The Belgian withholding tax act has been recently modified as a result of the European ‘Tate & Lyle’ case. The new Act limits the withholding tax on dividends distributed to foreign minority corporate shareholders by Belgian companies to 1.6995% instead of 27%, if certain conditions are met.
In 2012, the European Court of Justice ruled that the Belgian dividend withholding tax treatment was incompatible with EU law (‘Tate & Lyle’ case). Under that treatment, dividends distributed by Belgian companies to foreign corporate shareholders having a holding in the capital of a company of less than 10% but with an acquisition value of at least EUR 1.2 million (currently EUR 2.5 million), in principle are subject to full a withholding of 25% (27% as from 1 January 2016).
According to the new Act (Act of 18 December 2015), dividends distributed by a Belgian company to non-resident minority corporate shareholders are now subject to a reduced withholding tax rate of 1.6995% (instead of 27%) provided certain conditions are met.
Some conditions need to be met, being e.g.:
– The reduced rate of 1.6995% is only applicable to the extent that the Belgian withholding tax cannot be credited or is not refundable in the beneficiary’s jurisdiction.
– The beneficiary must be a non-resident corporate shareholder having a holding in the capital of the distributing company of less than 10% but with an acquisition value of at least EUR 2.5 million.
– The holding should be held for an uninterrupted period of at least one year (in full ownership).
– The shareholder must be a company located in the European Economic Area or in a jurisdiction with which Belgium has concluded a double taxation agreement.
– The shareholder must have a legal form as mentioned in the EU Parent-Subsidiary Directive or a similar form.
Note that the distributing company should have a certificate confirming that the various conditions are met, including confirmation to what extent the beneficiary can claim a tax credit or refund of the withholding tax on 31 December of the year preceding the dividend distribution.
This measure is applicable to dividends attributed or made payable as from 28 December 2015.
Administrative guidance (dated from 2013) has already laid down the procedure for claiming back withholding tax for previous years.
If you want to obtain additional information e.g. on the various conditions to be met, please do not hesitate to contact your PwC tax consultant.