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| “The
avoidance of tax may be lawful, but it is
not yet a virtue .” |
| (Lord
Denning) |
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| News |
Belgium
Extends Withholding Tax Exemption to Foreign Banks
Date:
18 July 2005
In a royal decree issued 3 July, Belgium has granted
foreign banks the same exemption from withholding
tax as Belgian banks. It is of particular interest
to British, French, and U.S. banks, as they now
can recover tax that has been withheld during
the past two years.
When a Belgian company takes out a loan with a
Belgian bank, the bank does not have to withhold
tax at source. Until now, however, that exemption
did not apply to foreign banks, unless they could
rely on the provisions of a tax treaty. That situation
put British, French, and U.S. banks at a disadvantage
when they were competing with a Belgian bank or
with banks from one of the other aforementioned
countries, as they had to include withholding
tax when computing their interest rates.
In a royal decree of 16 May 2003, the Belgian
government updated the income tax rules to bring
them into line with modifications to the financial
legislation. At that time, the exemption was extended
to listed companies and Belgian coordination centers.
While investigating the new tax status set up
by the Belgian government to counter claims that
its tax regime for coordination centers constituted
illegal state aid, the European Commission asked
Belgium to change its legislation with retroactive
effect.
The royal decree of 3 July 2005, exempts all interest
paid to financial institutions established in
a member state of the European Union or the European
Economic Area, or in a country with which Belgium
has signed a double tax treaty. The exemption
has retroactive effect from 5 June 2003. Foreign
banks now can claim a refund of the tax that has
been withheld at source on any interest paid or
granted to them for the past two years. However,
to do that, they must file a formal appeal, and
they have only three months to do so.
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© Vandendijk
& Partners - Advocaten - Avocats - International
Tax Law
rue Edith Cavell 66 - B-1180 Brussels -
Tel +32 (0)2 343 33 45 - Fax +32 (0)2 343
41 45 |
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