Belgium updates list of tax havens

In two Royal Decrees dated 1 March 2016 (published in the Belgian State Gazettes of 10 and 11 March 2016), the Minister of Finance has updated the list of countries which are deemed to have an advantageous tax regime.

The first list relates to the participation exemption, the basis for the Belgian holding company regime. One of the conditions for the participation exemption or dividend received deduction for dividends received by a Belgian company is that the subsidiary must not be resident in a country that has an ordinary corporate income tax regime that is substantially more advantageous than the Belgian corporate income tax. This means that either the ordinary nominal tax rate is less than 15 percent, or the effective tax burden does not arrive at 15 percent.  For this purpose, a list of advantageous tax regimes is laid down in a Royal Decree ; this ensures legal certainty as only the tax regimes that are listed can be considered to be advantageous tax regimes.

The list had not been adapted since 2015. The new list is much shorter than before : Abu Dhabi*, Ajman*, Andorra*, Bosnia and Herzegovina, Dubai*, Gibraltar, Guernsey, Jersey, Kyrgyzstan*, Kuwait*, Kosovo*, Liechtenstein, Macao, Macedonia*, Maldives, the Isle of Man, Marshall Islands, Micronesia, Moldova*, Monaco, Montenegro*, Oman, Uzbeki­stan, Paraguay*, Qatar*, Ras al Khaimah*, Serbia*, Sharjah*, East Timor*, Turkmenistan*, Umm al Quaiwain*. The countries with an * are new on the list.

This does not mean that these are the only countries that are tax havens. Countries that do not have a corporate income tax system and countries that do not impose corporate income tax on certain companies are excluded from the participation exemption as well.

This list applies to dividends paid or granted since 1 January 2016. As a transitory measure, for accounting years ending on or before 31 March 2016, companies can still rely on the old list.

The second list relates to the obligation of Belgian companies and permanent establishments of foreign companies to declare in their annual tax return all (direct and indirect) payments they have made to tax havens (art. 307 ITC 1992) for a total of €100,000 or more. If these payments are not reported, they are not tax deductible. And when reported, such payment is only tax deductible if the taxpayer can justify that the payment was made in the context of an actual and genuine transaction with persons other than artificial tax avoidance schemes.

The law defines as a tax haven any State that is blacklisted by the OECD Global Forum on Transparency and Exchange of Information as not having effectively or substantially implemented the OECD exchange of information standard; or any State that has no or a low tax. The threshold is set at a nominal corporate tax rate of 10% (art. 179 RD/ITC 1992). 

A list of these states was adopted in a Royal Decree of 6 May 2010.  This list is now updated as follows : Abu Dhabi, Ajman, Anguilla, Bahamas, Bahrain, Bermuda, British Virgin Islands, Cayman Islands, Dubai, Fujairah, Guernsey, the Isle of Man, Jersey, Marshall Islands, Micronesia, Monaco, Montenegro, Nauru, Palau, Pitcairn Islands, Ras al Khaimah, Saint Barthelemy, Sharjah, Somalia, Turkmenistan, the Turks and Caicos Islands, Umm al Qaiwain, Uzbekistan, Vanuatu and Wallis-en-Futuna.

The Marshall Islands, the Pitcairns Islands, Somalia, Turkmenistan and Uzbekistan have been added to the list. Andorra, the Maldives and Moldova have been taken off.

Please note that Seychelles is be added to this list as that country is deemed non-compliant with the OECD’s Global Forum’s information exchange standard, just like the British Virgin Islands, Cyprus and Luxembourg. However, these last three countries have agreed to exchange information with Belgium. Seychelles will stay on until the double tax treaty between Belgium and Seychelles enters into force or until Seychelles ratifies the Convention on Mutual Administrative Assistance in Tax Matters.

This list applies to payments made as of 1 January 2016. As a transitory measure, for accounting years ending before 1 April 2016, companies can still rely on the old list.

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