United States and Belgium Sign Income Tax Treaty and
Date: 27 November 2006
On 27 November the Belgian Finance Minister and
the U.S. Ambassador to Belgium, signed a new Income
Tax Treaty and Protocol
to replace the existing bilateral income tax treaty, concluded in
1970, as amended in 1987, between the two countries.
The most important aspect of the Treaty and
Protocol is the taxation of cross-border dividend payments.
Withholding tax on dividends will be zero rated if received by a US
parent company holding 10 percent of the voting rights. However, for
a Belgian parent company, the threshold is put at 80 percent. The
source-country withholding tax on dividends is also eliminated on
dividends paid to pension funds. The withholding tax on
interest will also be zero rated.
Resident employees paying into the pension funds
of the other State may be entitled to tax deductions in the same way
as residents of the other State.
The Treatywill also introduce a procedure for
mandatory arbitration of certain cases that cannot be resolved by the
competent authorities within a specified period of time. The
mandatory binding arbitration provision, long advocated by the U.S.
business community, has only one precedent in U.S. tax treaty
practice, that is in the protocol signed on 1 June 2006 with Germany.
In addition, the Treaty and Protocol also
strengthen the Treaty's provisions preventing so-called treaty
shopping, which is the inappropriate use of a tax treaty by
third-country residents. The Treaty and Protocol will also serve to
improve the exchange of information between the two countries,
including bank information.