How To Tax In Belgium

Transcription

1 Belgium Taxation FUNDS AND FUND MANAGEMENT Taxation of funds Open-ended collective investment funds are organized either as an FCP (investment fund fond commun de placement) with a variable number of units, or a bevek/sicav (investment company with a variable number of shares beleggingsvennootschap met veranderlijk kapitaal/société d investissement à capital variable). A general exemption of registration duties on formation applies. FCP (investment fund) An FCP, not being a legal entity but comprising assets held in joint ownership, is transparent for tax purposes. As a result it is exempt from corporate income tax on income and/or capital gains. Interest and dividends received by the management company on behalf of an FCP are subject to a 25 percent withholding tax on dividends (15 percent on dividends related to certain shares issued as from 1 January 1994), and 15 percent on interest. For foreign income, this withholding tax is to be paid by the first Belgian intermediary, which may be the management company. An FCP can only distribute or capitalize its net income (that is, income after deduction of Belgian withholding tax). An FCP is, in principle, not eligible for the reduced rates or exemptions of withholding tax provided in the tax treaties concluded by Belgium. BEVEK/SICAV (investment company) A bevek/sicav is an autonomous legal entity and is therefore subject to corporate income tax at the rate of percent on income and /or capital gains. However, the taxable basis of a bevek/sicav consists only of the aggregate of non-deductible expenses (other than amounts written off on and losses on the disposal of shares) and abnormal and benevolent advantages received. Therefore the actual tax burden is negligible. A bevek/sicav will mostly be exempt from Belgian withholding tax on its income received, with the exclusion of Belgian source dividends. The latter are

2 2 Belgium Taxation subject to a 25 percent withholding tax (15 percent on dividends related to certain shares issued as from 1 January 1994), unless they fall under the application of the Parent-Subsidiary Directive (exemption of withholding tax). The withholding tax can be credited against the tax liability of the bevek/sicav and any excess is refundable. A bevek/sicav is eligible for the reduced rates of withholding tax with respect to foreign dividend and interest income provided in the tax treaties concluded by Belgium. Institutional collective investment companies formed as bevek/sicav benefit from the same favorable tax treatment. 3.2 Taxation of resident unitholders/investors in a resident fund Distribution of income By a (transparent) FCP Income attributed to resident private individual unitholders of a (transparent) FCP is in principle not subject to withholding tax since it has already been subject to withholding tax upon receipt by the fund s management company. For private individual investors such withholding tax is the final tax and no further income tax is due by the unitholder. When the management company of the FCP however does not provide a breakdown of the attributed or distributed income, a withholding tax of 25 percent will be due on the attributed or distributed income. This withholding tax is the final tax for the private investor. For income attributed to resident corporate unitholders, the breakdown of the attributed or distributed income should allow transparent taxation of the income with application on behalf of the corporate investor of the dividends received deduction for dividends (which broadly can disregard 95 percent of the dividend for tax purposes) and the fixed foreign tax credit for foreign source interest. If no breakdown of the income is given, a withholding tax of 25 percent will be due. This withholding tax is credited against the final corporation tax and any excess is refundable.

3 3 Belgium Taxation By an (incorporated) investment company (bevek/sicav) Income attributed to a resident shareholder, whether individual or corporate, is subject to a withholding tax of 15 percent. For a private individual this withholding tax is the final tax. For a corporate shareholder the withholding tax is credited against the final corporation tax and any excess is refundable. The dividend attributed by the investment company in principle does not qualify for the dividends received deduction, unless it is stipulated in the articles of association of the investment company that at least 90 percent of its net income is to be distributed to the shareholders. The dividends received deduction, where applicable, will apply only to the extent that the dividend stems from income that would satisfy the conditions for this deduction (transparency rule). Distribution of gains By a (transparent) FCP If the fund s management company provides the investor with a breakdown of the capital gains attributed, these gains attributed to resident private individual unitholders of a (transparent) FCP are not subject to tax. For gains attributed to resident corporate unitholders, the breakdown of the attributed or distributed income should allow transparent taxation of the income with application on behalf of the corporate investor of the exemption of capital gains on shares. If no breakdown of the income is given, a withholding tax of 25 percent will be due. By an (incorporated) investment company (bevek/sicav) Gains realized by the investment company can be attributed to its shareholders by way of a dividend distribution only (withholding tax of 15 percent). Undistributed income and gains In a (transparent) FCP Due to the look-through approach, the unitholder is deemed to be the beneficiary of the income and gains of the FCP, whether distributed or not.

