Summary

In chapter one I introduced the financial center industry in Belgium. A financial center is an independent entity which performs financial services on behalf of group companies. Since the implementation of the Coordination Center Regime, Belgium has attracted over 350 companies and more than 200 of these have been active over a longer time period. These centers employs nearly 10 000 people, but do only pay 1.47 % in direct taxes. Nonetheless, the employees and the increased activity from the centers contribute to increase Belgium’s tax revenue, attract multinationals and develop special capabilities. The CCR is being phased out since it was labeled a harmful tax practice due to low effective taxes and ring-fencing. The successor NID however is available to all companies, and was introduced in 2006. Already in the first chapter I concluded that by looking at the multinationals behavior, Belgium is a preferred location for financial centers.

In chapter two I gave a comprehensive overview and evaluated relevant legislation and rules applicable for financial centers in Belgium. The CCR is an advantageous tax regime because taxes are calculated not on profit, but on a limited number of costs, excluding the two most important ones for financial centers, namely wage and financial cost. Still, to participate in the regime a company must fulfill stringent conditions concerning size and turnover and needs to be a truly multinational company. The NID however is available to all Belgian companies and is unique both in a European and worldwide context. The NID offers a notional deduction on the basis of equity and this way levels the playing field between debt and equity. For financial centers which are capital intensive this is a beneficial measure and secures the continuation of advantageous taxation. In addition to these two main tax regimes, the EC directives especially

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ensure that the centers are not subject to double taxation and that profit can be distributed free from withholding tax to the parent company.

In chapter three I presented other aspects which make Belgium a suitable location for financial centers. Despite the political turmoil the last years, Belgium is very accommodating for foreign investors. Belgium ranks high in all rankings regarding business environment and being part of the euro zone is no disadvantage. Throughout the last 30 years a cluster has developed and gives the incumbent firms several advantages. Last, Belgium’s central location gives a unique starting point for multinationals establishing a central function.

In chapter four I turned to the company’s view of the financial center. The activities of such centers are mostly based on internal funding and cash management, but they also deal with tax management, accounting and advisory. The advantages from establishing such centers come from economies of scale and the benefits of centralization and are by themselves reason enough to establish a financial center. Yet, the taxation aspect is highly valid as the nature of the industry ensures beneficial tax treatment which contributes to the profitability. In the current market conditions the NID is highly attractive as the interest rates in general are low, and the interest curve is upward sloping.

In chapter five I showed the view on the subject from important Norwegian stakeholders. The media focuses on tax savings and hint that these activities result in lost tax revenue for the Norwegian government. The authorities do not share this view, and state that as long as national and international rules and regulations are followed, these operations are completely legit. Also, I noted that Norway has a ring fenced regime for shipping companies making their view disqualified. The tax agency informs that multinationals are easy to deal with and that they disclose the information requested and there is no sign of tax evasion or similar. Nonetheless, a financial center is a complex matter and to evaluate if transactions are fairly priced is difficult.

In chapter six I explored the Statoil Coordination Center. This center was established in the late 1980s by the means of receiving loan subsidies from the Belgian state. Following the development of the internal bank the financial activities became more and more important. Today the income for the most part originates from the financing and banking activities and accumulated over the period from 1999 to 2000 the center had a profit of over € 1 billion. In 2009

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the SCC transferred to the NID regime and can now be subject to larger tax bill. However, the current market conditions propose that the center continues to be beneficially taxed.

In chapter seven I looked at the Statkraft Treasury Center. Stakraft has been expanding significantly abroad over the last decade and opened its financial center in 2008. The main rationale was to increase the focus on such activities and streamline the financing of group companies. Similarly to the SCC, the taxation of the STC most likely will prove to be beneficial.

In chapter eight I illustrated the “double-dip”, a financing structure, which can create tax arbitrage. This particular arbitrage exploits the differences in tax systems with the result of a risk-free profit. The method is difficult to discover, but nonetheless illegal, and if caught the multinationals risk both litigation and bad press.

9.2. Conclusion

Belgium offer multinationals many advantages for establishing a financial center. The CCR was an extraordinary advantageous tax regime for financial centers, and with the NID, even though not to the same extent, the beneficial tax treatment is set to continue. Furthermore, for a Norwegian multinational with a financial center in Belgium the profit in the center can be transferred tax free to the parent company. Also contributing to the attractiveness of Belgium is the business environment, with accommodating authorities, a central geographic location, well developed financial markets and last but not least a cluster of financial centers.

The mentioned financial centers mostly engage in internal financing and cash management, and by centralizing these functions the companies hope to exploit the advantages of economies of scale and centralization. Taking the example of the Statoil Coordination Center most of the profit comes from bank margins, earned on loans given to group companies, and the banking activity.

The future for the financial centers and the industry as a whole in Belgium looks promising. The combination of the way the NID is constructed and the current market conditions ensure the continuation of low taxation of financial centers and thereby also the presence of those in Belgium.

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