The tax authorities are always looking for their piece of your tax pie. But things get complicated when your income crosses borders. Fortunately, Belgium has double taxation treaties (DTTs) with over 150 countries.

But how do they work, and when do they apply? Well, your (or your company's) tax residency status plays a major role.

Here's what you need to know about double taxation treaties in Belgium.

What is a Double Taxation Treaty?

A double taxation treaty (DTT) is an agreement signed between two contracting countries to prevent double taxation on the same income of an individual or company.

It's also commonly referred to as a:

  • Double taxation agreement (DTA)
  • Double taxation convention (DTC)
  • Double taxation avoidance agreement (DTAA)

In a DTT, the two countries agree on which of them can tax corporate income, dividends, interest, rental income, salaries, pensions, royalties, and more. A DTT also has provisions for tax relief when double taxation arises.

While double taxation treaties in Belgium are modeled after the OECD's Model Taxation Convention in Income and Capital, none of them is exactly the same.

Each treaty has unique regulations on taxing income and capital of individuals and legal entities.

Belgium's conventions for the avoidance of double taxation serve other purposes, too. They help limit tax evasion, stop tax discrimination, and encourage foreign investment. They also allow for information interchanges between countries.

Which Countries Have Double Taxation Treaties With Belgium?

Belgium has double taxation treaties with countries across the globe. Here's a quick breakdown by geographic location according to the Belgian MyMinfin (Tax-on-Web) website:

EU Countries

The following European Union member states have double taxation avoidance agreements with Belgium:

  • Austria
  • Bulgaria
  • Czech Republic
  • Cyprus
  • Germany
  • Denmark
  • Estonia
  • Finland
  • Greece
  • France
  • Hungary
  • Ireland
  • Italy
  • Latvia
  • Lithuania
  • Luxembourg,
  • Malta
  • The Netherlands
  • Poland
  • Portugal
  • Romania
  • The United Kingdom
  • Slovenia
  • Slovakia
  • Sweden
  • Spain

Non-EU Countries

Belgium has double taxation agreements with these non-EU countries:

  • Albania
  • Belarus
  • Bosnia-Herzegovina
  • Croatia
  • Georgia
  • Iceland
  • Kosovo
  • Macedonia
  • Moldova
  • Norway
  • Serbia
  • Montenegro
  • The Republic of San Marino
  • Switzerland
  • Ukraine

African Countries

Belgium has double taxation conventions with the following countries in Africa:

  • Algeria
  • Bahrain
  • Egypt
  • Gabon
  • Ghana
  • Ivory Coast
  • Mauritius
  • Morocco
  • Nigeria
  • The Republic of the Congo
  • Rwanda
  • Senegal
  • Seychelles
  • South Africa
  • Tunisia

Asian and Eurasian Countries

These countries in Asia have double taxation avoidance agreements with Belgium:

  • Armenia
  • Azerbaijan
  • Bangladesh
  • China
  • Hong Kong
  • India
  • Israel
  • Indonesia
  • Japan
  • Kazakhstan
  • Kyrgyzstan
  • Kuwait
  • Malaysia
  • Mongolia
  • Pakistan
  • The Philippines
  • Taiwan
  • Tajikistan
  • Thailand
  • Turkey
  • Turkmenistan
  • Russia
  • Singapore
  • South Korea
  • Sri Lanka
  • The United Arab Emirates
  • Uzbekistan
  • Vietnam

South American Countries

The following South American countries have double taxation conventions with Belgium:

  • Argentina
  • Brazi
  • Chile
  • Ecuador
  • Mexico
  • Uruguay
  • Venezuela

North American Countries

Belgium has double taxation treaties with the United States and Canada.

Oceanic Countries

Belgium has also signed double taxation agreements with Australia and New Zealand.

When Does a Double Taxation Treaty Apply in Belgium?

Belgium's double taxation treaties only apply when a person or legal entity is considered a tax resident in terms of both countries' laws. These agreements have special rules to determine how taxes are levied on income derived from particular sources.

Belgium's double taxation avoidance agreements typically define and clarify common issues, such as:

  • Taxes: Where a DTT with Belgium applies to corporate, individual, non-resident, and legal entity income tax.
  • Tax residency: How tax liability is determined according to an individual or legal entity's residence.
  • Income: The types of incomes subject to the treaty in question, such as income derived from immovable property, pensions, director's fees, business profits, and others.
  • Dividends: A DTT may allow for the dividends paid by a resident company in country A to a resident company in country B to be taxed in the latter country, where such dividends are effectively received.
  • Tax rate limits: The applicable tax rate limits in the case of dividend income (such as a minimum withholding tax rate).

For the purpose of a double taxation treaty with Belgium, a distinction exists between the income tax of a legal entity and corporate income tax.

The former applies to government and public associations, non-profit organizations, and other certain institutions and associations. Meanwhile, foreign investors in Belgium are concerned with the latter.

Belgium's Convention for the Avoidance of Double Taxation applies to all taxes agreed upon in a particular treaty and any identical taxes that may be imposed after signing.

Belgium's Tax Residency Rules

Before we dive deeper into Belgium's DTTs, here's a brief summary of Belgium's tax residency rules.

