Belgium: Belgian investment companies no longer entitled to withholding tax credit

The Belgian Government has approved an amendment to the Belgian Tax Law in order to prevent Belgian investment companies from crediting withholding tax paid on Belgian dividends against corporate tax payable in Belgium (the balance, if any, being refundable in Belgium).

The new Law was published in the Belgian Official Gazette on 1 August 2013 and is now effective.

This amendment is the result of the European Court of Justice (EUCJ) decision¹ that considered the difference of treatment between Belgian investment companies (entitled to tax credit) and non-resident investment companies without a permanent establishment in Belgium (for which the withholding tax on Belgian dividends is a final tax that is not creditable or refundable in Belgium) as an infringement of a European Union principle (Freedom of establishment and free movement of capital).

Starting from fiscal year 2014 (annual accounts closed on 31 December 2013), the Belgian Government has decided that Belgian investment companies will no longer be allowed to credit withholding tax collected at source on dividends received as from 1 January 2013.

By approving this amendment, the Belgian Government has put an end to the discrimination and will now treat resident and non-resident investment companies equally in this regard.

Note: The previous regime for Belgian dividends remains unchanged for OFPs (Organismes de Financement de Pension) and for compartments of investment companies whose shares are exclusively held by OFPs.

As the tax credit could not be obtained by the Belgian investment funds via Clearstream Banking, the new amendment has no impact on our current procedure.

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1. In the case 387/11 Commission Vs. Belgium of 25 October 2012, Belgium was condemned by the EUCJ for having a discriminatory tax treatment between non-resident and resident investment companies with regard to withholding tax on Belgian-sourced dividends.