Brussels, Tel. 02 506 8411.

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If the employer does not have the requisite knowledge,he must also sign up to a recognized external healthand safety service. The firms providing such service haveexperts in safety at work, health at work, ergonomics,hygiene, the psycho-social aspects of labour,harassment, etc.

(d) The employer must register with the office for directtaxes to enable the payment of income tax retained atsource on employee salaries.

(e) Finally, the employer must appoint an authorisedagent to keep the compulsory employment documentsand act as a post box to which all official correspondenceis sent by the NOSS.

GENERAL LABOUR CONDITIONS

6.7 Belgian labour law applies to any employee working inBelgium. Even though parties are free to determine the lawapplicable to their employment relations, the contractualterms nonetheless may not conflict with the mandatoryprovisions of Belgian law. Most provisions for the protectionof employees are mandatory and are mainly fixed by statuteor by CLA.

6.8 Some of the most important labour conditions areas follows:

(a) Employment contracts: a contract of employmentcan be agreed verbally or in writing (a written contract isstandard practice). However, certain contracts must be inwriting. It are mainly those for a fixed term a defined jobof work, part-time employment or home working orthose concluded with a student. Specific clauses suchas those dealing with post-employment restrictions,confidentiality, trial periods, variable pay, terms of notice,etc. can be included in the employment contract.

(b) Wage scales and minimum wages: these are agreedin collective bargaining agreements (CBA) concludedwithin the Joint Committee at industry level.

(c) Working hours: employees are not allowed to workmore than 38 hours a week on an average basis and9 hours a day, nor may they work on Sundays or publicholidays. A five-day week applies generally. It must benoted, however, that the Act on working time has beenamended to cater for flexible working. In principle,work between 8.00 p.m. and 6.00 a.m., defined asnight work, is prohibited. However, there are manyexceptions where night work is authorized, mainlyfor rotating shift work, for work where a continuouspresence is considered necessary, and so forth.

Work performed beyond the daily (9 hours) and/orweekly (40 hours or 38 hours depending on the sector)working time limits is generally defined as overtime.Belgian labour law contains a general prohibition onovertime. As an exception, the Act on working timeonly permits overtime in certain cases and under veryspecific conditions. Generally, overtime gives the workeran entitlement to compensatory rest. This has to begiven within a certain period after the overtime isworked and to extra compensation of 50% for overtimeworked on the normal weekdays and Saturday and100% of overtime worked on Sunday and publicholidays.

(d) Holidays: the right to holiday is based on the workdone by the employee during the calendar year (the“service year”) immediately preceding that duringwhich holidays are taken (the “holiday year”).

Employees are entitled to 20 working days’ annualholidays if they work on the basis of a five-day weekand 24 working days on the basis of a six-day week.

(e) Public Holidays: employees are entitled to ten pubicholidays on top of their annual holidays. The Belgianpublic holidays are as follows:

• New Year’s Day (1 January) • Easter Monday • Labour Day (1 May) • Ascension Day • Whit Monday • National holiday (21 July) • Assumption Day (15 August) • All Saints’ Day (1 November) • Armistice Day (11 November) • Christmas Day (25 December)

Employee pay is not affected by these public holidays.Employers are in principle prohibited from requiringemployees to work on public holidays. If a publicholiday falls on a Sunday or a normal day of inactivity,the public holiday will be replaced by a normalworking day.

USE OF LANGUAGE

6.9 In Belgium, the use of language in employment relationswithin a company depends on the location of the employer’splace of business, not the location of its registered office.

(a) For employers located in the Brussels Region, alldocuments intended for the staff, must be written inFrench for French-speaking members of staff and inDutch for Dutch-speaking members of staff.

(b) For employers located in the Flemish Region,the documents must be in Dutch; and for employerslocated in the Walloon Region, they must be in French,regardless of the native language of the employeesinvolved.

(c) For employers located in the German-language region,the documents must be in German, regardless ofthe native language of the employees involved.

SALARIES IN BELGIUM

6.10 Minimum Wages. In most industries, CLAs set down fixedminimum hourly wages for blue-collar workers (workersmainly undertaking physical work) and minimum monthlysalaries for white-collar workers (workers primarily undertakingso-called intellectual work). Salaries are automatically indexedto the rate of inflation. The monthly salary must be paid oncertain fixed dates, with a maximum interval of sixteen daysbetween payments for blue-collar workers. Salaries of white-collar employees have to be paid on a monthly basis.The minimum salaries for white-collar employees withinone of the most important industry sectors (Joint LabourCommittee n° 218) range from EUR 1,590.01 gross/monthfor category A with 0 years of seniority and EUR 2,639.06gross/month for category D with 26 years of seniority(amounts as per 1 January 2012). However, most employerspay salaries above these minimum levels.

6.11 In general, industry CLAs provide the obligation for theemployer to pay employees a so-called “thirteenth month”as an end-of-year bonus.

6.12 Irrespective of the applicable industry agreement,the employer must pay single and double holiday payto the employees. The single holiday pay equals the normalsalary for four weeks. The double holiday pay equals 92% ofthe monthly salary, in case of full entitlement. For white-collarworkers, the holiday pay is paid by the employer who payswages to his employees. For blue-collar workers, holidaypay is paid by the holiday fund they are affiliated to.That means that the employer doesn’t pay any holiday payto his workers but he does, however, have to pay specialsocial security contribution in order to finance the holidaypay of his blue-collar workers.

6.13 Employers can provide their employees with a range offringe benefits, such as stock options, meal vouchers,personal use of a company car, complementary insuranceplans, pension plan coverage, medical insurance, etc.These fringe benefits are normally considered to be anintegral part of the employee’s salary, but are often subjectto lower social security contributions and taxes.

