- Adjustment legislation regarding the introduction of tax transparency for foreign legal structures
In our newsflash of 24 April 2015 we announced the “look-through-tax” for foreign legal structures. As stated in our newsflash of 18 August 2015, the programme law has been published in the Belgian Official Gazette of 18 August 2015.
The programme law entered into force as from 1 January 2015 and provides for:
- the introduction of the “look-through-tax”;
- the introduction of a new taxation of distributions; and
- the adjustment of the reporting obligations, introduced as from 1 January 2013.
The law introducing measures for improvement of job creation and of purchasing power of 26 December 2015 (published in the Belgian Official Gazette on 30 December 2015), the “tax shift”-law, adjusts the “look-through-tax”, introduced earlier in 2015.
The adjusted law enters into force as from 1 January 2015 and provides for:
- the extension of the reporting obligation;
- the rewriting of the new taxation of distributions; and
- the adjustment of the categories of excluded legal structures.
1.1 Extension of the reporting obligation
As from assessment year 2014 (income year 2013), founders and third party beneficiaries have the obligation to report the existence of targeted foreign legal structures in their annual personal income tax return.
The law of 26 December 2015 extends this reporting obligation.
The following additional information needs to be reported:
- the name of the legal structure;
- the legal form of the legal structure;
- the address of the legal structure;
- the identification number of the foreign legal structure, if available;
- the name and the address of the trustee of the legal structure if the legal structure concerns a trust.
The extension of the reporting obligation is applicable as from the personal income tax return regarding assessment year 2016 (income year 2015).
1.2 Adjustment new taxation of distributions
Founders are taxed on distributions made by targeted foreign companies and foundations at the moment of their liquidation or at the moment their assets are transferred without consideration.
The distribution is taxed as a dividend at a fixed rate of 27%.
According to the programme law, as published in the Belgian Official Gazette of 18 August 2015, the taxable basis was the part of the distribution, that exceeded the amount of the contributed assets “that have been subjected to the Belgian tax regime”.
The requirement “that have been subjected to the Belgian tax regime” is deleted in the “tax shift”-law.
Example: a non-Belgian resident contributes assets, gained outside of Belgium, into a legal structure. After the contribution, the founder becomes a Belgian resident. At the moment a distribution is made by the legal structure, the entire contribution will be exempted from Belgian income tax.
1.3 Adjustment categories of excluded structures
- The programme law, as published in the Belgian Official Gazette of 18 August 2015, stated that the following structures (with and without legal personality) were excluded:
(alternative) Institutions for collective investment;
- Entities for management of pension funds / employee participations;
- Listed companies in the E.E.A. or in a third state with equivalent conditions;
- Entities with an actual economic activity in the context of a professional activity and with premises, staff and equipment in proportion to their economic activity, provided that:
the entity is established in:
- a member state of the E.E.A.;
- a state that concluded a treaty with Belgium for avoidance of double taxation;
- a state that concluded an agreement with Belgium on exchange of information in tax matters;
- a state that participates with Belgium in a bi- or multilateral concluded legal instrument;
provided that the treaty / agreement / instrument makes an exchange of information possible in tax matters;
AND the founder or third party beneficiary provides the evidence.
The “tax shift”-law of 26 December 2015 restricts the category of excluded structures.
First, the entities mentioned under point 4) are removed from the list of excluded structures (see below point 1.4).
Further, the structures mentioned under point 1) to 3) are deemed to be targeted legal structures, if the rights of these structures are held by one person, or by several persons that are related to each other, considered per separate compartment if applicable.
Persons are considered to be related with other persons if:
- One or more natural or legal persons control another legal entity; or
- These persons are relatives up to the fourth degree of kinship;
- These persons are married, are legal cohabitants, or their residence or seat of fortune is established
at the same address.
With regards to the structures mentioned under point 1) to 3), see point 2.2 regarding the new Royal Decree.
1.4 Entities with an actual economic activity
Henceforth, entities with an actual economic activity as described under point 4) of point 1.3, are targeted and need to be reported in the annual income tax return.
However, these entities are exempted from the “look-through-tax” if the founder or the third party beneficiary reports in the annual personal income tax return and can provide the evidence at mere request that the conditions set out in point 4) under point 1.3 have been fulfilled.
- New Royal Decree including “blacklist” for E.E.A.-entities
2.1 Royal Decree including “blacklist” for E.E.A.-entities Belgian Official Gazette 28 August 2015) abolished
As announced in our newsflash of 10 June 2015 and confirmed in our newsflash of 28 August 2015, a Royal Decree was published on 28 August 2015, including the “blacklist” for E.E.A.-entities that are targeted for tax transparency purposes.
The “blacklist” for E.E.A.-entities included the following three structures:
- Liechtenstein: “Stiftung”;
- Liechtenstein: “Anstalt”; and
- Luxembourg: “Société de gestion patrimoine familiale” (“SPF”).
The Royal Decree entered into force as from 1 January 2015.
2.2 New Royal Decree including “blacklist” for E.E.A.-entities
The aforesaid Royal Decree (published in the Belgian Official Gazette on 28 August 2015) has been abolished and replaced by the Royal Decree of 18 December 2015, as published in the Belgian Official Gazette on 29 December 2015.
Henceforth, the following structures that have legal personality, established within the E.E.A., are deemed to be legal structures:
- The institutions, entities and companies, as stated out in the points 1 to 3 under point 1.3, if the rights of these institutions, entities and companies are held by one person or by several persons that are related to each other, considered per separate compartment if applicable;
- Foreign companies with legal personality
- To the extent that they receive Belgian source income that is not taxable in Belgium; and
- Of which the income, in the country of establishment, is
deemed to have been received by the shareholders or
partners of the company;
- The following legal forms:
- Liechtenstein: “Stiftung”;
- Liechtenstein: “Anstalt”;
- Luxembourg: “Société de gestion patrimoine familiale” (“SPF”); and
- Luxembourg: “Fondation Patrimoniale”.
The Luxembourg “Fondation Patrimoniale” does not yet exist in Luxembourg.
The Royal Decree of 18 December 2015 enters into force as from 1 January 2015.