4 4 Belgium Taxation Private individual unitholders are however not liable to tax on the undistributed income of a (transparent) FCP since they have already been subject to withholding tax upon receipt by the fund s management company (withholding tax withheld either by the Belgian debtor or paying agent or by the FCP). Corporate unitholders are generally not taxed on undistributed income and gains. The taxation will generally be postponed until the moment of the sale of the units, unless the income of the FCP is directly recorded in the books of the corporate unitholder (depends on the accounting decision; to be checked with the auditor of the corporate unitholder). In an (incorporated) investment company (bevek/sicav) Shareholders of an investment company are not taxed on undistributed income or gains. Gains on disposal of fund units Units of a (transparent) FCP Capital gains realized on the sale or redemption of units of a transparent investment fund are in principle exempt from Belgian withholding and income tax for Belgian private individual investors. However, Belgian individual participants of an investment fund that would invest more than 40 percent in debt securities (bonds, etc.) may be taxed upon redemption of the shares/units. In a recent ruling decision of 16 May 2006, the Belgian Ruling Commission confirmed that this exit tax also applies to the redemption of units of (fiscally transparent) contractual funds (FCP). This exit tax of 15 percent (or Belgian savings tax) is originally levied on the amount of the interest accrued on the underlying debt securities of the fund during the period that the individual investor has held the units. As from 1 January 2008, the taxable base is extended to the capital gains and capital losses on the underlying debt securities (calculation needed of a Belgian TIS). The taxation is however limited to the capital gain realized by the Belgian investor upon redemption of his units in the fund. On 30 June the Belgian tax authorities published a circular letter with regard to this exit tax. In this circular letter it is confirmed that the Home Country Rule as defined in the Savings Directive will be used in calculating the asset test and the TIS (with inclusion of capital gains and losses). Gains realized by resident corporate unitholders, are in principle not tax exempt. If the fund s management company however provides the investor with a breakdown of income attributed, this should allow transparent taxation of the

5 5 Belgium Taxation income with application on behalf of the corporate investor of the exemption of capital gains on shares. Shares of an (incorporated) investment company (bevek/sicav) Capital gains realized on the shares of an incorporated investment company are exempt from Belgian withholding and income tax for Belgian private individual investors, provided they are realized within the scope of the normal management of one s own private estate. The liquidation tax of 10 percent on capital gains realized upon liquidation or upon redemption of shares of a company is explicitly not applicable to a bevek/sicav. Capital gains realized upon redemption or liquidation of the shares may however be taxed on behalf of the Belgian individual participants when the bevek/sicav is investing more than 40 percent in debt securities (bonds, etc.). As from 1 January 2008 this exit tax of 15 percent is levied on the amount of the interest accrued and the capital gains and capital losses on the underlying debt securities of the fund during the period that the individual investor has held the shares. The taxation is however limited to the capital gain realized by the Belgian investor upon redemption of his shares in the fund. For resident corporate shareholders capital gains realized upon a sale of the shares of an incorporated investment company are subject to corporate income tax (at least under the current interpretation of the law as the administrative interpretation is under discussion). With respect to capital gains realized upon redemption of shares of an incorporated investment company the circular letter of 31 May 2006 has clarified the position of the Belgian tax authorities. The tax authorities clearly state that the income deriving from redemption of shares by a bevek/sicav may qualify for the dividends-received-deduction, to the extent that the underlying shares of the bevek/sicav meet the conditions for dividends-receiveddeductions (transparency rule). Wealth tax Belgian tax law does not provide for wealth tax. Gift/inheritance tax Belgian resident investors are in principle subject to gift/inheritance tax with respect to fund units.

6 6 Belgium Taxation Tax credit The Belgian withholding taxes are fully creditable and refundable for Belgian investors. Private individual investors are not entitled to a tax credit on foreign income. Corporate investors are entitled to a foreign tax credit in respect of foreign interest income only. Where the corporate unitholder of a (transparent) FCP is liable to tax on the underlying income of the FCP, he/she is entitled to a tax credit for foreign source interest income included in the (un)distributed income of the FCP. Where the corporate shareholder of an investment company receives a dividend, he /she is entitled to a tax credit for foreign-source interest income included in the dividend distribution. Tax relief There are no tax reliefs available to encourage investment in local funds rather than in foreign funds. 3.3 Taxation of resident unitholders/investors in a non-resident fund Foreign contractual fund The transparency of a foreign fund for Belgian tax purposes depends: on the absence of legal personality of the fund; and where the investments are legally owned by a separate corporate body (management company or trustee), on the yearly distribution by the fund of its total income. The tax transparent treatment of the FCP would in principle result in an immediate taxation of the income received by the FCP in the hands of the Belgian individual investors without conversion of the nature of the income. To that purpose, the Belgian tax law, as from 1 January 2007, obliges the management company of the FCP to provide a detail of the attributed or distributed income of the fund per income category (interest, dividend, and capital gain). If no such breakdown is given, the Belgian individual investor will be taxed at a rate of 25 percent on the attributed or distributed income. Provided that sufficient detail is given with respect to the nature and source of the fund s income that is distributed to the investor, withholding tax is to be levied by the Belgian correspondent only with respect to that portion of the unit income, which stems from non-belgian source income and according to the withholding tax rates that apply on that income.