PAYROLL COSTS

6.14 Social security benefits are financed by contributions paidto the NOSS by both employers (approximately 35% of thegross salary for white-collar workers and 50% of the grosssalary – including annual holiday pay contributions –for blue-collar workers) and by employees (13.07% of grosspay). For blue-collar workers, the percentages are calculatedon 108% of gross pay. Contributions are due on all paywithout any ceiling. There are various measures to promoteemployment that limit social security contributions or exemptemployers from having to pay them (e.g. for hiring unemployedpersons, young employees, older employees, etc.).

6.15 The following example illustrates the salary cost in Belgium:

(a) Yearly gross salary in case of EUR 1,500 EUR gross /month EUR 1,500 x 13.92 (to include single and doubleholiday pay and thirteenth month) = EUR 20,880

(b) Yearly employer’s cost (white-collar employee):EUR 20,880 + 35% = EUR 28,188

For more information: www.rsz.fgov.be/en/

REGULATION WITH REGARD TO DISMISSAL

6.16 A Belgian employer can terminate an employment contractat any given time. No mandatory preliminary authorizationprocedure is to be followed, such as for example in theNetherlands. An employment contract of indefinite termcan always be terminated with a notice period or withthe payment of a severance fee. This fee equals theremuneration and benefits to which an employee is entitledto at the moment of termination of the employment contract,multiplied with the number of months the employer shouldhave granted.

6.17 The notice periods for blue and white collar workers differ.For the latter category, the length of notice period is definedon the basis of remuneration and seniority. Notice periodsare relatively long in Belgium: for example, the noticeperiod for a white collar worker with 4 years of seniority(employment contract commenced as from 1 January 2012)is 150 days.

6.18 An employment contract for a limited duration or aspecifically defined work ends at the expiry of the termor at the completion of the work.

6.19 All employment contracts can be terminated in mutualconsent or for a serious cause.

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6.20 In principle, a dismissal need not be motivated. Nonetheless,blue collar workers have a right to a supplementary feeequal to six months of remuneration if their dismissal isconsidered unfair. A dismissal is considered unfair if it is notlinked to the aptitude or conduct of the worker or not linkedto economic reasons.

6.21 Moreover, many categories of employees carry an extraprotection against dismissal (f.e. pregnant employee,employee representative in works council, employee thathas filed complaint in the framework of a procedure forharassment at the work place, …). The employer remainsin the possibility to dismiss these workers at any time.However, proof has to be provided that they are (not)dismissed for certain reasons, possibly in combinationwith a procedure to be met.

MANDATORY EMPLOYMENT RECORDSAND DOCUMENTS

6.22 Every employer must draw up and retain certain “socialdocuments” (i.e. employment and social security-relateddocuments) in order to enable the “Social Inspectorate” toverify whether the employer is compliant with employmentand social security laws.

Most employers contract a private payroll agency to drawup and retain these compulsory documents (see below).

6.23 Under Belgian law, the following are regarded as the mainsocial documents:

(a) Work regulations are compulsory when a companyhas employees. The work regulations contain a numberof specific provisions relating to salary and employmentconditions as applicable within the company (such asthe full-time and part-time working time schedules,disciplinary sanctions, annual holiday dates, etc.).Each employee must be provided with a copy, and theyalso must be posted up in the company’s premises.

(b) DIMONA declaration (“Déclaration Immédiate –Onmiddelijke Aangifte”), i.e. an immediate notificationto the NOSS of the start and end of an employmentrelationship (see above).

(c) Monthly pay slips (“fiches de salaire – loonfiches”),should be provided to each employee with details ofall payments during that month.

(d) Individual accounts: each year, employers haveto provide each employee with a copy of his/her“individual account”. This account lists all amounts paidby the employer to the employee. For each paymentperiod, this document summarizes the time workedby the employee and the salary paid to him/her forthe entire year.

(e) LIMOSA notification: this is a duty of prior notificationin place since 1 April 2007 for posted (seconded)workers and self-employed persons who are temporarilyor partially employed or established in Belgium but whonormally work in one or more countries other thanBelgium or who are recruited in a country other thanBelgium. This notification has to be made by the foreignemployer or the foreign self-employed person via thewebsite of the NOSS (for employees) or the NationalInstitute for the Social Security for the Self-employed(for self-employed persons) before actuallycommencing work in Belgium. If a notification is madefor a foreign worker employed in Belgium, the employeris exempted for a period of 12 months from having todraw up a number of employment-related documents:the works regulations, the personnel register and theregulations to check up on part-time employees.

For more information: see www.limosa.be

PAYROLL AGENCY AND EMPLOYER’SASSOCIATION

6.24 Although not compulsory, it is common practice andrecommended for employers to use the services ofa payroll agency to manage all payroll-related issues.Usually, the payroll agency acts as an intermediarybetween the employer and the social security and incometax authorities.

A recommended payroll agency is ADMB(www.admb.be – contact person: Mr Pascal de Lophem,pascal.delophem@cmeservices.be).

6.25 The company may sign up to an Employers' association,which is a private association of persons and groups withcommon economic interests. Their object is to defend thoseinterests. Employers' associations are recognized asrepresenting a significant cross-section of employers, andcan negotiate with the trade unions representing employees'interests, leading to the conclusion of collective bargainingagreements at industry level (see above). The national inter-professional employers' association is the Federation ofBelgian Enterprises.

For more information: www.vbo-feb.be

EMPLOYING EMPLOYEES FROM NON-EEA(EUROPEAN ECONOMIC AREA) MEMBER STATESIN BELGIUM

6.26 Non-EEA nationals need a work permit to be employed inBelgium. The Member States of the EEA are the 27 countriesof the European Union plus Iceland, Norway and Liechtenstein.

