In a recent fiscal flourish, Belgian finance minister Vincent Van Peteghem’s tax reform, originally slated for summer passage, gave way to an intriguing end-of-year development: the amendment of the ‘Cayman tax’, approved just before Christmas in the Belgian parliament.
This reform is an outcome of the Belgian Court of Audit’s report from April 2023, which scrutinised the Cayman Tax legislation and urged the government to refine it. The proposed adjustments aim to address the Court’s observations, with the government not seeking a complete overhaul like in 2017, but rather targeted modifications, upgrading the Cayman tax to its 2.1 version.
These ‘remedies’ predominantly disrupt wealth structures in Luxembourg, the Netherlands, France, and Switzerland, held either directly or indirectly by individuals or entities liable for Belgian personal or corporate income tax. The explanatory memorandum reiterates the Cayman tax’s original intent: to repatriate ‘floating assets’ to Belgium via the dissolution of these legal structures.
Increasingly, we witness such repatriation, particularly with Luxembourg and Dutch structures, though French and Swiss ones also face scrutiny.
Reform targets Luxembourg structures
The reform specifically targets Luxembourg structures, like SPFs and Soparfis, owned by Belgian residents, propelling transformations or liquidations before 1 January 2024. A notable aspect is the challenge to ‘fonds dédiés‘—collective investment undertakings held by a person or connected persons. The new regime considers these as legal arrangements if over 50% of rights are held by connected persons.
This adjustment affects alternative collective investment undertakings (AICBs) dominated by single individuals or families, even if 49% of shares belong to third parties, as seen in Luxembourg Sicav-Sifs. Governed by the 2007 law and supervised by the Commission de Surveillance du Secteur Financier (CSSF), these Sifs may now face compatibility issues with EU directives such as the AIFMD and the free movement of capital or services.
Many fonds dédiés-AlCBs might contemplate transitioning into Belgian structures, which are not deemed legal constructions. However, such a move is impractical before year-end, making an advance ruling a prudent step to mitigate transition impacts.
Dutch Stak now defined as legal construction
The reform also targets Dutch Staks and Stak-Bm combinations. The substantive law changes are less concerning than clarifications on tax status provided in the memorandum and by the minister in the Parliamentary Committee. A Dutch Stak, now defined as a legal construction, may avoid the Cayman tax if it meets the conditions of the Belgian Certification Act, provided the certified shares are not linked to another legal construction.
For Stak-Bm constructions, the Belgian certification law typically does not apply. The minister hinted at administrative tolerances, though their exact nature and efficacy remain uncertain.
From 2024, blocking legal constructions via intermediary-held Stak certificates becomes unfeasible. Founders must report such constructions in tax returns, with implications like reporting obligations, description requirements for the legal arrangement, and implications for the annual tax on securities accounts.
Some are hastily relocating the Staks’ actual seats to Belgium or dissolving them before 1 January 2024, as Belgian structures are not considered legal constructions.
These amendments raise questions about compliance with EU principles, double taxation treaties, and the principle of equality.
Dirk Coveliers is a Belgian lawyer and Investment Officer knowledge expert.