Do German Corporations Use Belgium As a Financing Location? – A Case Study

Zeitschrift für betriebswirtschaftliche Forschung, 69 (4): 441-475, 2017

Posted: 12 Dec 2017 Last revised: 14 Dec 2017

See all articles by Dominik von Hagen

Dominik von Hagen

University of Mannheim - Department of Business Administration and Taxation

Oliver Hahn

Independent

Fabian Pönnighaus

University of Mannheim - Accounting and Taxation

Date Written: May 12, 2017

Abstract

For tax purposes, Belgium allows companies to take into account an NID on their equity. This regime enables companies to tax corporate profits in Belgian finance companies virtually for free. This case study presents in a first step how such finance companies can be set up. Then, using a unique hand-collected data set, it examines the extent to which DAX und MDAX corporations avail of tax planning strategies using finance companies in Belgium. This case study identifies seven finance companies; seven other DAX and MDAX corporations have a finance company that seems to be operationally active. In a further step, this case study approximates that profits of 914 million Euro are shifted to Belgium per year, which results in tax savings of 179 to 242 million Euro. For this data set, Belgium’s tax revenue loss due the NID on equity is estimated to equal 11 to 36 million Euro per year.

Keywords: DAX & MDAX, Notional interest deduction, Capital structure, Profit shifting, Tax planning in Belgium

JEL Classification: F23, H25, H26, H32, H73, M41

Suggested Citation

von Hagen, Dominik and Hahn, Oliver and Pönnighaus, Fabian, Do German Corporations Use Belgium As a Financing Location? – A Case Study (May 12, 2017). Zeitschrift für betriebswirtschaftliche Forschung, 69 (4): 441-475, 2017, Available at SSRN: https://ssrn.com/abstract=3084723

Dominik Von Hagen (Contact Author)

University of Mannheim - Department of Business Administration and Taxation ( email )

D-68131 Mannheim
Germany

Oliver Hahn

Independent ( email )

Fabian Pönnighaus

University of Mannheim - Accounting and Taxation ( email )

Mannheim, 68131
Germany

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