Cayman Tax: tax transparency for ‘legal constructions’

Philippe Vanclooster 5 May 2015


Currently, a bill of law is discussed at the level of the Belgian federal government concerning the so-called Cayman Tax. In principle, the new rule would be applicable as from assessment year 2016 (i.e. income collected during calendar year 2015).

The Cayman Tax is a tax on certain income that is derived, through legal constructions, by Belgian individuals and Belgian entities who are subject to legal entities income taxation. By virtue of the draft act, the listed constructions are deemed to be transparent for tax purposes.

The legal constructions falling within the scope of the Cayman Tax include, without being limited to, foreign trusts, foundations, undertakings for collective investments or pension funds if not publicly offered, low-taxed or non-taxed entities etc. to which the Belgian individual or Belgian entity subject to legal entities taxation is, in one way or another, linked as a founder, an effective beneficiary, a potential beneficiary etc.

Furthermore, the draft act makes a distinction between two categories of legal constructions.

The first category concerns trusts without legal personality. The income realized, paid or attributed by the trusts as from 1 January 2015 is taxable or the Belgian private individual, being the founder or beneficiary of the legal construction as if the Belgian individual would have realized the income directly.

The second category concerns legal constructions with legal personality, being foreign entities that are subject to an effective tax rate of less than 15%. The income realized by these legal constructions is deemed to be realized directly by the Belgian private individual (being the founder or the beneficiary of the legal construction).

Within both categories, the income concerns profits, such as real estate income, movable income (interest, dividends and royalties), miscellaneous income and earned (i.e. professional) income.

Regarding the second category, two lists with the legal constructions in scope would be published via a Royal Decree. The first list, an exhaustive list, will mention the type of legal constructions in scope that are based in the European Economic Area. The second list, a non-exhaustive list, will mention the type of legal entities in scope that are not based in the European Economic Area.

Needless to say, the Cayman Tax can have a substantial impact on existing structures. If you would like to discuss this further, please contact your regular PwC adviser.