On October 15th, 2020, the Belgian Court of Cassation, the highest court in our country, ruled for the second time that the double taxation of French dividends is not in accordance with the law. Currently, the Belgian tax authorities impose a tax of 30 % on net French dividends received by individuals considered to be resident in Belgium for tax purposes. However, the Court of Cassation has now ruled already for the second time that this is not in accordance with the provisions of the double tax treaty between France and Belgium.
WHAT EXACTLY IS IT ALL ABOUT?
A French dividend received by an individual who is considered a Belgian tax resident, is subject to withholding tax in France and then again subject to taxation in Belgium at a rate of 30 % on the net French dividend. This Belgian tax is levied either through the deduction of withholding tax by your Belgian bank or other financial intermediary, or through the annual personal income tax return. This double taxation in France and Belgium results in a significant tax burden on these dividends. However, Belgium has concluded a double tax treaty with France based on which, on the one hand, the French withholding tax in this situation is limited to a maximum of 15 % and, on the other hand, a tax credit should be provided in Belgium: the so-called lump sum foreign tax. Even though it is not in accordance with the provisions of the double tax treaty between France and Belgium, the Belgian tax authorities do not grant this tax credit on the basis of Belgian internal legislation.
DECISION AGAIN IN THE ADVANTAGE OF THE TAXPAYER
In the past, the Belgian Court of Cassation already ruled that the Belgian tax authorities do not act in accordance with the legal provisions of the double tax treaty between France and Belgium when they do not grant this tax credit to natural persons on the basis of Belgian internal legislation. In accordance with the general principle of primacy of international law over domestic law, the international treaty provisions have priority over Belgian domestic legislation. At the time, however, the Belgian administration simply disregarded the decision of the Court of Cassation, resulting in new, similar court cases. On October 15th, 2020, the Court of Cassation again ruled in favour of the taxpayer: a natural person who is considered a Belgian tax resident and who receives a French dividend is entitled to set off the lump sum foreign tax against the Belgian personal income tax due. This should reduce the heavy tax burden on these dividends. It remains to be seen how the Belgian tax authorities will deal with this second ruling in just a few years' time. Finally, we would like to point out that, in principle, these rules also apply to dividends from countries other than France with which Belgium has concluded a double tax treaty and which provides for a minimum amount or percentage of the lump sum foreign tax. However, please be informed that the provisions of the applicable double tax treaty always should be investigated in this respect.
WHAT CAN YOU DO?
In case you, as a private investor and tax resident in Belgium, receive French sourced dividends, you could, if not already done so, file a formal tax claim with the Belgian tax authorities in view of this second decision of the Belgian Court of Cassation to claim this tax credit. This must be done within a period of 6 months after receipt of your tax assessment note. In case more than 6 months have already gone by, you could submit a request for an ex officio exemption from personal income tax with the tax authorities and this within a period of 5 years as from January 1st of the year in which the tax assessment note was issued. If desired, RSM Belgium can assist you on this. Please note however that the Belgian tax administration has not yet taken a position on this matter in the past and that they were still waiting for the decision of the Court of Cassation. At this moment in time, they are still in the process of examining this new decision of the Court.
If you would like to receive additional information on this matter or assistance, the tax team of RSM Belgium is at your disposal ([email protected]).