As we already know, in domestic Belgian law, the tax payable by individuals on foreign-sourced dividends is often much greater than the tax charged on Belgian-sourced dividends.

A double-taxation situation

To find out why you need to go back to 1988 and the changes to the fixed foreign tax credit rules (QFIE) for individuals. This system allowed any individual who received a foreign-sourced dividend and was subject to the deduction of tax at source in the country of origin to offset all or part of this withholding against the Belgian tax relating to this dividend.

The ending of the QFIE system for individuals acting in a private capacity created a potential situation of double taxation of foreign-sourced real estate income, with no objections from the Belgian or European legal authorities thus far.

A judgement in favour of taxpayers

The situation is about to change, however, as the Belgian Court of Cassation has delivered a judgement which, for the first time, finds in favour of taxpayers.

This judgement was delivered within the restricted context of French-sourced dividends paid to a Belgian individual. It is unfortunately likely that the decision will not be transposable to dividends from other countries, such as Switzerland or the United States.

The grounds for the judgement are the conflict between Belgian domestic law and the provisions of the convention for the avoidance of double taxation with respect to taxes on income between Belgium and France and, more specifically, article 19, A, 1.

This provision stipulates that: "For revenue and income (from investments) […], which is received by other Belgian residents, [….], who have effectively been subject to the deduction of tax in France, the tax due in Belgium on the amount net of the French withholding shall be reduced, firstly by Belgian withholding tax levied at the normal rate and, secondly by the fixed foreign tax credit deductible under the conditions set by Belgian law, although this tax credit cannot be less than 15 p.c. of the said net amount".

An ongoing dispute

By restricting the possibilities for individuals to offset QFIE against tax due in Belgium after the entry into force of this convention for the avoidance of double taxation, the Belgian legislature created a conflict between domestic Belgian law and the Belgian-French convention, which establishes international legal provisions that are directly effective in Belgium.

The Court of Cassation reiterated, however, that, due to the general principle of the primacy of international law over domestic law, the Belgian state is obliged to allow the offsetting of QFIE, regardless of whether the conditions for allowing this offsetting have been changed retroactively. Based on the above, the Court of Cassation quashed the judgement of the Gand Court of Appeal, which ruled against the taxpayer and referred the case to the Antwerp Court of Appeal.

We therefore need to wait for the judgement from the Antwerp Court of Appeal before the dispute can be considered to have been finally resolved. If the Antwerp Court of Appeal is of the same opinion as the Court of Cassation, which is more than likely, this would mean that individual taxpayers who had received French dividends could be granted a rebate of part of the tax that they have had to pay on French-sourced dividends in the last five years.

The rebate in key figures

As an illustration, below is a quantified example of the sums for which a rebate may be requested for a year:

In practice, rebates should be requested by filing an administrative appeal with the relevant tax authorities. Although the Antwerp Court of Appeal will not deliver its judgement any time soon, there is nothing to prevent taxpayers from filing such appeals immediately.

Contact us to find out more

Bernard Goffaux
Head of Estate Planning
tel.: +352 49 924 3922

Christophe Delanghe
Estate Planner
tel.: +352 49 924 3924