6.27 All non-EEA Member State nationals intending to exceed90 days’ residence within a period of six months requirea residence permit. An application for a type D visa (on thebasis of the work permit or professional card) has to besubmitted to the Belgian diplomatic or consular authoritiesin the applicant’s country of residence. The applicant mustregister at the local town hall within eight days of arriving inBelgium. EEA citizens coming to Belgium with the intentionof working here for more than three months can register onpresentation of a valid passport or identity card. The visaand residence permit requirements vary from one embassy /municipality to another.

6.28 A professional card is required for each person wishing tocarry on self-employed activity in Belgium but who is not aBelgian national or a national of one of the Member Statesof the EEA and Switzerland. A professional card is alsorequired for managing directors of companies incorporatedin Belgium who stay in Belgium for an uninterrupted periodof more than three months. A professional card applicationcan be filed with the Belgian embassy or consulate in thecountry in which the non-resident self-employed person ormanaging director resides or in which they are staying.

7. COMMERCIAL ASPECTSOF DOING BUSINESS IN BELGIUM

7.1 This section gives an overview of the most important rulesand possible pitfalls while engaged in commercial activitiesin Belgium.

SALES AND SERVICES AGREEMENTS

7.2 As in most civil law countries, no formalities have to be metto conclude commercial agreements. The consent of theparties on the main elements of the agreement suffices tohave an agreement. For sales of goods, this is mostly priceand quantity; for services, nature of the service and price.Written agreements are obviously key for proving theagreement between the parties.

It is important to note that, in the absence of a written/signed agreement, any commercial agreement can beestablished and proven by “all legal means”. This typicallyincludes e-mails, ex parte documents (such as offers)that are tacitly accepted based on the execution thereof.Witness evidence is also allowed, but only seldom used inpractice. An important means of evidence is the invoice.The Commercial Code indeed states that an invoice,which is not disputed, provides proof of the existenceand the nature of an agreement.

7.3 The requirement to formally dispute an incoming invoicethat does not correspond to the agreement, under thepenalty of having tacitly accepted the invoice, is transposedto all correspondence. Not responding to correspondencegenerally amounts to the tacit acceptance of thatcorrespondence.

7.4 Sales agreements and services agreements are oftencomplemented by general conditions. In regular business,parties rely heavily on them for limitation of liability, jurisdiction,applicable law, etc. As general conditions are part of theagreement, they will only be applicable if the contractingparties have indeed agreed on them. According to Belgiancase law and Belgian legal authors, a contracting party hasagreed on the applicability of general conditions when he‘took note of the general conditions’ and has accepted themno later than when the agreement was concluded.

7.5 ‘Taking note of the general conditions’ means that thecontracting party indeed took note of the general conditionsor had a reasonable opportunity to do so. A mere referenceto the general conditions being available on the website,at the office of the court clerk or at the registered officedoes not suffice.

7.6 The acceptance of general conditions can either be explicitor tacit. There can, however, only be a tacit acceptance ofthe general conditions when the silence, considering thecircumstance, cannot be interpreted other than as theacceptance of the general conditions (e.g. payment ofthe invoice with general conditions).

UN CONVENTION ON THE INTERNATIONAL SALEOF GOODS

7.7 On 31 October 1996, Belgium acceded to the UN Conventionof 11 April 1980 on Contracts for the International Sale ofGoods (CISG). The CISG, containing substantive lawprovisions on the international sale of goods, is directlyapplicable to contracts on the sale of goods betweenparties having their places of business in different stateswhen: (i) the states are contracting states, or (ii) when therules of private international law lead to the application ofthe law of a contracting state.

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If the parties opt for the law of a contracting state to apply– which is generally done in the general conditions of oneof the parties – the CISG will be applicable, unless itsapplication is expressly excluded. We point out thatthe CISG is generally considered more vendor friendly,imposing, amongst other things, more onerous obligationson the purchaser to verify the goods upon receipt thanunder internal Belgian law.

COMMERCIAL ‘INTERMEDIARIES’

7.8 Foreign suppliers entering the Belgian market may chooseto make use of one or more commercial intermediaries.Under Belgian law, several types of commercialintermediaries can be distinguished. In this Memorandum,we will however limit our analysis to the most importantfeatures of the two types of intermediaries, i.e. thedistributors and the commercial agents.

• Distributors

7.9 A distribution agreement is an agreement whereby thesupplier agrees with the distributor to supply the latter withproducts or services for purposes of resale. The distributorsells the products or services in his own name and on hisown account. Strictly speaking therefore, the distributordoes not act like an intermediary.

7.10 With one exception, Belgian law does not contain specificrules on distribution agreements. The distributor and supplierare thus free to determine the content of their agreementand questions not addressed by them are governed by theBelgian Civil Code. Exclusive distribution agreements, quasi-exclusive distribution agreements and distribution agreementswhich impose onerous obligations on the distributor are,however, also governed by the Law of 27 July 1961 on theUnilateral Termination of Certain Categories of DistributionAgreements (the Law of 1961). The Law of 1961 isimperative and provides for protection of the distributor inthe event of those categories of distribution agreementconcluded for an indefinite period of time. Further, distributionagreements for a fixed period time can be considered underthe Law of 1961 to be concluded for an indefinite period oftime, for example, if the agreement is renewed twice or theagreement includes a tacit renewal clause. The protectionis also only applicable for the Belgian territory.

7.11 The Law of 1961 contains important rules regarding thetermination of distribution agreements and possibleindemnities due. Depending on criteria like the duration ofthe relationship, market share, investments made by thedistributor and the importance of the agreement to thedistributor, a notice period should be respected. In general,notice periods are set by case-law at between three monthsup to even three years. If this notice period is not respected,a compensatory indemnity will be due.