7 7 Belgium Taxation If no Belgian withholding tax has been withheld, the private individual unitholder will be obliged to declare the distributed and undistributed unit income in his/her personal income tax return. Capital gains realized on the sale or redemption of units of a transparent investment fund are in principle exempt from income tax for Belgian private individual investors (provided it is no FCP investing more than 40 percent in debt securities see above). Corporate unitholders are generally not taxed on undistributed income and gains. The taxation will generally be postponed until the moment of the sale of the units, unless the income of the FCP is directly recorded in the books of the corporate unitholder (depends on the accounting decision; to be checked with the auditor of the corporate unitholder). Foreign investment company As a rule, dividends received through a Belgian resident intermediary are subject to Belgian withholding tax. On behalf of an individual investor, there is no withholding tax obligation if the dividends are received directly abroad, but then the investor is obliged to declare the dividend in his/her income tax return and subsequently pay an income tax equal to the withholding tax. An exemption from Belgian withholding tax is available for corporate investors. As a rule, dividends distributed by an investment company normally do not qualify for the dividends-received deduction and are therefore generally taxed at the normal corporate income tax rate of percent. By way of exception, the dividends-received deduction applies where it is stipulated in the articles of association of the investment company that at least 90 percent of the investment company s net income is to be distributed to its shareholders (art. 26, S2, al. 2 R.D. 20 December 1996). In this case, the shareholders are entitled to the dividend-received deduction; however, only to the extent that the dividend stems from income that would satisfy the conditions for this deduction (transparency rule). Capital gains realized by a private investor upon redemption of the shares do not constitute taxable income (provided it is no bevek/sicav investing more than 40 percent in debt securities see above). For capital gains realized by corporate investors upon redemption, the same rules apply as for dividends received. Shareholders of a foreign investment company are not taxed on undistributed income or gains.

8 8 Belgium Taxation 3.4 Taxation of non-resident unitholder/investor in a resident fund Unitholders in FCP In principle, Belgian withholding tax will have been withheld on the income realized by the FCP. An exemption of withholding tax applies on Belgian dividends paid to certain recognized Belgian FCPs, which are only open for non-residents that are not engaged in a business activity and exempted from income tax in their home country. However, when the non-resident unitholder is contractually obliged to pay through the dividend income to the beneficial owner, the aforementioned exemption will not apply. Income distributed by an FCP to non-resident individual and corporate unitholders is not subject to Belgian withholding tax. Non-resident unitholders are not subject to further taxation on net income earned from the fund (unless they have a permanent establishment in Belgium). The obligation imposed on the fund to give a breakdown of the distributed and undistributed income and gains ought to allow a transparent tax treatment. Non-resident unitholders are not liable to tax in Belgium on capital gains arising on the disposal of a unit. Shareholders in BEVEK/SICAV Non-resident shareholders (individuals and corporations) are in principle liable to non-resident tax on distributions from a bevek/sicav. However, the non-resident tax equals the withholding tax due by the bevek/sicav on its distributions. Exemption from withholding tax has been provided for by royal decree for distributions to non-resident shareholders (corporate as well as individual) of a bevek/sicav, except for that part of the distribution which is traceable to Belgian-source dividends. The bevek/sicav is obliged to give a breakdown of the distributed income. On that part traceable to Belgian source dividends, a 15 percent withholding tax applies. This withholding tax is subject to the usual tax treaty reductions. Non-residents can apply for the general dividend withholding tax exemption if they are: not engaged in a business activity; and exempted from income tax in their home country (such as foreign pension funds).

