Belgium Issues Bill To Combat Tax Fraud And Tax Avoidance On Withholding Tax

; posted on
January 24th, 2019

A bill to combat tax fraud and tax avoidance regarding withholding tax was published in the Official Gazette of 22 January 2019. The bill focuses on combating withholding tax evasion and avoidance, and facilitating the recovery of withholding tax in the event of an unjustified exemption or refund.

The Scope

The bill covers income from movable property and capital, securities and compensation for missing coupons or missing lots pertaining to financial instruments that are the subject of an agreement constituting a valuable security or loan. In addition, it also covers the foreign dividends which have been collected or obtained by pension funds without the use of an intermediary established in Belgium, if the sole object consists exclusively or mainly of the management and raising of funds with the aim of paying out statutory or supplementary pensions.

New Measures

The bill contained the following measures:

  • Firstly, the beneficiary of the movable income (dividends, interest, etc.) would become liable for the WHT when it has benefited from either an unlawful WHT exemption (this was already applicable in case of misrepresentation) or an unlawful WHT refund. In particular, from a procedural perspective, it will now be possible for the Belgian tax administration to get the tax due from the beneficiary via a tax assessment (kohier/rôle) instead of going to civil courts.
  • Secondly, the full ownership of underlying securities on dividend record date is a condition to apply a withholding tax credit. In that case, generally, market claims would no longer be considered as dividends for Belgian tax credit purposes.
  • Finally, Belgian or foreign pension funds must have held the securities producing the dividends for at least 60 days in order to be eligible for a refund. A shorter period strengthens the suspicion that the securities are held in an artificial manner (its main purpose being the refund of the withholding tax). Practically speaking, the relief at source on short-term shareholding is likely to get impaired unless they demonstrate that the arrangement is genuine.

Takeaway

The bill will have an important impact on WHT relief at source and refunds. Not only for the taxpayers concerned but also for the movable income debtors and financial intermediaries (in their capacity of withholding agents).

Source: Belgian Government

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