The Constitutional Court quashed the tax provisions providing for a reduced withholding tax of 15 % on interest arising from Belgian regulated savings deposits exceeding the threshold of EUR 1,250 per annum (read: EUR 1,880 for tax year 2014). As a reminder, below this threshold, interest on Belgian savings deposits is tax exempt.
With the 15% withholding tax rate on interest above this limit being cancelled by the Court, it is now the general withholding tax rate of 25% that should normally be applicable.
The Constitutional Court examined the validity of the withholding tax of 15% in light of the judgment of the Court of Justice of the European Union (CJEU) which condemned Belgium in June 2013 for its (discriminatory) withholding tax exemption on interest up to an amount of EUR 1,250 per annum (read: EUR 1,880 for tax year 2014) arising from regulated savings deposits held with a financial institution established in Belgium. As a reminder, the CJEU considered this withholding tax exemption as discriminatory since this measure was not applicable to interest arising from regulated savings deposits held with a financial institution established outside Belgium.
The Constitutional Court ruled that the reduced withholding tax of 15% was also a discrimination against foreign financial institutions.