Belgium.

Are liable to the withholding tax on income from movable property: the inhabitants of the Kingdom, domestic companies, any associations, institutions, establishments and bodies, legal entities liable to legal entities income tax, debtors of income from capital and movable property.

Dividends, interest and alike.

The basis of assessment is the gross dividend and interest income (before deduction of collection costs).

Copyright and related rights are also subject to the withholding tax on movable property.

DIVIDENDS:

"Parent-subsidiary" dividends

Dividends allocated by a subsidiary to its parent company are exempted from withholding tax inasmuch as the parent company is located in a Member State of the European Union or in a State with which Belgium has concluded a double taxation agreement. To benefit this exemption, the parent company shall maintain or have maintained, during an uninterrupted period of at least one year, a minimum share of 10% in the capital of its subsidiary.

The system of exemption from withholding tax on participation dividends also applies to dividend payments to a contracting State (non-Member of the European Union).

INTEREST:

Savings deposits

The first € 1,880 bracket (2015 income) of a yearly income from ordinary savings deposits is exempted from withholding tax on movable property where the beneficiary is a natural person. A 15% withholding tax is levied on the amount exceeding the exempted bracket.

Each spouse or legal cohabitant is entitled to the exemption. The double exemption also applies when only one savings account has been opened in the name of both spouses or legal cohabitants.

For more information on exemption conditions for ordinary savings deposits, please refer to the Tax Survey publication on the website of Federal Public Service Finance - Belgium available at :

http://finance.belgium.be/en/figures_and_analysis/analysis/tax_survey/

ASSOCIATED COMPANIES : implementation of the “Interest-Royalty Directive”

Interest paid by a domestic company to a domestic associated company or to an associated company situated in another EU Member State is exempted from withholding tax on income from movable property.

Two companies are deemed to be “associated companies” where one of them has a direct or indirect minimum holding of at least 25% in the capital of the second or where a third company established in the European Union has a direct or indirect holding of 25% in the capital of both the first and the second company. This holding must be or have been maintained during an uninterrupted period of at least one year.

The waiver of withholding tax on income from movable property only applies where the rights or debt-claims in respect of which the interest is paid, have not been held, at any time during the income-generating period, by an establishment situated outside the European Union.

The burden of proof as to the fulfilment of the requirements needed to be exempted from the withholding tax, lies with the taxpayee, notably by obtaning a certificate relating to the beneficiary's status.

Exemptions in respect of the investor's status

There are five distinct categories of investors:

• “financial institutions” (FI) : banks, insurance companies, credit unions, financial enterprises and, more broadly, public and private institutions having a legal personality, the activity of which consists solely in attributing credits and loans,
• “semi-public social security institutions” (SPSSI) : health insurance funds and institutions created within the framework of social legislation,
• “professional investors” (PI) : notably companies liable to CIT and Belgian branches of foreign companies liable to non-resident income tax/CIT,
• “private savers” (PS) : all taxpayers who are Belgian residents and who have not used their interest bearing movable property for their professional activity;
• “non-resident savers” (NRS) : taxpayers liable to non-resident income tax who have not used their movable capital for their professional activity in Belgium. In order to be eligible as a non-resident saver, for exemption from withholding tax on movable property, a certificate must be submitted which ascertains that the taxpayer is the owner or usufructuary of the interest bearing capital.

The table hereafter summarizes the most important exemptions (E), which are generally conditional, according to the investor's status and the kind of income.

Exemptions according to the investor's status

(1) Only for the first € 1,880 bracket of interest, for income earned in 2015.

For income allocated or made payable as from 1 January 2013, the rate of the withholding tax on income from movable property amounts as a standard to 25%, with the exception of five income categories. It concerns dividends from residential real estate investment companies (SICAFI/vastgoedbevaks), income from ordinary savings deposits and interest from the so-called “Leterme government bonds”, interest linked to thematic citizens lending and a portion of income from copyright.

1. DIVIDENDS

Please refer to the field "special features".

Moreover, a special tax system is provided for dematerialised securities.

Capitalisation SICAVs/BEVEKS and funds

Income from capitalisation SICAVs/BEVEKS and capitalisation funds of which the portfolio consists of more than 25% of interest-bearing debt securities (bonds, etc.), is subject to a 25% withholding tax on income from movable property . Income from the “debt component” of investments made by the SICAVs/BEVEKS or the funds (including capital gains and after deduction of capital losses) is taxable. Only SICAVs/BEVEKS having a European passport and being established outside the EEA were previously concerned. However, since 1 July 2013, the application scope has been extended to SICAVs/BEVEKS without European passport established in the EEA.

Interest from government bonds subscribed to between 24 November 2011 and 2 December 2011 and issued on 4 December 2011 (Leterme government bonds)

A 15% withholding tax is levied on interest from these government bonds.

Thematic citizens lending

Income from savings certificates and from term deposits to finance thematic citizens lending, is liable to a 15% withholding tax. The funds collected via the citizens lending must be used to finance clearly defined socio-economic projects.

3. COPYRIGHT AND RELATED RIGHTS

A 15% withholding tax on income from movable property applies to the first 57,270 euro bracket (2015 amount) of gross income from copyright. Gross income exceeding 57,270 euro is liable to the withholding tax at the 25% standard rate. All income from copyright must be mentioned in the personal income tax return.