This indemnity can be very high. On top of that, the distributorcan benefit under the Law of 1961 from a complementaryindemnity, i.e. an indemnity for increasing the clientele,compensation for investments made and even compensationfor having to make redundancy payments.

• Commercial agents

7.12 An agency agreement is an agreement whereby thecommercial agent, acting independently and for payment,is charged on a regular basis by the principal to negotiateand possibly conclude business transactions.The commercial agent acts in the name and on behalfof its principal.

7.13 Agency agreements are governed by the Law of 13 April1995 regarding Commercial Agency Agreements(the Law of 1995).

7.14 The Law of 1995 contains the following important andmandatory rules regarding the termination of andindemnities under the agency agreements.

(a) Termination of the agency agreement: the mandatoryminimum notice period amounts to one month percommenced year of performance with a maximum ofsix months. A longer notice period can be agreed on.Notice is given by handing over a written statementwhich indicates the beginning and the duration of thenotice period. This written statement may also be sentby registered mail, in which case it will have effect threedays after the postal date, or can be served by a bailiff’swrit. The agency agreement can also be terminatedwith immediate effect in the event exceptionalcircumstances make continued cooperation impossible,or in case of serious failure by one of the parties toexecute its obligations.

(b) Indemnities under the agency agreement: besides theremuneration, which may consist of a fixed amount,commission or a combination of both, the commercialagent may be entitled to a clientele indemnity.An entitlement to this indemnity arises if the agent(i) has brought new customers to the principal or hassignificantly increased the existing volume of business,and (ii) if the principal continues to enjoy substantialbenefits thereof.

UNFAIR TRADE PRACTICES

7.15 The law on unfair trade practices is designed to protect freecompetition and is governed by the Law of 6 April 2010on market practices and consumer protection (the Law of2010). This law incorporates the provisions of several EUDirectives and deals with the information to be provided toconsumers, several regulated trade practices and the unfairtrade practices.

7.16 Unlike its predecessors, the Law of 2010 allows for acombined offer of products and services. This trade practicehad been forbidden for many years in Belgium. The onlyexception existed in a combined offer with a financialservice, although this exception was far from absolute.

7.17 When confronted with an unfair trade practice, one mayapply to the President of the Commercial Court for a cease-and-desist order. The application for such an order is madefollowing special injunction proceedings (stakingsvordering).

8. PURCHASING OR LEASINGREAL ESTATE IN BELGIUM

8.1 This section gives an overview of the most important rulesand possible pitfalls while purchasing or leasing real estatein Belgium.

PURCHASE OF REAL ESTATE

8.2 The purchase of real estate is established by a notarial deed.The notary is considered as a Public Officer under BelgianLaw and is thereby responsible for the legitimacy anddrafting of the title contained in the notarial deed.

8.3 In a first instance, the parties will enter into a private salecontract. This contract is in most cases drawn up by alawyer, the notary or a real estate agent. After the signing ofa private sale contract, the notarial deed will be executedby the parties before a Belgian notary public. This notarialdeed will restate the conditions of the private sale contract.This notarial deed is needed to give the transaction a formaland official character and to provide publicity for the transferof ownership rights on the real estate.

8.4 A real estate purchase contract must be registered with thetax authorities within four months as from the execution dateof the private sale contract. Registration is required to paythe transfer taxes. Further, transcription of the notarial deedin the Land Register is required to provide publicity for thetransfer of ownership rights on the real estate, which grantsan opposition right to any third party to state a claim onthe title of the property. The notarial deed will be filed withthe public authorities to register the transfer of real estateand to transcribe the ownership title.

8.5 The acquisition of real estate through an asset deal is eithersubject to VAT or to registration duties (transfer tax) inBelgium. When a sale is subject to VAT, transfer taxes arenot due (except for a lump sum tax of EUR 25). VAT appliesto the transfer of “new” buildings and as of 1 January 2011,in principle as well to the underlying land. Buildings areconsidered as “new” until 31 December of the second yearfollowing the year in which the first occupation or the firsttaking of possession of the building took place. The currentBelgian standard VAT rate is 21%. Upon disposal of realestate which is no longer “new” for Belgian VAT purposes,transfer taxes are due.

8.6 The transfer taxes vary depending on the Region in whichthe real estate is located. Transfer taxes are borne in practiceby the acquirer of the real estate and amount in the FlemishRegion to 10% of the purchase price and in the Walloon andBrussels Regions to 12,5% of the purchase price.

LEASE OF REAL ESTATE

8.7 The Belgian Civil Code makes a distinction between theso-called “common lease agreements” on the one handand two “particular lease agreements” on the other hand.In contrast with the “common lease agreements”, theparticular lease agreements are regulated in a very strictway, which means that most of the contractual lease termsare regulated imperatively (duration, termination, renewal, etc.).

8.8 These particular lease agreements are (i) the residentiallease, and (ii) the commercial lease.

8.9 Since the Belgian legislator considered the tenant to bemore vulnerable in these particular relations, imperative rulesmust be part of the lease agreement in order to protectthe tenant.

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8.10 Main provisions:

8.11 Each lease agreement must be deposited for registrationwith the tax authorities. A registration tax of 0,2% of allamounts payable under the lease agreement is due.

