The most important direct tax is the income tax. Since enactment of the tax law of 20 November 1962, this tax has been levied on the total amount of each taxpayer's income from all sources. Income tax rates vary from 25% to 55%, excluding local taxes. Local taxes are levied at rates varying from 0% to 10%. Taxes are not paid in one lump sum, but rather by a series of prepayments on the various sources of income. There is a withholding tax on salaries that is turned over directly to the revenue officer. Self-employed persons send a prepayment to the revenue officer during the first half of July. Banks and stockbrokers who offer dividends must first deduct a prepayment of 25%. Taxes on real estate are based on the assessed rental value.
The corporate income tax, which is levied on all distributed profits, was lowered from 48% to 45% in 1982, to 43% in 1987, to 38% in 1993, and stands at 39% since 1996. Nondistributed profits are taxed at progressive rates ranging from 28% to 41%. In some instances, local government bodies are entitled to impose additional levies. Numerous tax exemptions are granted to promote investments in Belgium.
In 1971, a value-added tax system was introduced, replacing sales and excise taxes. A general rate of 21% was applied as of 1996 to industrial goods, with a reduced rate of 6% applying to basic necessities and an interim rate of 12% to certain other products.