Belgian Prime Minister Guy Verhofstadt and Finance Minister Didier Reynders on March 4 announced that the government has finalized its plans to introduce a fictitious, or notional, interest deduction to encourage companies to self-finance their investments and to strengthen their capital structure.
The new measure, which also would reduce the discrimination between equity and borrowed funds, is intended to replace the tax regime for coordination centers, which will expire at the end of 2010. Under the current regime, the interest paid on borrowed funds is a tax-deductible expense, and the withholding tax on that interest is limited to 15 percent. However, the return on equity contributed to shareholders in the form of share capital is not guaranteed, and distributed dividends are not tax-deductible for the company and are fully subject to corporate income tax. Moreover, the company must withhold tax at source at a rate of 25 percent. (Read the article …)
On 4 February 2005, the Belgian Supreme Court, the Cour de Cassation has handed down a decision that will be quoted by the tax authorities in many litigations to come. (More …)
Belgium’s Cour de Cassation, has confirmed that dividends paid out by a French société civile immobilière (SCI, or property investment partnership) are not subject to Belgian income tax.
Under French law, certain civil companies are deemed to be separate from their shareholders (personne morale) contrary to Belgian law. That is particularly the case for the SCI. (Read the article …)
The Ghent Court of First Instance has sought a preliminary decision from the European Court of Justice on whether Belgium’s tax regime for inbound dividends is compatible with EU law.
One of the basic principles of the Belgian income tax system is that a dividend received by a resident individual is subject to a 25 percent withholding tax. That withholding tax is the final tax for the taxpayer, meaning that he does not have to declare the dividend in his tax return.
However, if no tax has been withheld at source, either by the company distributing its profits or by the intermediary (usually a bank), the taxpayer must declare the dividend and pay income tax at a rate of 25 percent.
Belgium taxes inbound dividends the same way. However, under the provisions of Belgium’s double tax treaties, the country where the dividend originates can withhold tax at source on the dividend before it is paid out. Belgium grants unilateral relief to prevent double taxation by applying the deduction method: The foreign tax is deducted from the gross dividend before the Belgian tax is calculated. The Belgian 25 percent withholding tax (or, alternatively, the final income tax) is calculated on the net dividend after deduction of the foreign withholding tax. (See below. (Read the article …)
At the end of 2004, the Flemish Tax Authorities reported that they had collected more than twice the gift tax they had anticipated. That was all the more extraordinary since the rate of the gift tax had just dropped. Why are all Flemish rushing to donate their assets ? (More …)