Both resident and non-resident investment companies have been subject to Belgian withholding taxes on Belgian-source dividends and interest. However, Belgian tax law provided an exemption of such income in the hands of Belgian-resident investment companies with the result that these taxpayers were able to obtain a refund of Belgian withholding taxes, whereas non-resident investment companies could not. Apart from a possible reduction to tax treaty rates (often 15%), Belgian withholding taxes posed a final burden.
The CJEU in October 2012 issued a judgment in Commission v. Belgium (C-387/11), and held that the Belgian rules on the taxation of income from capital of non-resident investment companies with no permanent establishment in Belgium created an unjustified restriction on the freedom of establishment and the free movement of capital.
Guidance for refunds of withholding tax
The Belgian tax authorities issued guidance in early March 2013 in response to the CJEU judgment. The guidance provides that:
- Investment companies established in the European Economic Area (EEA) may be eligible for refunds of withholding tax, provided they are in compliance with provisions of the European Undertakings for Collective Investments in Transferable Securities (UCITS) Directive.
- Investment companies established outside the EEA may also be eligible for refunds, provided there is compliance with the European UCITS Directive, as well as other criteria.
- Non-resident investment companies must prove that the withholding tax cannot be credited or refunded in their country of residence because of a local tax exemption regime or because of local tax losses or insufficient taxable profits.
As a consequence of the tax authorities’ March 2013 guidance, it is expected that tax officials assigned authority over a refund claim will first consider claims filed by EEA investment companies and request the necessary information, if not yet available, in order to assess the UCITS-compliant status. Once the UCITS-compliant status is demonstrated, it is expected that a positive decision and refund would soon follow.
Refund claims filed by investment companies not qualifying as UCITS-compliant investment companies would not be automatically rejected, but a decision could be postponed until guidelines have been published in respect of the CJEU judgment in the Tate & Lyle Investments case.
Investment companies that have not yet filed any refund claims can still do so, and request a refund of Belgian withholding taxes for all open tax years (the March 2013 guidance seems to accept at least a five- year period allowing refund claims going back to withholding taxes paid in 2008).
Read a March 2013 report prepared by the KPMG member firm in Belgium: Administrative circular gives first guidelines in the field of Aberdeen claims