In a – recently published – judgment of 3 June 2014, the Court of Appeal of Antwerp ruled against the Belgian State and ordered it to refund the Belgian withholding tax suffered by a Dutch real estate fund on a dividend distributed by its Belgian subsidiary. This judgment – which established discrimination of the Dutch fund compared to a similar local fund – is interesting in several respects.
In particular, the case concerned four dividends distributed on 31 May 2001, 31 May 2002, 30 May 2003 and 28 May 2004, respectively, by a Belgian closed-ended real estate investment company (SICAFI/vastgoed-BEVAK) to its parent company, a Dutch investment company (subject to tax – at 0% – in the Netherlands). A Belgian withholding tax of 5% was levied on these dividends. The Dutch fund – which considered that it had been discriminated against compared to similar local funds – filed several claims to obtain a refund of this withholding tax. The claims were rejected by the Belgian tax authorities. The Dutch fund then brought the case to the Court of First Instance of Antwerp, which ordered the Belgian State to refund the withholding tax. This judgment was appealed by the Belgian State.
In its judgment, the Court of Appeal of Antwerp considered that:
- the Dutch fund was comparable to a local fund, and the relevant Belgian tax provisions were in breach of the freedom of capital movement and the freedom of establishment;
- the discrimination only existed as from 12 June 2003, being the date on which the local fund’s favourable regime with respect to Belgian withholding tax formally entered into force (which is, in our view, subject to critics);
- with reference to the ECJ’s Amurta case (C-379-05), the tax credit the Dutch fund received in the Netherlands in relation to the Belgian withholding tax suffered is not deductible from the amount to be refunded;
- default interest accrues on the amount to be refunded.
Hence, the Court of Appeal ordered the Belgian State to refund the Belgian withholding tax – increased with default interest – levied on the dividend distributed to the Dutch fund on 28 May 2004.
Although we think that there are sound arguments to consider that the discrimination existed before 12 June 2003 (as local funds already benefitted from the favourable tax regime in practice), the outcome of this judgment should encourage foreign (corporate) funds to reclaim the Belgian withholding tax unduly levied on Belgian-sourced dividends.
We remain at your disposal to further discuss the practical aspects and the opportunities of similar claims.