Provision Common lease agreement Residential lease agreement Commercial lease agreement

Purposes Offices, industry, storage, etc. Residential housing Retail and shops

Review of No specific possibilities At specific moments + if increase/ At specific moments + if increase/the rent level decrease of rental value by 20% decrease of rental value by 15%

Usual length No imperative duration Minimum 9 years – under certain conditions Minimum 9 years – can be renewed3 years or less twice

Sublease Allowed when not otherwise agreed Forbidden without prior and written consent Allowed when not otherwise agreedin the contract of the landlord in the contract

Repairs Usually tenant for the minor and daily repairs, landlord for major repairs

Termination Cannot be terminated before Landlord: at specific moments, Landlord: at specific moments, the foreseen end date if no possibility specific conditions applicable specific conditions applicable of early termination is includedin the contract Tenant: at any moment in time but obligation Tenant: 6-month notice, only prior to

to pay an indemnity in case of termination the end of each 3-year periodwithin first 3 years (except if otherwise agreedin the contract)

We trust this Memorandum has given you a clearer insight on a number of specific topics relevant to an expansion of your businessin Belgium. Of course, we remain at your entire disposal to further elaborate on certain matters and to give you further clarificationand assistance.

Do not hesitate to contact us in this respect.Visit www.lydian.be/team and find your dedicated expert.

Brussels, August 2012

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1. BELGIUM’S BASIC TAX RATES

1.1 Corporate income tax: 33,99%. Small and medium-sizedcompanies benefit from a reduced progressive tax rate,provided certain conditions are met.

1.2 Personal income tax: between 25% and 50% applied ona sliding scale to successive portions of net taxable income.

1.3 Minimum wage: EUR 1,472.40 per month (2012).

1.4 Unemployment rate: 7,20% (February 2012).

1.5 VAT (Value Added Tax): 21% (but certain goods andservices are subject to rates of 6% and 12%).

1.6 Registration duties: registration duties are levied, as a rule,when a deed or written document is registered. There are threetypes of registration duties: proportional duties, specific fixedduties and the general fixed duty. The proportional registrationduties amount in each case to a percentage of the tax base:(i) sale of real estate: 12,5% (in the Walloon Region andBrussels Region) or 10% (in the Flanders Region); (ii) mortgageon real estate: 1%; (iii) lease of real estate: 0,2%.

• General remark

The list of business incentives below is only an overview ofthe main incentives available in Belgium and is by no meansexhaustive.

As Belgium is a federal state subdivided in three regions(Flanders, Brussels and Wallonia), some incentives (mainlyfrom a tax and employment point of view) are granted atFederal (i.e. national) level whereas other incentives andsubsidies are granted at Regional level and thus dependon the location of the company’s activities (i.e. Flanders,Brussels or Wallonia).

2. FINANCIAL INCENTIVES/SUBSIDIES

2.1 In Belgium, the power to grant public financial support liesmainly with the Regional authorities. For general informationabout investment in Belgium, see http://business.belgium.be.

• Flanders Region

2.2 Grants for Ecological Investments (“EcologiepremiePlus”): financial subsidy to companies making ecologicalinvestments in Flanders as from 1 February 2011.Ecological investments mean environment-investmentsand investments in the energy domain. The amount ofthe subsidy depends on: (i) the eco-class to which thetechnology belongs on the basis of its ecology number,(ii) the size of the company (SME or large companies), and(iii) the subsidy bonus. The percentage of subsidy variesbetween 5% and 30% for SMEs and between 0% and 15%for large companies. The total amount of the grantedsubsidy per company amounts to maximum EUR 1,000,000for a period of 3 years.

2.3 Strategic investment and training support: financialsupport to SMEs and large companies who intend to carryout a large professional investment or an extensive trainingproject in Flanders. The investment or training project mustbe 'strategic', which means that the project must serve tosupport a ‘turning point' for the company. For the trainingsupport, the subsidizable training costs must be of minimumEUR 250,000 for small companies and EUR 300,000 formedium and large companies. For the investment support,the subsidizable investment must be of minimum EUR 8million. The subsidy amounts to 0% to 25% for the trainingsupport and to 0% to 10% for the investments, dependingon certain criteria, with a maximum amount of EUR 1 million.The investment or training must be realized within a periodof 3 years.

2.4 Financial subsidies for R&D-Company projects inFlanders (IWT-Flanders): the basic support percentagedepends on the type of research project: (i) developmentprojects, aimed at the application of knowledge to new orrenewed products, processes or services: 15% of theaccepted costs, (ii) research projects, aimed at the creationof new knowledge which, on the long term can alsocontribute to innovation: 40% of the accepted costs.The percentages can be raised in certain circumstancesand under certain conditions, but the overall total is limitedto 60% of the project costs, with a maximum of EUR5 million. Such R&D-Company project can last maximum3 years and must have a budget of at least EUR 100,000.

2.5 SME innovation projects in Flanders (IWT-Flanders):subsidy for Flemish SMEs realizing an innovation, i.e. thedevelopment of a completely new or significantly renewed(improved) product, process, service or concept.

ANNEX 1 STATE AND REGIONAL INCENTIVES AVAILABLE TO BUSINESSES

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Such SME innovation project can last maximum 24 monthsand must have a minimum budget of EUR 50,000. The basicsupport percentage amounts to 35% of the accepted costs(25% + 10% SME premium; for business partners that arelarge companies, the basic support percentage amounts to15%) with a maximum of EUR 200,000. The percentagecan be raised in certain circumstances and under certainconditions to 55%, with a maximum of EUR 250,000.

2.6 Grants for young people (IWT-Flanders): post-graduategrants for research specialization at PhD level and post-doctoral fellowships.

2.7 More information about incentives/grants for Flanders-basedcompanies is available on www.investinflanders.be orwww.agentschapondernemen.be/subsidiedatabank(in Dutch).

• Brussels Region

2.8 Grants for general investments: public financial supportavailable for investments for SMEs which are necessaryfor their professional activity and which are implementedin Brussels (such as investments in land and buildings,investments in equipment and furniture, intangibleinvestments). Each investment must be in excess of:(i) EUR 15,000 excluding VAT for micro-enterprises,(ii) EUR 30,000 excluding VAT for small enterprises, and(iii) EUR 100,000 excluding VAT for mid-sized enterprises.The extent of the contribution varies from 2,5% to 15% ofthe investment and depends on the size of the enterprise,the location of the business (in or outside the DevelopmentZone) and some other specific objectives.