9 9 Belgium Taxation However, when the non-resident unitholder is contractually obliged to pay through the dividend income to the beneficial owner, the aforementioned exemption will not apply. No tax is due on capital gains realized by the shareholder on redemption of the shares in a bevek/sicav. Wealth tax Shareholders of an investment company are not taxed on undistributed income or gains. Gift/inheritance tax Non-residents are not subject to inheritance or gift tax in Belgium in respect of shares or units. There is no wealth tax in Belgium. 3.5 Taxation of fund management/custodian companies Fund management companies are relevant only to an FCP (A bevek/sicav is a corporate body and has its own management). Depository companies are required to be a bank, a private savings bank, or a credit institution created under a specific Belgian law. They are subject to normal Belgian corporate taxation (33.99 percent) without any special incentive. Value-added tax (VAT) exemptions apply to financial and administrative management of the fund. Other services are taxed at the rate of 21 percent. 3.6 Entitlement to income FCP The unitholder is legally regarded as being in receipt of income only on the occasion of the FCP making a distribution to the unitholder, by making payable one of the coupons attached to the unit. For tax matters, however, the unitholder is deemed to have received the income and gains of the FCP whether distributed or not. BEVEK/SICAV The shareholder is only regarded as being in receipt of income on the occasion of the bevek/sicav making a distribution, or upon redemption of the bevek/sicav shares.

10 10 Belgium Taxation 3.7 Double tax agreements A foreign fund in corporate form would in principle be entitled to the benefits of Belgium s double tax agreements. Other foreign funds (contractual funds) are not entitled to the benefits of Belgium s double tax agreements. In principle, the unitholders in such a transparent fund, if resident in a treaty state, are entitled to the treaty benefits, although claiming these may be difficult in practice. Similarly, an FCP is, in principle, not entitled to the benefit of Belgium s tax treaties but its unitholders are. In this case too, practical problems may arise when attempting to take advantage of the treaty benefits. It is however worth mentioning that the double tax convention between Belgium and The Netherlands, which has entered into force as from 1 January 2003, provides the possibility for the FCP to rely on this convention, in the name of and/or for the account of its unitholders, in order to apply for reduction of exemption of withholding tax. A bevek/sicav, being a corporate body that is in principle subject to Belgian corporate tax, is entitled to treaty benefits. 3.8 Other tax-favored vehicles Closed-ended investment funds Above we have explained the tax regime of open-ended investment funds. As mentioned under 1.1, the Belgian law also provides for closed-ended investment funds (investment fund with a fixed number of units - fonds commun de placement à capital fixe). Some of these closed-ended investments funds have a specific investment goal and are subject to specific tax provisions: Prifonds (private equity fund FCP with a fixed number of units) Re-bevak/sicafi (real estate investment companies) Privak/pricaf (private equity bevak, mainly investing in non-quoted companies and growth companies) Private privak/pricaf privée (a privately held private equity bevak investing in non quoted companies) An investment fund is deemed to be closed-ended if its shares/units may not be repurchased at the request of the holders. The shares/units of an investment fund with a fixed number of units must be listed on the stock exchange (except for the private privak/pricaf privée).

11 11 Belgium Taxation Both the re-bevak/sicafi, the privak/pricaf and the private privak/pricaf privée have the obligation to distribute a yearly dividend of at least 80 percent of the net-revenues (that is, profit of the year as adjusted). The specific investment restrictions for the re-bevak/sicafi are laid down in the royal decree of 10 April 1995, for the privak/pricaf and the prifonds in the royal decree of 18 April 1997 and for the private privak/pricaf privée in the royal decree of 15 May The tax system applicable to the prifonds is the same as that of an FCP. The tax system applicable to the re-bevak/sicafi, the privak/pricaf, and the private privak/pricaf privée is basically the same as that of a bevek/sicav; that is, taxation of the non-deductible expenses and the abnormal and gratuitous advantages received, be it that: the Belgian real estate owned by the re-bevak/sicafi will be liable to the (non-recoverable) real estate prelevy; and the privak/pricaf and private privak/pricaf privée will be subject to the normal corporate income tax (33.99 percent) when not complying with the specific investment restrictions. An exit tax of percent is levied upon the recognition of an existing company as a re-bevak/sicafi or privak/pricaf. The exit tax on the recognition of a re-bevak/sicafi is levied upon the actual value of the net equity of the company decreased with the paid-up capital of the company. In the past, according to the Belgian tax authorities, the registration duties or VAT on the immovable goods of the company (in principle due in case of a sale) should be incorporated in the actual value of the net equity. According to a circular letter, registration duties or VAT on immovable goods have to be deducted from the actual value of the net equity of the company. This exit tax is not applicable to a private privak/pricaf privée, which may be explained by the fact that the conditions to be recognized as a private privak/pricaf privée are severe and in practice only newly incorporated companies will be recognized as a private privak/pricaf privée. As a rule, the (mandatory) dividend distributions are subject to a withholding tax of 15 percent. An exemption of withholding tax is, however, available, regardless of the capacity of the shareholder: For the re-bevak/sicafi, if at least 60 percent of its real estate consists - directly or indirectly - of assets which are located in Belgium and which are exclusively destined for private habitation For the privak/pricaf and the private privak/pricaf privée, to the extent that the dividend stems from capital gains on shares.

