Who is liable to levy the withholding tax (“WHT”) on income attributed to taxpayers subject to the legal entity income tax? This question has been addressed by the Supreme Court in several (and opposite) decisions. On its side, the Belgian tax administration has consistently adjusted its stance on this matter in various Practice Notes, the latest of which was issued on 5 May 2018 following a decision of the Supreme Court rendered on 10 November 2017.
Decision of the Supreme Court of 9 January 2015
According to the decision of the Supreme Court of 9 January 2015 (Dutch Chamber), in a situation where the income debtor does not levy the WHT, the income beneficiary (i.e. the taxpayer subject to the legal entity tax) becomes the sole party liable to pay the WHT (even though the income debtor initially supported this obligation). This position results from a certain interpretation of article 262, 1°, a), of the Belgian Income Tax Code of 1992. At that moment, the Belgian tax administration had adjusted its stance in a Practice Note of 15 June 2015.
Decision of the Supreme Court of 10 November 2017
On 10 November 2017, the Supreme Court (French Chamber) changed its position and considered that, if the income debtor does not levy the WHT (whereas the law requires it), it is not relieved from this legal obligation by the sole fact that the income beneficiary would be a taxpayer subject to the legal entity tax. In addition, the income beneficiary should not be liable for the payment of the WHT.
Once again, the Belgian tax administration has adjusted its stance in a recent Practice Note issued on 2nd May 2018, coming back to its old position expressed in Practice Note of 21 March 2001. According to the Belgian tax administration, the taxpayer subject to the legal entity income tax should only be considered as liable to pay the WHT in situations where the absence of levying of the WHT at source is grounded by law.
The taxpayers concerned, be them income debtors or income beneficiaries, should carefully consider the implications of the decision of the Supreme Court rendered on 10 November 2017, with which the administrative stance is now aligned. For instance, depending on the viewpoint and circumstances, reclaims or regularizations could be opportune.
More generally speaking, PwC Belgium has gained an extensive experience and expertise on matters related to the legal entity income tax and remains at your disposal should you have any question or query in this framework.