2.9 Grants for environmental investments: financialcontribution granted to Brussels-based companies,irrespective of their size, for investments aimed at realizingenergy savings or at producing renewable energies, forcertain specific sectors. Such investments must involvea minimum investment of EUR 7,500. The extent of thecontribution varies from 25% to 45% of the investment(+ an additional 5% subsidy if the enterprise obtained certaincertifications) and depends on the size of the enterprise,with a maximum of EUR 80,000 per year per company.

2.10 Grants for R&D: industrial research: subsidy available topromoters who have all or part of their activities within theBrussels Region and who can demonstrate the importanceof their R&D project or R&D-related services for theirdevelopment strategy, as well as its favorable impact onthe economy, employment and sustainable developmentin the Brussels Region. The subsidy can go up to 50%of the eligible expenses attached to the execution ofthe project (can be increased for SMEs).

2.11 Grants for R&D: pre-competition development: subsidyavailable to promoters who have all or part of their activitieswithin the Brussels Region and who can demonstrate theimportance of their R&D project or R&D-related services fortheir development strategy, as well as its favorable impacton the economy, employment and sustainable developmentin the Brussels Region. Size and form of the aid: (i) a subsidyof up to 25% of the eligible expenses linked to the executionof the project, and (ii) a reimbursable advance of up to 40%of these expenses (can be increased for SMEs) – thisadvance must be repaid in full where the beneficiary projectsuccessfully reaches the commercial stage.

2.12 Financial contributions for studies and consultancy:grant available for studies with an economic, technical orfinancial character. These studies must be carried out byexternal consultants with at least two years’ experience.The Brussels Region will bear half the cost, up to a maximumof EUR 15,000 per study. In addition, an enterprise canapply for premiums for management consulting, with a viewto enlarge the enterprise, and not related to the daily ornormal management of the enterprise. The consultingadvice must be given by an external consultant having atleast two years’ experience. The maximum contributionby the Brussels Region is EUR 15,000.

2.13 Grants for export: financial incentives available undercertain conditions to SMEs in order to help them pay forbusiness trips, to take part in international trade fairs, toproduce export promotion materials, to promote theirproducts or services to foreign trade consultants,participate in export training programs, etc.

2.14 More information about incentives/grants for Brussels-basedcompanies is available on www.investinbrussels.com.

• Walloon Region

2.15 Investment grants: grants available to companies makinginvestments and creating jobs in the Walloon Region.Eligibility is subject to a minimum investment (EUR 500,000for SMEs and EUR 1,000,000 for large enterprises),relating to the purchase of buildings, new equipment,intangible assets or road vehicles exceeding 3,5 tons.This assistance varies depending on the location ofthe company, its activities and its size.

2.16 Subsidies for basic industrial research programs:direct grant of between 50% and 80% of the subsidy.The following criteria are, among others, taken into account:(i) innovative nature of the project, (ii) scientific importance ofthe research and the application of its results, (iii) expectedresults and their importance for the Walloon Region.

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2.17 Recoverable advance and/or subsidy for experimentaldevelopment programs: financial support between 45%and 75% of the accepted costs, depending on the typeof company and the characteristics of the project.The following criteria are taken into account: (i) innovativenature of the project, (ii) scientific importance of the researchand the application of its results, (iii) expected results andtheir importance for the Walloon Region. If it is decided toutilize the results of the research, the advance is repayablein annual installments.

2.18 FIRST-enterprises programs: subsidy designed to helpfund the recruitment and training of a young researcher whowill conduct his/her research within a university, equivalentestablishment or an approved research centre. The WalloonRegion covers up to 80% of the researcher's salary overa period of 18 to 24 months.

2.19 Export grants: financial grants provided by the foreign tradeoffice within AWEX to Walloon-based companies seeking toexpand into the export market. It also takes part in varioustradeshows and professional events geared towardspromoting exports.

2.20 More information about incentives/grants for Walloon-basedcompanies is available on www.investinwallonia.be.

3. TAX INCENTIVES

• Belgium

3.1 Notional interest deduction: allows companies andorganizations to reduce their taxable base when makinginvestments from their own resources. The amount that canbe deducted as notional interest from the taxable base equalsthe fictitious interest cost on the adjusted equity capital.The interest rate to be applied to the adjusted equity capitalis equal to the annual average of published interest rates for10-year Belgian government bonds. The notional interestrate for tax year 2013 is 3%. All companies that are subjectto Belgian corporate income tax, or non-resident corporateincome tax are eligible for the notional interest deduction.

3.2 Pan European Pension Funds: pension funds locatedin Belgium may have cross-border activities and operateseveral pension plans applicable to employees working indifferent countries, while being mostly only subject to Belgianlaw (some exceptions apply). Furthermore, the pension fundsenjoy a favorable tax regime, both for direct and indirecttaxes. Provided the pension fund avoids to be taxed onnon-deductible costs, and to the extent foreign investmentsare well-chosen or well-structured, the pension fund can aimat an overall “zero-taxation”.

3.3 Dividend Withholding Tax Exemption: are eligible for thedomestic dividend withholding tax exemption, any corporateshareholder who is a resident of a treaty country and whoholds at least a 10% participation in its Belgian subsidiaryfor a consecutive period of at least 12 months.

3.4 VAT Grouping: all taxpaying entities of a group can beregarded by the Belgian VAT administration as a single fiscalentity. Consequently, different companies of the same groupwill not have to invoice one another VAT and there will beonly one VAT return for the entire group.

