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Brussels, 24 November 2010

Taxation: the European Commission asks Belgium to put an end to the discriminatory tax treatment of certain income from capital

The European Commission has officially asked Belgium to review its tax system, which imposes additional taxes on income from capital (dividends/interest) paid by foreign intermediaries to Belgian residents who invest abroad. The request takes the form of a 'reasoned opinion' (the second step in the infringement procedure laid down in Article 258 of the Treaty on the Functioning of the European Union or TFEU). If no satisfactory response is provided within two months, the Commission reserves the right to bring this matter before the Court of Justice of the EU.

Income from capital paid in Belgium to Belgian residents is subject to a withholding tax. This deduction at source means that Belgian residents do not have to mention these dividends and interest in their annual personal income tax declarations and are exonerated from further taxation. Income from capital paid abroad to Belgian residents must, however, be mentioned in their annual personal income tax declarations. Such income is taxed at a rate identical to that of the withholding tax which exonerates interest and dividends paid in Belgium from having to be declared. However, these revenues are subject to additional taxation. As a result, Belgian residents who invest abroad are taxed at a higher rate than those who invest in Belgium.

The Commission therefore considers Belgium to be in breach of its obligations under Article 63 TFEU (free movement of capital) and Article 40 of the Agreement on the European Economic Area. Belgian legislation also allows Belgian residents to avoid this additional taxation by calling on the services of Belgian intermediaries only. This possibility is contrary to the principle of the freedom to provide services guaranteed by Article 56 TFEU.

For the press releases issued on infringement procedures in the taxation or customs area see:

For the latest general information on infringement measures against Member States see:

For more information on EU infringement procedures, see MEMO/10/605.

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