On 23 July 2014, the Belgian Central Tax Administration published a note to the debtors of payroll tax for payments to non-residents in the Belgian Gazette, which provides for some welcome clarifications.
Following the Miscellaneous Provisions Act of 13 December 2012 (published in the Belgian Official Gazette on 20 December 2012) and the Royal Decree of 4 March 2013 (published in the Belgian Official Gazette on 8 March 2013), as of 1 March 2013, Belgian debtors were required to retain payroll tax on payments made to non-residents located in a jurisdiction with which Belgium has:
• not concluded a double tax treaty (so-called ‘tax havens’); or
• 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 (according to the preparatory works, this concerns 8 double tax treaties as per today, being Argentina, Brazil, Ghana, India, Morocco, Romania, Rwanda, Tunisia).
As this obligation aims at taxing non-residents on every ‘other income’ (i.e. income for which there was previously no domestic tax basis to do so), this section 228, §3 BITC was soon referred to as ‘the catch-all provision’.
The rate amounts to 33% on the gross fee paid (resulting in an effective tax rate of 16,5% as a lump-sum deduction of 50% as business expenses is allowed), unless however the non-resident is able to demonstrate that:
• If no double tax treaty applies, this income is effectively taxed (i.e. included in the tax basis) in its own State of residence, in which case no payroll tax is due at all in Belgium on the payment; or
• If a double tax treaty applies, the relevant provision provides for a reduced rate, in which case the payroll tax due is limited by the rate of the double tax treaty.
The payments need to be reported by the Belgian debtor on a fee form 281.30 and filed before 1 March of the following calendar year.
Scope narrowed down to payments for services
As one could already read in the preparatory works, the Belgian Central Tax Administration confirms that, notwithstanding the broad wording of the law, only payments for services are targeted.
De minimis threshold of EUR 38,000
The Belgian Central Tax Administration takes the position that no payroll tax should be retained on the first tranche of EUR 38,000 per non-resident, per year and per Belgian debtor.
However, in case a double tax treaty applies which provides for a reduced rate, the maximum rate will not (per se) be calculated on the amount exceeding the EUR 38.000, but on the total amount of fees which trigger the exceeding.
Certificate of evidence for effective taxation
The note provides for a template which could be used by the non-resident to obtain certification by the tax authorities of its State of residence, confirming that:
• It is a resident there, and;
• It is effectively taxed or will be effectively taxed on the respective income.
If no such certificate has been provided to the Belgian debtor, who will need to maintain it in its files as evidence, the latter is required to retain and pay the payroll tax. However, the non-resident has the right to lodge an appeal, should the income be effectively taxed in its State of residence. Alternatively, relief can also be requested through a Belgian non-resident tax return to be filed by the non-resident service provider.