3.5 Tax Rulings: all taxpayers may request an “advance ruling”under which the Federal Public Finance Departmentdetermines how the tax code shall be applied to a particularsituation or specific transaction that has not yet taken effectfrom a taxation point of view. A decision is valid for five years,unless the object of the request justifies a different period.

3.6 Tax losses carried forward: prior and current year taxlosses incurred by a Belgian company can be carriedforward without any limits in time and amount in order tooffset future taxable income. The further use of tax lossesmay become partly or wholly unavailable where a companyis involved in certain tax-exempt reorganizations such asmergers and divisions (partly unavailable), or a change ofcontrol that does not meet financial or economic needs.

3.7 Depreciation: depreciation can be applied to formationexpenses and to intangible and tangible fixed assets witha limited economic lifetime. It must be taken every year,irrespective of the amount of corporate income, startingfrom the financial year in which the asset was acquired,produced or received as a contribution.

3.8 Investment deduction for environmentally friendlyinvestment in R&D: companies acquiring new tangible orintangible fixed assets used in Belgium for environmentallyfriendly investments in research and development, energy-saving investments and patents and investments relatingto security equipment can, subject to conditions, claim anadditional deduction from their taxable profit equivalent toa basic percentage of the acquisition or investment valueof those investments.

3.9 Tax deduction for patent income: tax deduction designedto stimulate technical innovations by Belgian companiesthrough R&D activities in relation to patents. The taxdeduction amounts to 80% of the income, thereby resultingin effective taxation of the income at the rate of 6,8%.

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3.10 Tax-free investment reserve: within certain restrictions,companies qualifying for reduced corporate tax rates(certain small and medium-sized enterprises) can build upa tax-free investment reserve amounting to 50% of theirtaxable results allocated to the reserves, reduced by (i) thetax-exempted capital gains on shares; (ii) 25% of capitalgains realized on vehicles; and (iii) the reduction of sharecapital compared to the share capital of the previous incomeyear during which a tax-free investment reserve was built upor increased. Companies applying the tax-free investmentreserve cannot benefit from the notional interest deductionduring a two-year period following the relevant financial year.

3.11 No capital tax: no capital tax is levied on contributions toa company's share capital.

3.12 Expat regime: Belgium has a special non-resident taxregime. It offers two important tax advantages to foreignexecutives meeting certain conditions: (i) reimbursementsmade by the employer to cover the additional expensesincurred as a direct result of the assignment or employmentin Belgium are treated as costs of the employer, which are,within certain limits, non-taxable for the expatriate; and(ii) the expat will only be taxed on his/her Belgian-sourceincome and not on the part of the remuneration thatcorresponds to the number of days worked abroad.

• Flanders Region

3.13 Fiscal incentive for the recruitment of R&D personnel:one-time tax exemption of profits (up to a certain maximumamount) for companies hiring additional research or qualityassurance personnel. A deduction from taxable incomeis granted for scientific researchers, persons in charge ofdeveloping a firm’s technological potential, the head of aquality assurance department and the head of an exportdepartment.

• Brussels Region

3.14 Royal Decree 123: provides a financial compensationby the Brussels Region, limited in the time (2 years), for therecruitment of unemployed personnel for a given projectunder the economic expansion scheme (such as R&Dprojects). Under certain conditions, this reduction can reachup to 90% of the total salary costs of the employee forthe first year, and up to 75% for the second year.

• Walloon Region

3.15 Tax reductions: companies that employ researchers onprojects carried out in collaboration with recognized scientificinstitutions in the Walloon Region can benefit from a 50%reduction in the payroll taxes due for these researchers.This can amount to between EUR 8,000 and EUR 10,000per full-time researcher per year.

4. EMPLOYMENT INCENTIVES

• Belgium

4.1 Activa Plan: an employer can receive a wage subsidy ofEUR 500 (for a full-time employee) when employing long-term unemployed jobseekers. The National employmentOffice pays the salary subsidy; the employer can deductthe amount from the net salary.

4.2 Activa Start: young (<26 years old) lower-educatedjobseekers from a foreign origin or who are disabledcan receive a premium of EUR 350 from the Nationalemployment Office, which the employer can deduct fromtheir net salaries. This advantage can be combined withother social security reduction programs.

4.3 Structural reduction: a quarterly reduction of social securitycontributions for all employees in the private sector with aminimum of EUR 400 per quarter. For low and high wages,there is a complimentary reduction.

4.4 Apart from the system of structural reduction, there areseveral target reductions: depending on the employee thatis hired and under certain conditions, employers can receiveadditional reductions on social security contributions,for instance for first employment, young employees,older employees, long-time unemployed jobseekers, etc.

4.5 Target reduction collective working time reduction:employers who reduce working time with at least 1 hourweekly, can receive a reduction of social securitycontributions for their full-time employees (EUR 400and EUR 1,000 per quarter).

4.6 Target reduction for personnel of companies inrestructuring: employers employing jobseekers whobecame unemployed due to the restructuring of theirprevious employer can under certain conditions receivea reduction of social security contributions (EUR 400 andEUR 1,000 per quarter).

4.7 Target reduction mentors: employers using certain oftheir employees for education or guidance of certain otheremployees that are following a training at the work place,can receive under certain conditions a reduction of socialsecurity contributions (maximum EUR 400 per quarter).

4.8 Tax exemption for supplementary personnel in smallenterprises: all industrial, agricultural and businesscompanies can under certain conditions receive a taxexemption of EUR 5,450 (for 2012) per in Belgium employedsupplementary employee in the first year of hiring.

4.9 Training support: the federal government provides supportfor employers whose employees are on training (e.g. paideducative leave, training-services cheques).

