Amstelveen, Brussels, 26 June 2023 – After years of negotiations, the Netherlands and Belgium signed a new tax treaty on 21 June 2023. What are the main changes, and what does the new treaty mean for companies and individuals with, for example, cross-border operations or assets?
Cees Nijman, partner at KPMG Meijburg & Co and Kizzy Wandelaer, executive director at KPMG in Belgium, sum up the essence of the new tax agreement.
The new treaty contains several simplifications for doing business and working across borders.
Importantly, the new treaty provides for an exemption from dividend tax when a subsidiary in one country pays dividends to its parent in the other country, provided the parent holds an equity interest in the subsidiary of at least 10% for a period of at least 365 days. Under the current treaty, only a reduction of dividend tax to 5% is provided.
The Netherlands is no longer authorized to levy 10% tax under certain circumstances, on interest paid by a debtor in the Netherlands to a creditor in Belgium.
For statutory directors, a distinction is now made between the activities they perform as statutory directors and other activities. This may mean that directors will now have to pay tax in two countries, rather than only in the country where the company is domiciled.
Contrary to pensioners' hopes, nothing about the complex pension article will change.
Professors, teachers, athletes and artists no longer fall under a special arrangement; they will now be taxed as "ordinary" employees and entrepreneurs.
Belgium gives no credit for the Dutch dividend withholding tax (15%) levied on dividends paid from the Netherlands to an individual resident in Belgium. The tax burden on Dutch corporate profits distributed to a shareholder in Belgium is therefore the sum of 25.8% Dutch corporate income tax plus 15% Dutch dividend tax plus 30% Belgian personal income tax plus Belgian municipal surtax (total burden of 57%).
In addition, the treaty contains a number of anti-abuse provisions that require a company established in one country to pay profits tax in the other country where it operates sooner than is currently the case. There is also a general anti-abuse provision allowing the treaty to be rejected if the purpose of an arrangement or transaction is to avoid tax.
