By virtue of the Miscellaneous Provisions Act of 13 December 2012 (published in the Belgian Official Gazette on 20 December 2012), two new provisions were enacted in respect of the taxation of services provided by non-residents to Belgian companies.
Withholding at source for qualifying service fees
As from 1 January 2013, pursuant to the introduction of a “catch-all” provision for the taxation of non-residents, Belgium will be able to tax alternative types of income such as e.g. fees for technical assistance provided in Belgium or abroad by a non-resident individual or company located in a jurisdiction with whom Belgium has either (i) not concluded a double tax treaty or (ii) has concluded a double tax treaty which contains a specific provision that gives Belgium taxing powers as regards certain services such as e.g. technical assistance (amounting up to 8 countries as per today, such as Argentina, Brazil, India, etc.). Belgium was not able to tax such services in the past in the absence of a national legal basis, but it will now be able to do so. As such it could cover a broad spectrum of services e.g. Indian IT services could fall in the scope of the new Belgian provision. Please note that no permanent establishment in Belgium is required.
In practice, for the above two situations, the payments to the foreign individual or company for these qualifying services will in principle be subject to a professional withholding tax at a rate of 33% on the gross fee paid (after a lump sum deduction of 50% as professional expenses, resulting in an effective tax rate of 16,5%) which will need to be levied at source by the Belgian company, unless the foreign beneficiary is able to demonstrate that, in case of no double tax treaty, this income is effectively taxed in its own residence state or, in case of a double treaty with a specific provision, the latter foresees in a reduced rate.
Please note that it is still unclear which formalities will need to be complied with, but it is expected that a fee form will need to be drawn-up to avoid the special secret commission tax of 309%.
Service permanent establishment (PE)
As from 1 January 2013, if an individual of a foreign enterprise is performing services in Belgium for more than 30 days in a year in the framework of one or more related projects, that enterprise will be considered to have a Belgian establishment.
Furthermore, depending on the availability of tax treaty protection, if any, it will need to be assessed whether the Belgian establishment is also taxable or not and, if so, allocate an arm’s-length profit to the PE. In this respect, specific attention should be paid to those double tax treaties that contain a specific service PE -definition (i.e. amounting up to 20 countries as per today such as Argentina, China, Hong Kong, Singapore, UAE, etc.) as the amendment aims the taxation of these specific service PE’s.
Please note that, even if the Belgian establishment would not be considered as a PE under relevant double tax treaty, such does not affect the compliance formalities of having a Belgian establishment under merely Belgian domestic law. These formalities contain e.g. the filing of a non-resident tax return, fee forms 281.50, etc. These remain mandatory and non-compliance could lead to administrative fines.