Since July 1993, the Belgian Inheritance Code has prescribed an annual tax on collective investment vehicles ("CIV").

The rate prescribed for foreign CIV is 0.0925%. However, article 161 ter, 5° of the Code prescribes a reduced taxation rate of 0.01% for Belgian CIV “to the extent that the financial resources of the funds, one or more of its compartments or classes of shares, are collected exclusively with institutional or professional investors for their own account and whose shares are not to be acquired by anyone else than those investors”.

Recently, the Commission referred Belgium to the European Court of Justice for discriminatory taxation of foreign CIV. According to the Commission, this article might treat foreign CIV less favourably than Belgian CIV. Belgian legislation doesn't apply the reduced rate to foreign CIV.

In principle, there shouldn't be any discrimination between Belgian and foreign CIV or similar entities incorporated under the law of other Member States of the European Economic Area.

Therefore, the Commission considers such discrimination to be an infringement of the free movement of capital and Belgium should cease the practice.

This isn’t a new position taken by the Commission which, on 26 December 2013, submitted a reasoned opinion to Belgium requesting that it modify its legislation. As there has been no response, the Commission has finally decided to summon Belgium before the European Court of Justice.

Belgium risks condemnation unless it can prove that the discrimination is motivated by an overriding reason of public interest.