Belgium

Domestic corporations and PEs of foreign corporations paying dividends, interest, royalties, service fees, and/or certain rentals are required to withhold tax.

Capital reductions decided by the general meeting as of 1 January 2018 will be deemed to derive proportionally from paid-up capital, taxed reserves (incorporated and non-incorporated into capital), and exempted reserves incorporated into the capital. The reduction of capital will be allocated to paid-up capital in the proportion of the paid-up capital in the total capital increased by certain reserves. The portion allocated to the reserves is deemed to be a dividend and will become subject to WHT (if applicable). Share premium distribution is submitted to the same system.

A uniform WHT rate of 30% is applicable on dividends, interest, and royalties. There are some exceptions.

Some WHT reductions/exemptions are foreseen under Belgian domestic tax law.

• A WHT exemption is foreseen for the distribution of profits made by a Belgian subsidiary to an EU parent company if both the parent and subsidiary have a legal form that is mentioned in the Annex to the EU Parent-Subsidiary Directive (taking into account the new Belgian company forms), if both are subject to CIT, and if the parent company holds, during an uninterrupted period of at least one year, a shareholding of at least 10% in the capital of the distributing company (implementation of the Parent-Subsidiary Directive). If the one-year holding requirement is not fulfilled at the time of distribution, the distributing company provisionally should withhold the amount of WHT due (but it does not have to pay the tax authorities). Once the one-year holding requirement is met, the provisionally withheld tax amount can be paid out to the parent company. If the one-year holding requirement eventually is not complied with (e.g. because the Belgian participation is disposed of by the parent company before the one-year holding requirement is met), then the Belgian company has to pay the amount provisionally withheld, increased by interest for late payment (4%), to the competent services of the Belgian tax authorities.
• Also, a GAAR has been introduced into Belgian legislation. As a result, the WHT exemption will be denied whenever the dividends originate from legal acts or a whole of legal acts that are artificial (i.e. no valid business reasons that reflect economic reality) and merely in place to obtain the WHT exemption.
• Further to the 'Tate & Lyle case' of the European Court of Justice dividends distributed by a Belgian company to non-resident minority corporate shareholders benefit from a WHT rate exemption provided certain conditions are met, among which are the following:
  • The WHT exemption is only applicable to the extent that the Belgian WHT cannot be credited or is not refundable in the jurisdiction of the beneficiary.
  • Both the company distributing the dividends and the beneficiary of the dividends are subject to a taxation condition.
  • The beneficiary must be a non-resident corporate shareholder having a holding interest in the capital of the distributing company of less than 10% but with an acquisition value of at least EUR 2.5 million.
  • The holding interest must be held for an uninterrupted period of at least one year (in full ownership).
  • The shareholder must be a company located in the EEA or in a jurisdiction with which Belgium has concluded a DTT.
  • The shareholder must have a legal form as mentioned in the EU Parent-Subsidiary Directive or a similar form.
• The application of the Parent-Subsidiary Directive to dividend payments has been extended towards non-EU-resident companies. Dividends distributed towards a country that has concluded a tax treaty with Belgium containing a qualifying exchange of information clause can be exempt from WHT, subject to the same conditions as laid down in the Parent-Subsidiary Directive.

• As of 1 January 2019, a WHT exemption has been introduced for Belgian resident individuals receiving shares in the framework of a 'spin-off' if certain conditions are met.

On top of the above exemptions, there are other dividend/interest exemptions/reductions implemented in Belgian tax law.

With respect to payments made to non-resident corporations or individuals, WHT exemptions and/or reductions can also be found in the DTTs concluded by Belgium.

Notes

1. The treaty concluded with ex-Yugoslavia is still applicable to Bosnia-Herzegovina, Kosovo, Montenegro, and Serbia.
2. Not applicable to Hong Kong.
3. The treaty concluded with the former USSR is still applicable to Kyrgyzstan, Moldova, Tajikistan, and Turkmenistan.
4. It concerns an EU country or the treaty contains a qualifying exchange of information clause. Hence, the rate of 0% is applicable subject to the same conditions as invoked by the Parent-Subsidiary Directive (see above). Where multiple rates apply, the difference is generally based on the percentage of participation the recipient holds (directly) in the capital of the company paying the dividends.
5. Under the Bilateral II agreement concluded between Belgium and Switzerland, a rate of 0% is applicable under certain conditions.
6. With respect to EU countries, a WHT exemption is applicable, provided that the conditions laid down in the Interest & Royalty Directive are met (see above). Furthermore, note that some treaties contain an exemption for trade receivables or loans concluded with a governmental body.

The treaties that are currently in force are listed above. Based on the websites of the Belgian government, the following tax treaties/protocols are signed, modified, or under renegotiation (including some for the exchange of information clause): Botswana, Canada, Congo, France, India, Isle of Man, Macao, Malaysia, Moldova, Netherlands, New Zealand, Norway, Oman, Qatar, Russia, Rwanda, Tajikistan, Uganda, the United Kingdom, Uzbekistan, and Vietnam.