According to the recently introduced ‘Belgian Cayman tax’, individuals residing in Belgium and investing in offshore investment funds are in principle taxable on a look through approach on their pro rata share of the income generated within the fund.
As from 1 January 2015, individuals qualifying as “founders” of a “foreign legal structure” are directly taxable on the income received by the legal structure, as if the legal structure did not exist.
Investment funds with legal personality established outside the European Economic Area in principle qualify as “foreign legal structures” if they are not subject to income tax in their state of residence or if the income tax amounts to less than 15%, determined according to Belgian tax law (which will often be the case for offshore investment funds). Exchange-traded funds as well as public and institutional (alternative) undertakings for collective investment are however explicitly excluded from the Cayman tax.
As a result, an individual holding shares or units in an offshore investment fund should in principle be considered as founder of a foreign legal structure and should therefore be taxable on a look through approach on all income generated by the offshore investment fund, according to his share in said fund.
This look through approach implies in practice that the individual should be provided with the full and detailed breakdown of the underlying income generated within the offshore investment fund, which will be extremely difficult in most of the cases.
Finally, when a Belgian bank (or a Belgian branch of a foreign bank) intervenes as qualifying intermediary in the context of the payment of income distributed by such offshore investment funds, it will have to apply a withholding tax of 25% (27% as from 1st January 2016), which might lead to a double taxation situation at the level of the individual.