Beneficial owners eligible for tax exemption - Belgian equities
The following types of beneficial owner of Belgian equities are recognised for tax purposes in Belgium:
- Residents of Double Taxation Treaty (DTT) countries;
- Supranational and international organisations;
- Non-resident pension funds;
- Foreign companies holding a "qualifying" participation.
Residents of Double Taxation Treaty (DTT) countries
Relief at source from withholding tax on dividends from Belgian equities is not available through Clearstream Banking.
A quick refund of withholding tax is available to beneficial owners that qualify for the benefit of a reduced rate of withholding tax in accordance with a Double Taxation Treaty (DTT) between their country of residence and Belgium.
A standard refund of withholding tax is available through Clearstream Banking if the required certification was not provided before the quick refund deadline.
The customer can reclaim withholding tax on behalf of the beneficial owner through Clearstream Banking by submitting the appropriate documentation.
The maximum rate of withholding tax is defined in the relevant DTT.
Supranational and international organisations
Relief at source from withholding tax on dividends from Belgian equities is available to beneficial owners that are supranational or international organisations of which Belgium is a member (for example, NATO) and that, by virtue of their organisation status and according to Royal Decree C.I.R. 92 article 105 paragraph 2c, are exempt from Belgian withholding tax on their income provided that the securities were effectively held by the beneficial owners for a full dividend year.
A quick refund of the full amount of withholding tax is available through Clearstream Banking provided that the securities were effectively held by the eligible beneficial owner for a full dividend year.
A standard refund of the full amount of withholding tax is available through Clearstream Banking if the required certification was not provided before the quick refund deadline and provided that the securities were effectively held by the eligible beneficial owners for a full interest year.
If the securities were owned by the eligible beneficial owner between dividend payment dates, a standard total refund is available for the period in which the securities were effectively held.
The customer can reclaim withholding tax on behalf of the beneficial owner through Clearstream Banking by submitting the appropriate documentation.
Non-resident pension funds
A non-resident pension fund is recognised as an eligible beneficial owner of Belgian equities provided that it fulfils the following criteria according to Belgian Law:
- It does not have its domicile or principal source of income in Belgium.
- Its business is not managed or controlled in Belgium and it does not have its registered address in Belgium.
- It is the beneficial owner of the securities held in the safekeeping account.
- Its corporate purpose consists exclusively in the management and placement of funds collected for the purpose of financing legal or complementary pension schemes.
- Its sole and exclusive activities are limited to the operations listed within article 182, 2°, of the Income Tax code.
- It is exempt from any kind of tax on income in its own country of residence.
Exemption at source or quick refund from withholding tax is not available.
A standard refund of the full amount of withholding tax is available through Clearstream Banking.
The customer can reclaim withholding tax on behalf of the beneficial owner through Clearstream Banking by submitting the appropriate documentation
Foreign companies holding a "qualifying" participation
Beneficial owners that are foreign companies holding a “qualifying” participation in a Belgian parent company distributing dividends can obtain a reduced withholding tax rate of 1.6995% (only for payments from 2016 till 31 December 2018) or exemption of withholding as follows:
Eligibility criteria parent company with minority participation
A reduced withholding tax rate of 1.6995% on dividends was granted since 2016 to foreign investors provided that they fulfil the following criteria, as set out in Article 269/1 of the Belgian Income Tax Code. This tax rate is equal to 5% of the Belgian corporate tax (33.99% - including the supplementary 3% crisis contribution).
As of 1 January 2018, new fiscal measures including the repeal of the 1.6995% rate became effective. With the new laws, the dividend received deduction (DRD) applied on qualifying dividends received by Belgian parent companies from subsidiaries, increased from 95% to 100%. Consequently, the withholding tax rate of 1.6995% is no longer applicable, and dividends received by non-resident parent companies are fully exempt.
The reduced rate of 1.6995% is still applicable, through standard refund, for dividends paid until 31 December 2017.
In order to benefit from the reduced rate or exemption, both the foreign company and the issuing company must be fully subject to corporate tax.
The foreign investor must:
- Be either incorporated in a country other than Belgian, which is a member of the European Economic Area or in a country having signed a double taxation treaty with Belgium containing an exchange of information provision;
- Have one of the legal forms described by Directive 2011/96/EU of 30 November 2011, or comparable for a beneficiary resident in a non-EU jurisdiction;
- Hold a participation of less than 10% in the capital of the Belgian distributing company but for an acquisition value of at least EUR 2.5 million;
- Hold the shares for an uninterrupted period of one year;
- Be fully subject to corporate tax;
- Not be able to deduct the Belgian withholding tax from the tax payable in its country of incorporation;
- Have certified to the Belgian Tax Authorities that it complies with all the above-mentioned required conditions.
Eligibility criteria for parent company with substantial participation ( exemption of withholding tax)
As per Royal Decree of 21 December 2006, incorporating the EU Parent-Subsidiary regime Directive 2011/96/EU (formerly 90/435/CEE), a parent company that meets the following conditions can be eligible for an exemption on dividends distributed by a subsidiary established in Belgium:
The parent company must:
- Be established in a member state of the EU other than Belgium or in a country having signed a double taxation treaty with Belgium containing an exchange of information provision;
- Have one of the legal forms described by Directive 2011/96/EU of 30 November 2011, or comparable for a beneficiary resident in a non-EU jurisdiction;
- Hold a participation of more than 10% in the capital of the Belgian distributing company for an uninterrupted period of one year;
- Be subject to corporate tax or similar, without being exempt from it;
- Have certified to the Belgian Tax Authorities that it complies with all the above-mentioned required conditions.
Exemption at source from withholding tax is available on submission of the required certification.
A quick refund of the full amount of withholding tax is available through Clearstream Banking if the required certification was not provided before the exemption at source deadline.
A standard refund of the full amount of withholding tax is available through Clearstream Banking if the required certification was not provided before the exemption at source or quick refund deadlines.