For certain categories of shares the dividend withholding tax rate is lowered to 13.39%. While drafting the 1996 Budget, the Belgian Government has announced that it will raise this reduced rate from 13.39% to 15% and lower the ordinary withholding tax rate to 25% as of January 1, 1996.
One of the categories of shares which may benefit from the reduced withholding tax include, inter alia, (i) shares which are publicly issued after January 1, 1994 and (ii) shares which are privately issued after January 1, 1994 in exchange for a capital contribution in cash and which are in registered form or, if in bearer form, are kept in open custody in accordance with the conditions and formalities to be determined by Royal Decree.
The conditions and formalities of the open custodianship are now laid down in the Royal Decree ("RD") of September 1, 1995.
In order to be able to benefit from the reduced withholding tax, the bearer shares must as from the date of their issuance be held in open custody with a bank, public credit institution, savings bank or broker firm which is subject to the supervision of the Banking and Finance Commission.
In order to qualify for uninterrupted open custody it is required that:
(1) the shares are entrusted from the date of issue by the issuing company to a qualifying custodian selected by the depositor at the moment of subscription of the capital increase. In other words, there can be no delivery of bearer shares to the shareholder; and (2) the open custody is maintained without interruption until the date of attribution of the dividend.The issuing company must register the shares at the moment of issue with the Office for Securities (Secretariaat voor Roerende Waarden / Secretariat des Valeurs MobiliŠres).
To this end a special ID number will be attributed.
As debtor of the dividend withholding tax, the issuing company is required to inform the Office for Securities of the date of attribution of the dividend and of the gross tax amount of the coupon. The Office for Securities will communicate this information to the custodians of the shares upon their request.
Upon the attribution of the dividend, the custodian of the shares is obliged to provide a global certificate to each issuing company specifying the number of shares complying with the aforementioned conditions of uninterrupted open custody. This certificate has to be attached to the dividend withholding tax return in order to qualify for the reduced withholding tax, provided that the special registration number is requested and obtained from the Office for Securities.
In case the bearer shares are transferred from one qualifying custodian to another, the conditions of uninterrupted custody will be deemed to be fulfilled provided that (1) no shares have been physically delivered to the depositor and (2) the initial custodian delivers to the new custodian a certificate stating that until the day of the transfer the shares have been held in compliance with the rules on open custody.
The RD of September 1, 1995 took effect on September 28, 1995.
Bearer shares which were issued prior to September 28, 1995 and which have been held in Belgium in open custody since the date of material issue qualify for the reduced withholding tax provided that the special registration number is requested and obtained from the Office for Securities no later than November 30, 1995.
The content of this article is intended to provide general information on the subject matter. It is therefore not a substitute for specialist advice.
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