On 15 July 2022, the tax framework for ELTIFs has been completed with the necessary exemptions of Belgian withholding tax (WHT).
As a recall, the law of 21 January 2022 on various tax provisions provides a tax framework for European long-term investment funds according to three principles:
- Corporate tax neutrality of the investment company
- Avoidance of economic double taxation for resident corporate investors (under the dividend-received deduction regime)
- Avoidance of economic double taxation for non-resident corporate investors (exemption of Belgian WHT) under similar circumstances to those of Belgian resident corporate investors
The Royal of Decree of 5 July 2022 supplements the measures taken so far with some Belgian WHT exemptions according to two principles:
- Internal consistency
- EU compliance
1) Movable income (other than Belgian source dividends) paid to Belgian regulated investment companies are exempt from Belgian WHT (art. 116 RD/BITC).
It avoids pre-financing costs in the hands of the regulated investment company (considering it is not taxed on such income, hence would have been refunded later on in any case).
→ This Belgian WHT exemption henceforth also applies to Belgian ELTIF (internal consistency) and to foreign corporate ELTIF (EU compliance).
2) Dividends distributed by a Belgian company to a Belgian ELTIF (with a shareholding of at least 10% in the Belgian distributing company) are exempt from Belgian WHT (under conditions), hence of Belgian corporate income tax (art. 106, §6 RD/BITC).
→ This Belgian WHT exemption henceforth also applies to dividends distributed by a Belgian company to a foreign corporate ELTIF in similar circumstances (EU compliance).
3) Dividends (other than those derived from income from Belgian real estate income or from dividends of Belgian origin) distributed by Belgian regulated investment companies to non-resident savers are exempt from Belgian WHT (art. 106, §7 RD/BITC).
This Belgian WHT exemption, which is of a general nature, has a double objective:
– on the one hand, it aims to exempt from Belgian WHT all income of foreign origin which may be received by a Belgian regulated investment company and which are redistributed by the latter to non-residents savers,
– on the other hand, it aims to exempt from Belgian WHT all Belgian source movable income which would have been granted such an exemption if they had been received directly by non-resident savers (i.e. without the intermediation of the investment company).
→ This Belgian WHT exemption henceforth also applies to dividends distributed by Belgian ELTIF (internal consistency).
The ELTIF regime offers large prospects for public and private financing of our economy. The advantages of ELTIF are not insignificant. In addition to the advantage of an efficient structure and access for investors to a wide range of assets (including infrastructure assets, digital transformation projects, ecological transition projects and investments in SMEs), they benefit from an EU marketing passport, allowing them to raise funds from Belgian investors as well as from investors from other Member States.
Now that the tax framework has been fine-tuned, it is up to the business actors to make it successful!
Want to find out how you could take advantage of ELTIFs? Visit our dedicated ELTIF webpage.