journal article
Jul 15, 2013
Belgium-Luxembourg Income and Capital Tax Treaty (1970) Resolves Double Taxation on Net Assets of Luxembourg Investment Funds with Belgian Investors
Abstract
The Brussels Court of First Instance has decided on two occasions that
a Luxembourg SICAV can invoke the Belgium-Luxembourg Income and Capital Tax
Treaty (1970) and claim exemption from Belgian tax on its net assets. The
judgements also seem to have consequences for Luxembourg contractual
funds.
a Luxembourg SICAV can invoke the Belgium-Luxembourg Income and Capital Tax
Treaty (1970) and claim exemption from Belgian tax on its net assets. The
judgements also seem to have consequences for Luxembourg contractual
funds.
Topics
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References
41
[1]
LLM (Internat. Taxation), Director, KPMG Tax and Legal Advisers, Belgium. The author can be contacted at woepen@kpmg.com.
[2]
Partner, KPMG Tax and Legal Advisers, Belgium. The author can be contacted at klievens@kpmg.com.
[3]
Supervising Senior Tax Adviser, KPMG Tax and Legal Advisers, Belgium. The author can be contacted at tvandenbruel@kpmg.com.
[4]
The authors wish to thank Olivier Schneider, Manager, KPMG Luxembourg, for his review of the Luxembourg-related passages; all responsibility for errors, however, remains with the authors.
[5]
Convention between Belgium and Luxembourg for the Avoidance of Double Taxation and the Regulation of Certain Other Questions Relating to Taxes on Income and Capital [unofficial translation] (17 Sep. 1970) (as amended through 2002), Treaties IBFD [hereinafter: Bel.-Lux. Income and Capital Tax Treaty].
[6]
LU: Law on Collective Investment Vehicles, 2010, art. 173(1). Previously, LU: Law of 20 December 2002, art. 127(1).
[7]
0.01% for money market funds, cash funds and institutional funds. An exemption from subscription tax is available for, inter alia, funds of funds.
[8]
EU UCITS IV Directive (2009): Directive 2009/65/EC of the European Parliament and of the Council of 13 July 2009 on the Coordination of Laws, Regulations and Administrative Provisions Relating to Undertakings for Collective Investment in Transferable Securities (UCITS), OJ L302 (2009), EU Law IBFD.
[9]
BE: Inheritance Tax Code, art. 161 et seq.
[10]
BE: Inheritance Tax Code, art. 161 no. 3 in conjunction with BE: Law on Certain Forms of Collective Management of Investment Portfolios, 2004, art. 127.
[11]
Previously, the Banking, Finance and Insurance Commission (Commission bancaire, financière et des assurances /Commissie voor het Bank-, Financie- en Assurantiewezen, CBFA).
[12]
BE: Inheritance Tax Code, art. 161bis (1) and (2).
[13]
See www.beama.be/nl/publicaties/aanbevelingen/jaarlijkse-taks-op-de-collectieve-beleggingsinstellingen.
[14]
See K. van Duyse, De jaarlijkse taks op de collectieve beleggingsinstellingen (ICB-taks), Tijdschrift voor Financieel Recht 1, m.n. 6-9 (2009), who describes and partly criticizes the BeAMA guidelines.
[15]
BE: Trib. Bruxelles/Rb. Brussel, 2 Aug. 2011, docket no. 2006/2662/A (for assessment year 2004) and BE: Trib. Bruxelles/Rb. Brussel, 23 Nov. 2011, docket no. 2008/16347/A (for assessment year 2006), Tax Treaty Case Law IBFD.
[16]
Art. 2(1) Bel.-Lux. Income and Capital Tax Treaty.
[17]
Art. 2(2) Bel.-Lux. Income and Capital Tax Treaty.
[18]
EU Capital Duty Directive (1969): Council Directive of 17 July 1969 Concerning Indirect Taxes on the Raising of Capital (69/335/EEC), arts. 2 and 10, OJ L249 (1969), EU Law IBFD. Currently, Council Directive 2008/7/EC of 12 February 2008 Concerning Indirect Taxes on the Raising of Capital, OJ L 046 (2008), EU Law IBFD.
[19]
BE: Inheritance Tax Code, art. 161bis (1) no. 2.
[20]
A. Cools, Rechtbank Brussel verduidelijkt welke belastingen beoogd worden door artikel 2 OESO, Tijdschrift voor Fiscaal Recht 18, p. 932 (2012); D. Trippas & N. Bammens, Taks op collectieve beleggingsinstellingen schendt DBV, Fiscoloog Internationaal 342, p. 4 et seq. (2012); and Van Duyse, supra n. 10, at m.n. 11.
[21]
Protocol Amending the Convention between the Kingdom of Belgium and the Grand Duchy of Luxembourg for the Avoidance of Double Taxation and the Regulation of Certain Other Questions Relating to Taxes on Income and Capital, and Its Final Protocol, Signed at Luxembourg on 17 September 1970 (11 Dec. 2002), Treaties IBFD and Protocol Amending the Convention between the Kingdom of Belgium and the Grand Duchy of Luxembourg for the Avoidance of Double Taxation and the Regulation of Certain Other Questions Relating to Taxes on Income and Capital, and Its Final Protocol, Signed at Luxembourg on 17 September 1970, as Amended by the Protocol Signed at Brussels on 11 December 2002 (16 July 2009), Treaties IBFD.
[22]
UN Vienna Convention of the Law of Treaties art. 31 (1969), Treaties IBFD.
