Corporate Tax 2010 - BMR Advisors

Eubelius
Belgium
2.6 Are there any other indirect taxes of which we should be
aware
An indirect tax is levied on premiums related to insurance contracts,
including most collective life and pension insurance agreements
that cover a risk located in Belgium. The rates vary from 1.1% to
9.25%. Numerous exemptions exist, among others, for reinsurance,
labour accident insurance and individual or collective pension
savings accounts.
Customs duties are generally payable on goods imported from
outside the EU. Excise duties are levied on specific types of goods
(e.g. alcohol and tobacco) upon their distribution in Belgium.
3 Cross-border Payments
3.1 Is any withholding tax imposed on dividends paid by a
locally resident company to a non-resident
According to domestic tax law, dividend distributions are generally
subject to a 25% withholding tax in Belgium. This tax rate is
reduced to 15% for dividend distributions on certain qualifying
shares (so-called “VVPR” shares) issued after 1993, and to 10% for
liquidation and share buy back bonus distributions.
Full withholding tax exemption can be obtained for:
dividends paid by a Belgian resident company to a nonresident
legal entity which does not exercise a business or
professional activity and is exempt from income tax in its
state of residence (e.g. foreign pension fund);
dividends paid by a Belgian resident company to a parent
company resident in another EU Member State, subject to
certain minimum holding requirements. In accordance with
the amendments to the Parent-Subsidiary Directive in 2003,
the minimum participation requirement is reduced to 10% as
of 1 January 2009; and
dividends paid by a Belgian resident company to a parent
company resident in a jurisdiction with which Belgium has
concluded a bilateral tax treaty, subject to the same
conditions as for parent companies resident in the EU (see
supra) provided that this treaty (or another separate treaty)
provides for the exchange of information for purposes of
applying domestic tax law between the treaty states.
Generally, most bilateral tax treaties concluded by Belgium provide
for a reduction of the Belgian dividend withholding tax rate to 15%
and even 10% or 5% in the case of a substantial participation in the
capital of the Belgian company (often 25%) held by a company
resident in the other contracting state. Most recent treaties (e.g. the
treaty with Hong Kong and with the US) and the Belgian Draft
Model Convention provide for a 0% rate for dividends on such
substantial participation.
are paid are not connected to a permanent establishment of the
beneficial owner of the royalty income located outside the EU
territory. Companies are considered to be “related companies”
provided that either:
(i) one of these companies directly or indirectly holds a
participation of at least 25% in the capital of the other
company, during an uninterrupted period of at least 1 year; or
(ii) a participation of at least 25% in the capital of both
companies is directly or indirectly held by an EU resident
company during an uninterrupted period of at least 1 year.
3.3 Would there be any withholding tax on interest paid by a
local company to a non-resident
According to domestic tax law, Belgian source interest payments
are generally subject to a 15% withholding tax. Some bilateral tax
treaties to which Belgium is a party (e.g. treaties with Germany,
Luxembourg and the Netherlands) provide for an exemption from
interest withholding tax in the source state. Other treaties limit the
withholding tax to be levied in Belgium to 10%. Domestic tax law
also provides for a withholding tax exemption for certain interest
payments to non-residents, such as:
interest payments on receivables (other than bonds) that are
paid by Belgian companies or professionals (including
permanent establishments of non-resident companies or
physical persons) to non-resident credit institutions located in a
Member State of the European Economic Area, or in a country
with which Belgium has concluded a bilateral tax treaty;
interest payments on receivables (other than bonds) that are
paid to non-residents that do not use the receivables for
professional activities in Belgium, by Belgian financial
enterprises, including certain listed holding companies and
intra-group financing companies, subject to certain
conditions;
interest payments on registered bonds that are paid to nonresidents
that do not hold the bonds for professional activities
in Belgium, subject to certain conditions;
interest payments to the Belgian permanent establishment of
foreign banks; and
interest payments between two non-residents through the
intermediation of a group finance or cash pooling centre
located in Belgium (under certain conditions).
Moreover, in execution of the Interest and Royalty Directive,
interest payments by a Belgian resident company to a related
company in another EU Member State are exempt from
withholding tax, provided that, during the period to which the
interest income relates, the underlying receivable is not held
through a permanent establishment of the beneficial owner of the
interest income located outside the EU territory. We refer to
question 3.2 above for the definition of “related companies”.
Belgium
3.2 Would there be any withholding tax on royalties paid by a
local company to a non-resident
3.4 Would relief for interest so paid be restricted by reference
to “thin capitalisation” rules
According to domestic tax law, Belgian source royalty payments
are subject to a withholding tax of 15%. However, in many bilateral
tax treaties to which Belgium is a party, royalty payments must be
exempt from income tax in the source state. In some treaties,
however, this is limited to specific types of royalty payments.
In execution of the EU Interest and Royalty Directive, royalty
payments by a Belgian resident company to a related company in
another EU Member State are exempt from withholding tax,
provided that, during the period to which the royalty income relates,
the underlying assets or intellectual property for which the royalties
ICLG TO: CORPORATE TAX 2010
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Belgian tax law includes 2 specific rules aimed at avoiding thin
capitalisation:
the “7:1” rule: according to this rule, interest payments, other
than those on bonds or similar publicly issued debt securities,
to beneficiaries that are not subject to income tax or benefit
from a substantially more favourable tax regime in respect of
such interest income compared to the normal tax treatment in
Belgium, are not tax-deductible to the extent that they relate
to that part of the loans granted by such beneficiaries which
exceeds seven times the paid in capital and (non-exempt)
reserves of the Belgian borrowing company; and
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