Double tax treaty Belgium – The Netherlands: Belgian Supreme Court counters subject to tax clause


On January 25, 2018 the Belgian Supreme Court rendered a decision with respect to the application of the Belgian-Dutch double tax treaty. In doing so, the Supreme Court has taken a rather uncommon approach as to the interpretation of the subject to tax clause.

Based on article 17.1. of the Belgian-Dutch double tax treaty, the taxation power with respect to income derived from personal activities exercised in The Netherlands, by a tax resident of Belgium, as a sportsman, is attributed to The Netherlands. In the case at hand, a Belgian tax resident claimed a tax exemption in his Belgian tax returns for his income as a professional cyclist (to the extent that it was physically exercised) in The Netherlands.

Based on article 23.1 a) of the Belgian-Dutch double tax treaty, if the income of the sportsman is taxed in The Netherlands, Belgium has no taxation rights and should prevent double taxation by granting a tax exemption (with progression effect). In this specific context, the Belgian tax authorities interpret the expression taxed as effectively taxed, meaning that a tax relief will only be granted in Belgium if the income was subject to taxation in The Netherlands and if no Dutch tax exemption was applicable.

A dispute occurred between the Belgian tax authorities and the taxpayer regarding the number of working days spent outside of Belgium. Moreover, the question was also raised whether it was necessary to verify / demonstrate if the Dutch source income, was actually effectively taxed in The Netherlands.

In application of article 17.1. (sportsmen), the Belgian Supreme Court attributed the taxation power in relation to the income (for the Dutch working days) to the Netherlands and – at the same time – decided that this excludes taxation rights for Belgium. In this specific case, Belgium (residency state) was not allowed to levy taxes on any income which was allocated to The Netherlands, regardless of the fact whether or not this income was also effectively taxed in The Netherlands. The subject to tax clause (article 23.1 a) – which would potentially allow Belgium to tax any income which was not effectively taxed in The Netherlands – was countered by the Supreme Court and could thus not result in any effect.

This seems to be leading to a rather non-conventional interpretation and application of the Belgian-Dutch double tax treaty.

We will keep you informed about any future developments in this respect.