Former prohibition of exemption of withholding tax on dividends distributed by Belgian Regulated Real Estate Companies annulled by Constitutional Court

Olivier Hermand 12 May 2016


On 11 May 2016, the Belgian Constitutional Court annulled the former prohibition of exemption of withholding tax on dividends distributed by Belgian Regulated Real Estate Companies (RRECs) on the ground that it was discriminatory compared to dividends paid by Belgian Real Estate Investment Funds (REIFs).

The Act of 12 May 2014, applicable as from 16 July 2014, has introduced the regime of RRECs* besides the pre-existing regime of REIFs**, notably to create a lighter investment structure from a regulatory perspective (RRECs are not subject to AIFMD regulations).

Even though the legislator’s objective was to provide a similar tax treatment for both structures, a provision of the Belgian Income Tax Code prevented the granting of withholding tax exemptions for dividends distributed by RRECs whereas this was not the case for dividends distributed by REIFs.

In essence, two types of investors were hindered by this provision:

  • ‘public’ RRECs holding a shareholding of at least 10% for a minimum of one year in another ‘public’ RREC;
  • foreign pension funds which benefit, under certain conditions, from a general exemption of dividend withholding tax.

On 11 May 2016, the Belgian Constitutional Court annulled the provision referred to above on the ground that it created a discrimination between Belgian RRECs and Belgian REIFs.

As this provision had already been repealed by an Act of 18 December 2015, applicable as from 7 January 2016, the practical impact of this decision covers withholding tax unlawfully levied on dividends distributed by Belgian RRECs during the period between 16 July 2014 and 6 January 2016.

Key takeaways

Investors concerned should consider filing an administrative claim to get a refund of any dividend withholding tax unlawfully levied. When assessing the amounts at stake, investors should also take into account that a yearly 7% default interest is likely to apply on any reimbursement.

Of course, PwC remains at your disposal to help you assess the reclaim opportunities and to discuss the practical details of such process.

 

You can download here the decision in French or in Dutch.

* Gereglementeerde vastgoedvennootschappen / Sociétés immobilières réglementées

** Vastgoedbevaks / SICAFIs