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• Flanders Region

4.10 Employment subsidy for 50+: the Flemish employmentAgency (VDAB) grants employers under certain conditionsa subsidy (between EUR 1,200 and EUR 4,500 per quarter)when employing older employees (with a maximum offour quarters).

4.11 Individual In-House Training (IBO): when organizing in-house training, the job seekers/trainees retain their benefitincome during training and the Flemish employment agency(VDAB) pays an additional premium. The company does notpay salary or social security during training, but pays a feeto the VDAB. There are several versions of the classicalIBO (e.g. an IBO for opportunity groups combined with aninterim, an IBO for foreign speakers, a specialized IBOfor disabled persons, etc.).

4.12 Inserted employees: companies in the Flanders region whocreate supplementary employment through short-educatedand/or long-time unemployed jobseekers can receiveimportant reductions on the salary cost during the firsttwo years (up to EUR 35,500).

4.13 SME-Wallet (KMO-portefeuille): enables SMEs located inthe Flanders Region to purchase entrepreneurial supportingservices such as training and advice, special advice forinternational entrepreneurship, strategic advice andtechnology exploration. The premium amounts to 50% ofthe cost of the training and advice (with a yearly maximum ofEUR 2,500 and EUR 5,000 for advice for entrepreneurship),75% of the cost of technology exploration (with a yearlymaximum of EUR 10,000). The total maximum for allsupporting services amounts to yearly EUR 15,000.

4.14 Strategic training support: during a period of maximum3 years, companies in the Flanders region can be granteda subsidy of minimum 20 % and maximum 30% oftraining costs.

• Brussels Region

4.15 Grant for employee training: SMEs with operationalfacilities located in Brussels can benefit from financial grantsconsisting of (i) 50% of the cost of training hours forjobseekers, and (ii) 50% of the cost of training hours ofthe trainer, with a specified limit.

4.16 The foreign language cheque-jobs: this cheque allowsthe jobseeker having a poor knowledge of languages(French, Dutch, German or English) to obtain 60 hours freeindividual language courses from the moment he/sheis hired, financed by ACTIRIS.

4.17 Inserted employees: companies in the Brussels region whocreate supplementary employment through short-educatedand/or long-time unemployed jobseekers can receiveimportant reductions on the salary cost during the firsttwo years (up to EUR 35,500).

4.18 Individual In-House Training: for companies in theBrussels Region to enable them to engage personnel underadvantageous conditions and at the same time to train themfor specific functions in the company. As soon as thetraining is finished, the trainee must be employed for thesame duration as the training. The trainee continues toreceive unemployment benefits during the training contract.The company pays the trainee a (progressive) incentivebonus equal to the difference between the wage level ofthe trainee’s future vocation and his actual income.

• Walloon Region

4.19 The PFI training & recruitment plan: designed to enablecompanies in the Walloon Region to recruit staff suited totheir needs on advantageous terms, while at the same timeundertaking to train them in specific tasks within thecompany. As soon as the training is finished, the traineemust be employed for the same duration as the training.The trainee continues to receive unemployment benefitsduring the training contract. The company pays the traineea (progressive) incentive bonus equal to the differencebetween the wage level of the trainee’s future vocationand his actual income.

4.20 Training Cheques: the Training Cheque, a form of financialaid for ongoing employee training, cuts the cost of trainingby 50%. It is available to companies in the Walloon Region(with exception of the German speaking region) with amaximum of 250 employees and turnover of no more thanEUR 40 million.

4.21 Subsidies for employment of disabled persons:a company can be granted financial aid of 25% of the salaryfor the employment of disabled persons (recognized bythe Walloon Agency for the integration of disabled persons(AWIPH)).

NOTES

DOING BUSINESSIN BELGIUM

22

Lydian is a full-service, fully-fledged, independent Belgian business law firm.

Our approach is all about being committed, available, responsive and proactive.We make sure that we thoroughly understand the opportunities and demands of ourclient’s business, and we put its interests to the fore. Our legal culture, which is firmlygrounded on London ‘magic circle’ and premium Belgian law firms, makes us ideallyplaced to provide the highest quality services to an international standard and practice lawwith the sophistication of a big firm, but with the close client-lawyer contact more typicalof a smaller firm. Excellent communication with our clients is key for us.

“Straight-to-the-point adviceis the hallmark of Lydian”

Legal 500

Disclaimer

The information contained in this Memorandum is for general guidance on matters ofinterest only. The application and impact of laws can vary widely based on the specificfacts involved. Given the changing nature of laws, rules and regulations, there may bedelays, omissions or inaccuracies in information contained in this Memorandum.Lydian does not have any obligation towards the reader of this Memorandum to update,complete or otherwise modify this Memorandum. Accordingly, the information in thisMemorandum is provided with the understanding that the authors and publishers arenot per se engaged in rendering legal, accounting, tax, or other professional adviceand services merely by handing this Memorandum to you. As such, this Memorandumshould not be used as a substitute for consultation with professional accounting, tax,legal or other competent advisers. Before making any decision or taking any action,you should consult a professional at Lydian.

While we have made every attempt to ensure that the information contained in thisMemorandum has been obtained from reliable sources, Lydian is not responsible forany errors or omissions, or for the results obtained from the use of this information.All information in this Memorandum is provided "as is", with no guarantee of completeness,accuracy, timeliness or of the results obtained from the use of this information, andwithout warranty of any kind, express or implied, including, but not limited to warrantiesof performance, merchantability and fitness for a particular purpose. In no event willLydian, its related partnerships or corporations, or the partners, associates or employeesthereof be liable to you or anyone else for any decision made or action taken in relianceon the information in this Memorandum or for any consequential, special or similardamages, even if advised of the possibility of such damages.

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