Direct taxes: The European Commission formally requests Belgium to change its provisions with regard to the higher taxation of dividends and interest received by foreign investment funds
European Commission - IP/10/94 28/01/2010
Brussels, 28 January 2010
The European Commission has formally requested Belgium to change its tax provisions which result in a higher tax burden on dividends and interest paid to foreign investment funds compared to similar payments made to domestic investment funds. The request takes the form of a reasoned opinion (second step of the infringement procedure provided for in Article 258 of the Treaty on the Functioning of the EU (TFEU). If there is no satisfactory reaction to the reasoned opinion within two months, the Commission may decide to refer the matter to the Court of Justice of the European Union.
Under article 106 §3 of the Royal Decree implementing the Belgian tax code dividends distributed by Belgian companies to a Belgian investment fund are exempted from withholding tax under certain conditions, whereas dividends paid by their foreign counterparts are taxed at a 25% or 15% rate.
Under article 110 of the mentioned Royal Decree, a Belgian investment fund meeting certain legal obligations related to its investments and investors is exempt from withholding tax on revenues deriving form money deposits performed in Belgium, whereas revenues of their foreign counterparts are taxed at 15% rate.
The Commission considers this treatment to be discriminatory and a restriction on the freedoms laid down in articles 49, 54, 56, 63 of the TFEU and articles 31, 34, 36 and 40 of the EEA Agreement , since it results in a higher tax burden on dividends and interest paid to foreign investment funds compared to similar payments made to domestic investment funds.
The Commission's case reference number is 2007/4791.
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