Withholding tax on income from movable property becomes liable at the date of attribution or payment of the income.

Federal Public Service Finance

The legislation described includes changes decided in the year 2014 and likely to concern income allocated or made payable in 2015.

• Suspended indexation for exempted income from savings deposits.
• End of the transitional system and of the separate rate of the withhodling tax applicable to liquidation surpluses.
• Consequences as regards the withholding tax on movable property of the possibility for SMEs to build up a liquidation reserve.

Interest on advances assimilated to dividends

Interest on advances granted to their company by company managers or by natural persons who are shareholders, are assimilated to dividends insofar as and to the extent that:

• either the interest rate exceeds the normal market rate applicable to the present case;
• or the total amount of interest-bearing advances exceeds the total represented by the paid up capital at the end of the taxable period, increased by the taxed reserves existing at the beginning of the taxable period.

Interest on advances assimilated to dividends is liable to the withholding tax at the 25% standard rate.

Liquidation surpluses - end of transitional system

A 25% withholding tax (rate applicable as from 1 October 2014) is levied on the amounts allocated as a result of the total or partial distribution of the assets of a resident or foreign company. The amount liable to withholding tax is the amount chargeable as a dividend distributed under CIT provisions.

According to a transitional system, a reduced rate of 10% applied to dividends corresponding to the decrease in taxed reserves of which the amount has been immediately injected in the capital of the company and maintained for a specific period. This period is equal to 4 years for SMEs and 8 years for other companies.

Taxed reserves, as approved by the General Meeting on 31 March 2013 at the latest, could be distributed at a 10% tax rate, provided that and insofar as the amount received has been immediately injected in the capital and the capital injection has occurred during the last accounting year ended before 1 October 2014.

If the capital injected under this measure has been reduced, a withholding tax of 15%, 10% or 5% will apply according to the kind of company concerned (SME or other) and to the year in which the capital reduction occurs (within the 4 or 8 years after the capital injection).

Liquidation reserve

A special tax system of liquidation surpluses has been introduced for SMEs (as defined in Art. 15 of the Corporation Code). As from tax year 2015, SMEs have the possibility to use totally or partially their accounting profit after tax to build up a “liquidation reserve”. This reserve must be recorded and held continuously in one or several separate liabilities accounts (it may not be used as basis for any remuneration or allocation). It is liable to a separate tax of 10% when it is built up.  

No withholding tax will be due on the part of this reserve held until the liquidation of the company.

If dividends are distributed via a withdrawal from this reserve, before the liquidation of the company, the dividends are subject to the withholding tax on income from movable property at the following reduced rates:

-        15% if the distribution occurs during the first five years,

-        5% if the distribution occurs later.

If a part of the liquidation reserve is reduced, the oldest reserves are deemed to be the first withdrawn.

This system also applies to dividends from foreign companies established in a Member State of the EEA, provided that this Member State has decided similar measures to the Belgian system concerning the payment or the allocation of dividends.

Surpluses from repurchase of own shares

A 25% withholding tax is levied on the amounts allocated for the repurchase by the company of its own shares. The amount liable to withholding tax is the amount chargeable as a dividend distributed under CIT provisions.

This rate of 25% is valid for income paid or allocated as from 1 January 2013.

Residential real estate investment companies (SICAFI/vastgoedbevaks)

Since 1 January 2013, dividends from Belgian or foreign residential real estate investment companies (SICAFI/vastgoedbevaks) are liable to a 15% withholding tax.

Dividends from some shares of SMEs

 A reduced withholding tax applies to dividends allocated by SMEs (as defined in article 15 of the Corporation Code) to new registered shares issued upon cash contributions carried out as from 1 July 2013.

The withholding tax is equal to:

• 20% for dividends allocated or assigned on the occasion of the profit distribution relating to the second accounting year following that in which the injection occurred;
• 15% for dividends allocated or assigned on the occasion of the profit distribution relating to the third accounting year following that in which the injection occurred, and of the following profit distributions.

The conditions for the application of those reduced rates of withholding tax are the following:

• it must concern new cash contributions carried out as from 1 July 2013;
• the company benefiting from the capital injection must be a SME as defined in Article 15 of the Corporation Code;
• the new shares must be registered and paid up in full;
• the new shares must be hold by the shareholders in full ownership and for an uninterrupted period as from the capital injection.

Anti-abuse measures complete this system in case of capital increases associated with capital reductions.

Savings Directive

The EU Savings Directive provides for an automatic exchange of information in respect of interest payments made by paying agents established within a Member State to private individuals resident in another Member State. Interest payments received by an individual in a Member State that is not his residence for tax purposes are communicated by this Member State to the tax authorities of the beneficiary's country of residence.

The interest payments referred to in the Directive are interest payments related to debt claims of every kind, obtained directly or indirectly via undertakings for collective investment: accounts and deposits, fixed rate securities, interest distributed by some collective investment institutions (CII's) with a European passport and capital gains on parts in certain CII's.

During a transitional period, Belgium was allowed to levy a "Withholding tax for the State of Residence (WSR)" instead of applying the automatic exchange of information. Belgium moved on 2010 to the automatic exchange of information.