Survival of the Richest

Belgium
Taxation
Tax treaties
In total, Belgium has 50 tax treaties with developing
countries, which is above average among the countries
covered by this report. Within those treaties, the average
rate of reduction of developing country tax rates – 2.3 per
cent - is the lowest among all the countries covered by this
report. 247 However, this does not mean that the Belgian tax
treaty system is unproblematic for developing countries.
According to research by ActionAid, seven of Belgium’s
tax treaties with developing countries are so-called 'very
restrictive' treaties, which impose strong limitations on
developing country taxing rights. 248
In February 2016, Belgian NGO 11.11.11 issued a report
assessing the potential economic and fiscal effects of
Belgian tax treaties on developing countries, with a focus
on 28 treaties which include reduced withholding tax rates
for income from dividends and interests. A conservative
estimate puts the fiscal cost to these developing countries
at €35 million in 2012. 249 More in-depth analysis of Belgium’s
treaties with African countries such as Rwanda, Democratic
Republic of Congo or Senegal identified a number of
deviations from OECD and UN models that erode the tax
base of these countries. 250 The report sparked a debate
in the Belgian Parliament, including a series of hearings
of representatives from the European Commission, the
OECD, academia, the private sector and civil society in the
Parliament’s foreign affairs committee. 251
Following the debate, a resolution was tabled by Members
of Parliament belonging to the opposition asking the
government to conduct a thorough and independent
impact assessment of existing tax treaties, especially
with developing countries, and to refrain from signing tax
treaties with tax havens. It also called for the government
to base negotiations with developing countries on the
UN Model Treaty, to increase investment in the tax
administrative capacity of developing countries and regional
cooperation in tax matters, to revise the current model
treaty in light of international developments and to increase
the transparency of ongoing and future negotiations of tax
treaties. 252 Meanwhile, Finance Minister Van Overtveldt has
stated Belgium takes the ‘special circumstances of partner
countries including developing countries’ into account
when negotiating tax treaties and is willing to ‘respond to
a country’s request to revise a certain treaty’, but is not
considering conducting an impact assessment. 253
In general, Belgium adheres to the OECD model treaty as
closely as possible when negotiating with partner countries.
An explicit public policy on tax treaties is unavailable, but in
2008 the administration issued a Belgian model convention
that implicitly indicates what policy is followed. The current
model convention dates from 2010. 254 Relevant stakeholders,
including civil society, are not officially consulted during the
negotiations of double tax treaties.
To address treaty shopping, Belgium has introduced
some general anti-abuse provisions. However, the current
provision in the Belgian model treaty (article 27, paragraph
3) is very broad, and largely deviates from the OECD’s
guidelines. It is also unclear how effective it is. In principle,
if the administration becomes aware of particular issues,
an attempt will be made to incorporate specific anti-abuse
provisions into the treaty under consideration. The Court of
Audit has concluded that in this area "give and take is often
involved in the negotiations with regard to the position and
the sensitivities of the other partner state”. 255
Following the OECD’s plan on BEPS, Belgium committed to
‘support all multilateral initiatives to modify tax treaties’ and
‘to include additional anti-abuse clauses in future treaties
and treaty revisions to tackle so-called treaty shopping as
determined in the OECD’s plan of action’. 256 At the time of
writing, the model treaty has not been revised in this sense.
In response to parliamentary questions on the subject,
minister Van Overtveldt stated that the inclusion of article
26, §5 of the OECD model treaty allowing for automatic
exchange of information is an ‘absolute condition’ for
Belgium to sign a new tax treaty. 257
Harmful tax practices
Although discussions within the Belgian government
focus on shifting from specific tax schemes to a corporate
tax policy based on low tax rates and less generous
deductions, 258 the statutory corporate income tax rate
currently stands at 33.99 per cent. 259 While this debate is
still ongoing, Belgium has a large number of corporate tax
deductions available to investors that reduce the effective
tax burden to 17 per cent on average. 260
Research commissioned by the European Commission
identified a total of 16 ‘aggressive tax planning (ATP)
indicators’ ranking Belgium second only after the
Netherlands with 17 ATP-indicators. 261 The report
specifically identified three active indicators that can
directly promote or prompt an ATP structure: the notional
deduction regime, Belgium’s patent box regime and the
excess-profit rulings.
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