[23]
OECD Model Tax Convention on Income and on Capital art. 2(3) (22 July 2010), Models IBFD, begins: “The existing taxes to which the Convention shall apply are in particular...” (Emphasis added)
[24]
Convention between Ireland and Belgium for the Avoidance of Double Taxation and the Prevention of Fiscal Evasion with Respect to Taxes on Income (24 June 1970), Treaties IBFD. See also M. Lang, “Taxes Covered” – What is a “Tax” according to Article 2 of the OECD Model? 59 Bull. Intl. Fiscal Docn. 6, sec. 3.2. (2005), Journals IBFD, who analyses the (limited) treaty consequences when contracting states simply do not mention a tax in the list of existing taxes.
[25]
T. Viitala, Taxation of Investment Funds in the European Union sec. 3.7. (IBFD 2005), Online Books IBFD: “Essentially, the subscription tax is comparable to a net wealth tax, being due irrespective of the financial result of the fund”.
[26]
Arts. 1 and 4 Bel.-Lux. Income and Capital Tax Treaty.
[27]
OECD Model Tax Convention on Income and on Capital: Commentary on Article 1 paras. 6.11-6.13 (22 July 2010), Models IBFD, and paras. 8.5-8.7 OECD Model: Commentary on Article 4 (2010). See also OECD, The Granting of Treaty Benefits with Respect to Income of Collective Investment Vehicles – Discussion Draft m.n. 27-30 (OECD 2010), International Organizations’ Documentation IBFD. See also K. Schellekens, Beleggingsvennootschappen naar Belgisch en Luxemburgs Recht p. 57 (Larcier 2002), who specifically addresses Belgian investment companies.
[28]
See www.impotsdirects.public.lu/conventions/opc/sicav/index.html. The list shows under which tax treaties a Luxembourg SICAV is entitled to treaty benefits and under which it is not (as either the other state has expressly rejected treaty entitlement or the treaty text is clear). Belgium is mentioned in the second group of tax treaties.
[29]
OECD Draft Tax Convention on Income and on Capital art. 4 (30 July 1963), Models IBFD, had a different wording: “under the law of that State” (instead of “laws”) and “liable to taxation” (instead of “liable to tax”).
[30]
J. Wheeler, The Missing Keystone of Income Tax Treaties sec. 2.3.3. (IBFD 2012), Online Books IBFD.
10.59403/2610aqx
[31]
Id., at n. 26.
[32]
Id., at sec. 2.3.3. This may be due to the fact that Wheeler focuses on income tax treaties; hence, her statement was presumably not intended to exclude tax residence being derived from an unlimited capital tax liability.
[33]
See, for example, IN: ITAT, 30 Sep. 2010, Chiron Behring GmbH & Co KG v. ADIT , ITA No. 3860/Mum/08, Tax Treaty Case Law IBFD. A German limited liability partnership was not liable to corporate income tax in Germany (tax transparency). However, to grant treaty benefits (reduced withholding tax), it was sufficient for the Indian court that the partnership was liable to German trade tax (Gewerbesteuer), which is a tax on business profits explicitly mentioned in the list of existing taxes in the applicable tax treaty. What is problematic about the judgement is that German trade tax solely applies to business profits from German permanent establishments (K. Vogel, Doppelbesteuerungsabkommen, 5th ed., art. 2, m.n. 55 et seq. (K. Vogel & M. Lehner eds., C.H. Beck 2008)). Thus, it is generally seen as imposing a limited tax liability in terms of art. 4
[34]
(1) OECD Model (2010), not conveying treaty residence. See W. Oepen & S. Münch, Die Gewerbesteuer als Türöffner zum DBA-Schutz? Zur Abkommensberechtigung deutscher Personengesellschaften unter dem DBA-Indien, 18 IStR 2, p. 55 et seq. (2009) with further references.
[35]
OECD Model Tax Convention on Income and on Capital (11 Apr. 1977), Models IBFD. See also K. Vogel, Klaus Vogel on Double Taxation Conventions, 3rd ed., art. 4, m.n. 31 (Kluwer Law International 1997).
[36]
See also paragraph 8.1 of the OECD Model: Commentary on Article 4 (2010).
[37]
The French version of art. 4 (1) OECD Model (2010) reads: “Au sens de la présente Convention, l’expression ’résidente d’un Etat Contractant’ désigne toute personne qui, en vertu de la législation dudit Etat, est assujettie à l’impôt dans cet Etat en raison de son domicile, de sa résidence, de son siège de direction ou de tout autre critère de nature analogue …” (Emphasis added)
[38]
Agreement between the State of Malta and the Kingdom of Belgium for the Avoidance of Double Taxation and the Prevention of Fiscal Evasion (28 June 1974) (as amended through 1993), Treaties IBFD.
[39]
Memorandum of Understanding on the Legislative Draft, Doc. 972 (1970-1971) No. 1, at [1] and [2].
[40]
Art. 3(1) no. 5 Bel.-Lux Income and Capital Tax Treaty.
[41]
BE: Inheritance Tax Code, art. 161 no. 3 in conjunction with BE: Law on Certain Forms of Collective Management of Investment Portfolios, 2004, art. 127. In contrast, annual tax in respect of the net assets of a Belgian contractual fund is not imposed on the fund itself but on its management company (Inheritance Tax Code, art. 161 no. 2).
Cited By
2
What Is Tax on Capital for the Purposes of a Tax Treaty? An Analysis of Two Recent Belgian Supreme Court Decisions on the Belgian Net Asset Tax
Bulletin for International Taxation
N. Bammens, F. Debelva · 2022
Metrics
2
Citations
41
References
Details
- Published
- Jul 15, 2013
- Vol/Issue
- 67(8)
Cite This Article
W.(Wolfgang) Oepen, K. Lievens, T. Van den Bruel (2013). Belgium-Luxembourg Income and Capital Tax Treaty (1970) Resolves Double Taxation on Net Assets of Luxembourg Investment Funds with Belgian Investors. Bulletin for International Taxation, 67(8). https://doi.org/10.59403/2arwew5
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