Direct Taxation: European Commission asks Belgium to modify certain discriminatory tax provisions
The European Commission sent two reasoned opinions to Belgium on discriminatory aspects of its taxation of inbound dividends and foreign investment companies.
The first request refers to Belgian rules regarding certain inbound dividends received by natural persons. Under Belgian law, residents in Belgium pay a tax of 15 % on dividends paid by a Belgian company of which the majority of the shares are held by natural persons or of which part of the capital is contributed by a private investment company established in Belgium. Dividends paid out by similar companies resident in other European Economic Area countries are subject to a tax rate of 25%. The Commission considers that the Belgian provisions are discriminatory and restrict the free movement of capital and the freedom of establishment.
The second reasoned opinion refers to legislation which discriminates against foreign investment companies. Under Belgian law, Belgian investment companies do not effectively pay tax on their Belgian-sourced interest and dividend income. They get a refund for any Belgian withholding taxes on their Belgian-sourced interest and dividend income. Foreign investment companies have to pay withholding taxes of 15 or 25 % on their Belgian-sourced interest and dividend income and cannot claim refunds. The Commission considers that the Belgian law is discriminatory and restricts the free movement of capital and the freedom of establishment.
According to the Commission these discriminations are incompatible with articles 49, 54 and 63 of the Treaty on the Functioning of the European Union (TFEU) and with the corresponding articles 31, 34 en 40 of the Agreement on the European Economic Area.