European Commission Requesting Belgian Tax Change

February 4, 2010 Taxation in BelgiumTaxation in EU

Angel & National Flag of Belgium, Martyrs' Square - Place des Martyrs - Martelaarsplaats, Brussels, BelgiumThe European Commission (EC) has formally requested that the Belgian Government alter its legislation regarding taxation of interest and dividends received by foreign investment funds.

On January 28th the EC placed an official request to the Belgium Government to address its tax treatment of dividends and interest distributions to foreign owned investment funds, as it claims the current treatment is discriminatory and restricts the freedoms mandated by the Treaty of the European Union. Under current legislation, distributions made by a Belgian company to Belgian investment funds can be exempt from withholding tax, if the receiver meets a predetermined set of legal requirement concerning its investments and investors. Conversely, distributions made to foreign held investment funds will face a tax burden of 15 or 25 percent, depending on the circumstances.

The request comes as the second step of Article 258 of the TFEU (Treaty on the Functioning of the European Union), which outlines the EC’s infringement procedures. The first stage of the process involved the EC making a request to Belgium to supply information in order for an investigation to be conducted. The current stage consists of a formal request of action, called a reasoned opinion. The last stage is invoked if Belgium does not make a satisfactory reaction to the reasoned opinion, at which point the matter may be referred to the Court of Justice of the European Union.

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