4. UPGRADED SYSTEM OF ADVANCE TAX RULINGS
Since 2003, Belgium has had an efficient and effective ruling system that easily bears comparison with other more traditional ruling jurisdictions: taxpayers may now obtain from the Belgian tax authorities advance rulings on the application of tax laws to any contemplated transaction (including transfer prices), provided such transaction has not yet generated any fiscal effect. Only a few matters may not be the subject of an advance ruling, in particular when the essential elements of the transaction relate to a tax haven country listed by the Organization for Economic Co-operation and Development (OECD) or when the contemplated transaction has no economic substance in Belgium.
In principle, the Belgian Ruling Commission rules on a matter within three months. A formal ruling covers a five-year period, unless its object justifies another time limit. In addition, meetings on a no-name basis are possible without there being any obligation to file a ruling application.
5. ATTRACTIVE TAX REGIME FOR INVESTMENT FUNDS
5.1. Institutional Investment Funds
Belgium has positioned itself as a prime onshore jurisdiction for institutional investors to set up investment funds, thus becoming an attractive location inter alia for international asset pooling by pension funds. Belgian institutional investment funds indeed enjoy favourable regulatory and tax regimes. Properly structured, these investment vehicles can achieve an overall tax burden of close to nil.
Institutional investment funds must be registered with the Ministry of Finance, but the registration conditions are minimal (designation of a depositary, copy of the bylaws and an extract thereof as published in the Belgian Official Journal, and a declaration that all the operating conditions are complied with); approval is fast track (notification within 15 days of application).
• no prudential supervision by the Financial Services and Markets Authority;
• minimal reporting and publicity requirements: annual accounts must be prepared once a year and a specialist statutory auditor must be appointed, but there is no obligation to draft a prospectus or publish net asset values in the newspapers;
• no investment limit, even though redemption requests must be honoured at least once a month;
• possibility to invest in a broad array of financial instruments, to use leverage and engage in short selling.
Institutional investment companies are subject to Belgian corporate tax, but in principle the tax base will be nil or close to nil, as it comprises only any non-arm’s length benefits the company may receive and a limited number of non-deductible items.
As far as withholding tax on inbound dividends and interest is concerned: as institutional investment companies are subject to Belgian corporate tax, they generally qualify for the benefits of Belgium’s double taxation treaties and can therefore benefit from the reduced foreign WHT rates that these treaties provide for.
As far as WHT on outbound dividends and capital gains is concerned: as yet, only foreign pension funds enjoy a general exemption from WHT on the dividends distributed by institutional investment companies. However, except to the extent the income qualifies as interest under the Savings Directive, there is no WHT upon the redemption of shares,and shares can be redeemed flexibly in open-ended companies. Similarly, no Belgian tax will be withheld upon liquidation. As a rule, foreign investors are also not taxable in Belgium on capital gains upon the transfer of shares in institutional investment companies.
As far as indirect taxes are concerned: as institutional investment funds are not supervised by the Financial Services and Markets Authority (FSMA), they are not subject to the 0.04% fee on their net assets, which otherwise represents a contribution to the Commission’s operating expenses. They also enjoy a reduced annual subscription tax of 0.01%, instead of the 0.08% payable by public investment companies.
5.2. Favourable Reit Regime:The Regulated Real Estate Companies
In 2014, Belgium has created a new status of real estate investment company called the société immobilière réglementée (SIR) or gereglementeerde vastgoed vennootschap (GVV), as an alternative to the existing status of a real estate fund (sicafi or vastgoedbevak).
The new status of SIR/GVV is the equivalent of the existing Belgian real estate funds (sicafi or vastgoedbevak) but with the major difference that, contrary to those forms, it is not caught under the AIFMD regulations since SIRs/GVVs carry on operational and commercial activities.
A SIR/GVV must carry out operational activities (no management functions may be delegated) and may not own real estate assets other than land and buildings above a certain percentage of their total assets. They are subject to supervision by the Belgian FSMA. SIRs/GVVs are obliged to redistribute at least 80% of their corrected net results.
Although SIRs/GVVs are subject to corporate income tax (33.99%), their taxable income is limited to the amount of any non-arm’s length benefits transferred to them by related parties and to the amount of certain disallowed expenses. Capital gains and recurrent income from property are not therefore subject to corporate tax.
From a Belgian perspective, SIRs/GVVs benefit double taxation treaties because they are subject to Belgian corporate income tax.
Dividends distributed by SIRs/GVVs are as a rule subject to a 25% withholding tax (15% for dividends distributed by SIRs/GVVs qualifying as « residential »). Non-resident investors can apply for reduced withholding tax under an applicable tax treaty. This needs to be examined on a case-by-case basis. For non-resident investors and resident individual investors, the withholding tax is the final tax.
Like other registered investment companies, SIRs/GVVs are subject to an annual subscription tax and have to pay annual fee to the FSMA.
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