On 27 November 2015 the Council of Ministers revised the lists of tax havens that apply for the purposes of the so-called dividends-received deduction (‘DRD’) and the reporting obligation for payments (to tax havens). Two draft Royal Decrees have been approved that add or delete certain countries to or from the lists following changes to domestic tax legislation.
Dividends received deduction
Under the DRD regime, Belgian companies or branches can exempt 95% of dividends received relating to qualifying shareholdings for Belgian Corporate Income tax (‘CIT’) purposes. Amongst others dividends do not qualify if received from a company that
- is not subject to Belgian CIT or a similar foreign tax (first category); or
- is established in a country of which the common tax regime is substantially more advantageous than in Belgium (second category).
Belgian tax law provides a list of countries that are deemed to have a substantially more advantageous common tax regime (second category), because the statutory nominal tax rate or effective tax rate is lower than 15%. One of the recently approved draft Royal Decrees adapts this so-called black list as follows:
- The following countries are deleted from the list: Afghanistan, Belize, Burundi, Cape Verde, the Central African Republic, Comoros, Cook Islands, Cuba, Dominica, Equatorial-Guinea, Grenada, Guinee-Bissau, Haiti, Iran, Iraq, Kiribati, Laos, Liberia, Montserrat, Namibia, Niue, North-Korea, Panama, Saint Kitts and Nevis, Saint Lucia, Saint-Pierre and Miquelon, Saint Vincent and the Grenadines, Samoa, American Samoa, Sao Tomé and Principe, Seychelles, Tuvalu and the United States Virgin Islands.
- The following countries are included in the list: Abu Dhabi, Ajman, Andorra, Bosnia-Herzegovina, Dubai, Gibraltar, Guernsey, Jersey, Kyrgyzstan, Kuwait, Kosovo, Liechtenstein, Macao, Macedonia, Maldives, the Isle of Man, Marshall Islands, Federated States of Micronesia, Moldova, Monaco, Montenegro, Oman, Uzbekistan, Paraguay, Qatar, Ras Al-Khaimah, Serbia, Sharjah, East-Timor, Turkmenistan and Umm al Qaiwain. According to a first press release, Switzerland would also have been added to the list, but this country has been removed in later updates after discussions on government level.
Please note that countries in which companies are not subject to a tax similar to Belgian CIT (first category) are not included in the above list, but dividends distributed by such companies would not qualify for the DRD either. In this respect, the Council of Ministers refers to Anguilla, Bahamas, Bermuda, Cayman Islands, British Virgin Islands, Nauru, Palau, de Pitcairn Islands, Saint-Barthelemy, Somalia, Turkish- and Caicos Islands, Vanuatu and Wallis-and-Futuna. The same applies for countries in which only companies with certain activities are subject to a tax similar to Belgian CIT on the profits therefrom, such as Bahrain and Fujairah.
Reporting obligation for payments
Companies subject to Belgian corporate income tax (residents/non-residents) have to report all (direct and indirect) payments in excess of EUR 100.000 made to recipients established in countries:
- with no or low taxation, i.e. the nominal standard tax rate is lower than 10% (Belgian list); or
- that, during the whole taxable period in which the relevant payment has been made, do not substantially or effectively apply the OECD exchange of information standard (OECD list).
The second recently approved Royal Decree would adjust the Belgian list as follows:
- Marshall Islands, Uzbekistan, Pitcairn Islands, Somalia and Turkmenistan would be added; and
- Andorra, Maldives and Moldova would be deleted.
Both draft Royal Decrees have been submitted to the Council of State.