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Belgium Update Non-resident taxation Stefan Creemers explains how the new definition of taxable period affects Belgian non-resident tax liability and, in particular, executives benefitting from the special tax status. Belgium is known for its beneficial special tax status for foreign executives who are temporarily assigned to Belgium. Even if these executives move (with their family) to Belgium, they are deemed to be non-resident taxpayers during the full length of their assignment. Under this special tax status, they shall only be taxed in Belgium on that part of their income that is related to activities physically performed in Belgium (“travel exclusion”). Moreover, special tax deductions (related to expenses to be borne by the employer) can be made, even on a favourable, lump sum basis. The year of arrival or departure in Belgium could turn out to be even more beneficial. However, this has recently changed. To the extent possible, we now advise that a Belgian assignment should be set up in such a manner that it starts on 1 January or at year end. The end date of the Belgian assignment should be set on 31 December or the beginning of the calendar year. Planning your assignment start date and end date will significantly decrease the tax impact of this new measure. Since this new legislation is applicable as of income derived during 2010, it might be worthwhile to verify whether the necessary tax provisions have been made. Old legislation : the taxable period in Belgian non-resident personal income tax coincides with the (full) calendar year prior to the year of assessment. For example, the taxable period of income year 2011 is related to assessment year 2012. There was one exception to this rule. In the case where taxable income was only obtained during a time period that started after 1 January or ceased before 31 December, the taxable period coincided with that part of the year during which taxable income was obtained. ■ ceased to be obtained prior to 31 December, the taxable period ends on that date only if the taxpayer’s tax position changes (from resident to non-resident or vice versa). Impact on Belgian non-resident tax liability According to Belgian non-resident tax legislation, personalised tax credits (e.g. for dependent children, non-working spouse, etc) are only applicable provided that the non-resident tax payer disposes of an abode in Belgium during the full taxable period (or acquires more than 75% of his taxable professional income from Belgian sources). An abode is defined as the place where the taxpayer resides (with his family), even without this being his permanent normal tax residence (special tax status of non-resident, see above). Consequently, if a non-resident (and in particular a foreign executive benefitting from this special status) arrives in or departs from Belgium in the course of the taxable period and obtains income taxable in Belgium, he will, under the new regulation, not be entitled to the personalised tax credits because he did not dispose of an abode during the full taxable period. Under these specific circumstances, the Belgian tax liability will increase (unless the so-called 75% rule or double tax treaty provisions can be applied). For more information please contact: Stefan Creemers PKF Belgium T: +32 (0)2 242 11 41 F: +32 (0)2 242 03 45 E: scr@pkf.be New legislation : By way of a Royal Decree (dated 22 December 2010) Belgian legislation was adapted and now indicates that if the taxable income is ■ obtained only after 1 January, the taxable period starts as of that date only if the taxpayer’s tax position changed on that date (from resident to non-resident or vice versa) 9 // PKF International Tax Alert All Regions Issue 8 November 2011
Canada Update New Canadian treaty-based withholding rate and benefit forms In April 2011, the Canada Revenue Agency (CRA) released final versions of declaration forms that should be used by non-residents of Canada to provide the CRA and Canadian resident payers with information regarding their residency status and eligibility for treaty benefits. These new forms are important for both Canadian resident payers and non-resident payees of interest, dividends, rents, royalties, management fees and other similar payments which are subject to Part XIII non-resident withholding tax in Canada and may be eligible for a reduced withholding tax rate under a treaty. The forms can also be used when requesting a refund of Part XIII withholding tax, obtaining a Regulation 105 withholding tax waiver, requesting a certificate of compliance or filing a Canadian tax return for a hybrid entity. The introduction of these forms resulted from the changes in the Fifth Protocol to the Canada-US Tax Treaty. The forms are similar to the US Form W-8BEN, Certificate of Foreign Status of Beneficial Owner for United States Tax Withholdings. ■ NR 301 - Declaration of Eligibility for Benefits under a Tax Treaty for a Non-Resident Taxpayer (i.e., Individual, Corporation or Trust) ■ ■ NR 302 - Declaration of Eligibility for Benefits under a Tax Treaty for a Partnership with Non-Resident Partners NR 303 - Declaration of Eligibility for Benefits under a Tax Treaty for a Hybrid Entity. For the purposes of the forms, a hybrid entity is an entity that is considered "fiscally transparent" under the tax laws of a country that Canada has a tax treaty with and not "fiscally transparent" for Canadian tax purposes. For example, a US limited liability company is generally treated as a partnership for US tax purposes, but is treated by the CRA as a corporation for Canadian tax purposes. Additional information and copies of the forms and instructions can be obtained from the CRA website. Our commentary is available on the Smythe Ratcliffe LLP website at http://www.smytheratcliffe.com/pdf/Cross-Border- Tax-Update-NR301-302-and-303.pdf. Inbound investment into Canada US businesses continue to find it difficult to structure their new and ongoing ventures in Canada in the wake of the Fifth Protocol to the Canada-US Tax Treaty signed in 2007. An unlimited liability company (ULC) is a certain type of Canadian corporation that can be incorporated in the provinces of Nova Scotia, Alberta and British Columbia. 10 // PKF International Tax Alert All Regions Issue 8 November 2011
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