  • As a resident taxpayer, you're taxed on your worldwide income.
  • As a non-resident for tax purposes, you're only taxed on your Belgium-sourced income. Foreign income is exempt from taxation but is still used to calculate the marginal tax rate applicable to your taxable (Belgian-sourced) income.
  • If you can prove that your principal domicile or center of your economic interests remains located abroad, you may be considered a non-resident for tax purposes.

Exempted income from the following countries is still subject to communal taxes in Belgium:

  • Bahrain
  • China
  • Congo
  • France
  • Germany (employment income only)
  • The Netherlands
  • Rwanda
  • San Marino
  • Singapore
  • Taiwan
  • The United Kingdom

Tax Residency in Belgium as an Individual

As an individual, you're considered a Belgian tax resident if your domicile or seat of wealth is established in Belgium.

Your domicile is defined as your effective and enduring place of residence, including where your family lives and where your personal contacts are maintained.

Your seat of wealth is defined as the place where your personal estate is managed or where your primary business activities are located. (The place where your property and assets are situated aren't necessarily considered your "seat of wealth" for tax residency purposes.)

If you're registered in the population register, you're considered a Belgian resident and presumed to be a resident taxpayer.

Tax Residency in Belgium as a Company

A company is defined under Belgian tax law as an institution, corporation, corporate body, or association engaging in business or profit-making activity and that has a legal personality.

A company is considered a resident of Belgium for tax purposes if:

  • Its registered office is in Belgium
  • Its principal place of establishment is in Belgium
  • Its seat of management is in Belgium

You can get more detailed facts on Belgium's tax residency rules here.

DTTs and Tax Residency in Belgium

In cases where an individual or company is considered a resident in both Belgium and the other contracting state, special DTT rules apply. Here's how tax residency is then determined for purposes of the applicable double taxation treaty:

The Individual Tax Resident for DTT Purposes

An individual is deemed to be a resident only in the state or country where they have a permanent home available.

A permanent home is defined as any kind of dwelling, whether rented, purchased, or otherwise occupied, that the individual retains for permanent use (as opposed to occasional use).

"Permanent" is the keyword here. The permanence of the home rather than the nature of its tenancy, ownership, or size is relevant (even a rented furnished bedroom can qualify as a permanent home).

However, the individual must have continuous (and not occasional) access to the home. For instance, if you own a house but rent it out to an unrelated party during the applicable period, it's not available to you permanently. The house isn't in your possession, and there's no possibility of staying there.

What if you have a "permanent home" available to you in both Belgium and the other contracting state?

In such a case, you'll be deemed a resident of the state where the center of your vital interests lies. This includes personal and economic factors like:

  • Family and social relations
  • Occupations
  • Cultural, political, or other activities
  • Your place of business or where you administer your property

The above list isn't exhaustive, and your circumstances are considered as a whole. Of course, your personal acts still receive special attention.

What happens if you don't have a permanent home available to you in either country or your center of vital interest can't be determined?

In this instance, you'll be deemed a resident in the state where you have a "habitual abode."

A habitual abode is no longer defined by hard and fast criteria like a set number of days but rather based on frequency, regularity, and duration of your stay.

If you have a habitual abode in both or neither of the contracting states, then you'll be considered a resident of the state in which you're national.

In any other cases, the relevant authorities of both states must determine your residency by mutual agreement.

If you don't want to be considered a Belgian resident for tax purposes, you must prove to the authorities that your stay in Belgium is temporary. Here are some possible examples:

  • Your partner or spouse lives abroad
  • You own real estate abroad
  • You have a foreign life insurance policy or social security scheme

The Legal Entity Tax Resident for DTT Purposes

A legal entity is defined as a person other than an individual.

If a legal entity is a resident of both Belgium and the other contracting state, then it's deemed a resident of the state where its effective management takes place.

The competent authorities must settle the matter by mutual agreement in cases where this can't be determined.

Registration alone isn't sufficient. The tax authorities consider other relevant factors to determine a legal entity's place of effective management, such as:

  • Where key commercial and management decisions necessary for the entity's business conduct are made
  • Where the entity's headquarters are located
  • Where senior-level daily management takes place
  • Where the board of directors (or equivalent body) hold meetings
  • Where the CEO and other senior executives conduct their activities
  • Which country's laws govern the entity's legal status
  • Where accounting records are kept 

Can a legal entity have more than one place of management? Yes. However, it can have only one place of effective management at any given time.

That's why all relevant facts and circumstances are examined to determine where effective management of a legal entity takes place.

Such a place of effective management may still be refuted by the tax authorities after careful consideration of all factors. This is particularly true for subsidiary companies seeking to claim treaty benefits of one state but:

  • Have a parent company with residency in the other contracting state
  • Are established in tax havens
  • Benefit from harmful preferential tax regimes

Hence, the parent company's place of effective management is also taken into account.

Remember, the rules provided in Belgium's double taxation treaties don't create taxes. They simply determine which country is legally allowed to levy taxes on a resident's income.

If a DTT gives a country the right to impose an income tax on the resident, but that country's tax laws don't provide for such a tax, the resident can't and won't be taxed on that income.

Get Your Taxes Right the First Time and Avoid Double Taxation in Belgium

Double taxation treaties are nuanced agreements. They require an in-depth understanding of both signatory countries' tax laws, residency rules, and legal frameworks.

If you want to avoid double taxation in Belgium and benefit fully from a DTT, it's best to get expert advice from international and Belgian tax specialists. You can learn more here.

Sources:

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.