The Belgian Ruling Commission took recently position on the application of the Belgian participation exemption regime to income from a Luxembourg SICAR. The Ruling Commission considered that the SICAR qualifies as Investment Company under Belgian law and that dividends and capital gains from the SICAR could be exempt in Belgium.

Background

Several Belgian investors (resident companies and individuals) intended to establish a Luxembourg SICAR. Based on the Belgian participation exemption regime, in case of an investment in a so-called "investment company", the Belgian exemption only applies if at least 90% of the profits are distributed and if these profits are taxed in the source state at a rate of at least 15%.

Position of the Belgian Ruling Commission

The Ruling Commission analysed these conditions based on the SICAR regime and came to the conclusion that:

  • the SICAR qualifies as an "investment company" in the case at hand;
  • dividends received by Belgian resident Companies from the Luxembourg SICAR can be exempt in Belgium;
  • capital gains realized by Belgian resident Companies on a share buy-back from the Luxembourg SICAR can also be exempt in Belgium;
  • dividends received by Belgian resident individuals from the investment in the Luxembourg SICAR qualify for the application of the reduced withholding tax (roerende voorheffing) of 15% (standard rate is 25%) and the anti-abuse provisions do not apply.

Implications

Even though each specific investment made by Belgian residents in a Luxembourg SICAR will require a careful review prior for the investors to being comforted that the income out of the SICAR should be exempt in Belgian, the position recently taken by the Belgian ruling commission is very good news and makes the SICAR a very attractive investment vehicle for Belgian investors:

SICARs are subject to tax on their income as any Luxembourg resident company, but they benefit from an exemption from corporate income and municipal business tax on income from transferable securities (valeurs mobilières) as well as on income from the sale, contribution or liquidation of these assets. This mainly includes dividends, interest and capital gains. SICARs are also exempt from withholding tax on dividend distributions to Belgian investors.

SICARs are regulated investment vehicles and thus subject to the control of the Luxembourg supervisory authority of the financial sector ("CSSF"). For more information on the SICAR, you can refer to our SICAR Brochure and/or contact our SICAR team: http://www.atoz.lu/IMG/pdf/ATOZ_034_Brochure_SICAR_BD.pdf

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.