12 12 Belgium Taxation Non-resident shareholders of a privak/pricaf or private privak/pricaf privée can additionally apply for the exemption from withholding tax with respect to that part of the dividend distribution which is not traceable to Belgian source dividends. Non-resident shareholders of a re-bevak/sicafi, a privak/pricaf, or a private privak/pricaf privée can further apply for a full withholding tax exemption if they are: not engaged in a business activity; and exempted from income tax in their home country (such as foreign pension funds). For corporate shareholders of a re-bevak/sicafi or a privak/pricaf the dividends received deduction will be applicable under the same conditions as for the bevek/sicav (that is, distribution of at least 90 percent of its net income and exemption to the extent that the dividend stems from income that would satisfy the conditions for the deduction). For corporate shareholders of a private privak/pricaf privée the minimum distribution condition is not applicable. Capital gains realized by a resident corporate shareholder upon sale of the shares of a privak/pricaf or private privak/pricaf privée are exempt from Belgian withholding and income tax, if the privak/pricaf or private privak/pricaf privée undertakes to invest the totality of its assets in companies of which the dividends would satisfy the conditions for the dividends received deduction. No tax is due on capital gains realized by an individual shareholder on the sale of the shares in a re-bevak/sicafi, a privak/pricaf, or private privak/pricaf privée. Institutional investment funds An institutional investment fund is only open to qualified investors. A recent update of the Belgian tax law provided for these institutional beveks/bevaks a favorable tax regime similar to that of public investment funds. The tax system applicable to the institutional beveks/bevaks is basically the same as that of public beveks/bevaks, that is, taxation of the non-deductible expenses and the abnormal and gratuitous advantages received. Dividend distributions are in principle subject to a withholding tax of 15 percent, unless they fall under the application of the Parent-Subsidiary Directive (exemption of withholding tax). The withholding tax exemption that is applicable for public re-bevaks/sicafi if at least 60 percent of its real estate is exclusively destined for private habitation in Belgium is not yet applicable for institutional re-bevaks/sicafi.

13 13 Belgium Taxation 3.9 Transfer taxes, stamp duty, capital duty Both FCP and bevek/sicav are exempt from registration duties. No stock exchange duties apply upon the issue of new shares/units. On the purchase and sale of accumulation shares/units in Belgium via a Belgian financial intermediary institution, a stock exchange duty of 0.5 percent is due with a maximum of EUR 750 per transaction (0.07 percent in case of distributive shares with a maximum of EUR 500). On redemption of accumulation shares the tax rate amounts to 0.5 percent (with a maximum of EUR 750). As from 1 January 2004 both resident and non-resident FCP and bevek/sicav are subject to the annual tax on collective investment institutions. As from 1 January 2007 the annual tax amounts to 0.08 percent. Institutional collective investment funds benefit from a reduced annual tax of 0.01 percent. The annual tax is calculated on the net outstanding amounts of the fund. For non-resident funds, the annual tax is calculated on the net outstanding amounts placed in Belgium on 31 December of the preceding year, as from the fund s registration with the Belgian Banking and Finance Commission. The net outstanding amounts of the fund placed in Belgium comprises the total assets of the fund decreased with any redemptions made by the fund, for which the transactions (subscriptions, sales) have been realized through a Belgian financial intermediary. The tax should be paid yearly by 31 March at the latest. Note that financial institutions such as Euroclear and FundSettle, who solely intervene with clearing and settlement, do not qualify as financial intermediaries for purposes of the annual tax. Transactions through Euroclear or Fundsettle without intervention of a Belgian financial intermediary are therefore not included in the taxable base of the annual tax Miscellaneous None

14 14 Belgium Taxation KPMG in Belgium Lievens Kris KPMG Tax Advisers Prins Boudewijnlaan 24d Antwerp 2550 Belgium Tel. +32 (0) Fax +32 (0) klievens@kpmg.com The information contained herein is of a general nature and is not intended to address the circumstances of any particular individual or entity. Although we endeavor to provide accurate and timely information, there can be no guarantee that such information is accurate as of the date it is received or that it will continue to be accurate in the future. No one should act upon such information without appropriate professional advice after a thorough examination of the particular situation.