Recent rulings by the Courts of First Instance of Mons and Brussels have thrown cold water on Belgian tax authorities’ cases against companies it has accused of misusing foreign tax credits to avoid corporate income tax liability.
When a Belgian company receives interest from a foreign source, the payer usually has to withhold tax at source, at rates varying from 0.5 percent to 30 percent. When the company declares the interest it received, it cannot set off the tax withheld by foreign tax authorities against its Belgian income tax bill.
However, Belgium does provide some unilateral relief against that form of double taxation by granting a foreign tax credit1 to companies that can prove that tax has been withheld at source on foreign-source investment income (other than dividends). The foreign tax credit is granted on the assumption that the tax collected at source was 15 percent, regardless of the level of tax actually withheld abroad. (Read the article …)