The Belgian Constitutional Court has partially annulled the most recent reform of the Cayman tax, also known as the look-through tax. This creates opportunities for Belgian individuals who invest through the Luxembourg structures Sicav-SIF and Soparfi.
The judgment of September 18, 2025 concerns the most recent reform of the Cayman tax, from late 2023. Several appeals were filed against that reform. Some complaints were rejected, but a number of important objections were upheld by the Constitutional Court.
This ruling creates opportunities for the Luxembourg financial sector and for Belgian individuals who invest (or want to invest) through a Luxembourg specialized investment fund Sicav-SIF or through the Luxembourg holding structure Soparfi (Société de participations financières).
Freedom of establishment and free movement of capital
According to the Court, the Cayman tax can restrict the freedom of establishment and the free movement of capital. Such a restriction is only permissible when the regulation in question targets purely artificial arrangements intended to avoid the tax normally due in a given state. The fact that a legal structure has the sole purpose of managing the founder’s private assets is not, in itself, sufficient to prove that it is a purely artificial arrangement.
The Court annulled the provision requiring that the structure must perform a substantial economic activity, consisting of the supply of goods and services on a particular market, and that this substantial activity may not have the purpose of managing the founder’s (or one of the founders’) private assets.
The Court’s position and reasoning may also benefit various Soparfi cases, offering additional arguments against being treated as a legal arrangement.
Anti-abuse rule must remain rebuttable
The judgment also opens new perspectives for the use of a Luxembourg Sicav-SIF structure. Since the latest reform, this structure was considered a legal arrangement if the fund was more than fifty percent owned by one person or by several related persons.
The Court finds it justified to set a maximum participation threshold to escape the Cayman tax, but considers fifty percent disproportionate. Not every collective investment vehicle where more than half of the rights are held by one person or related persons automatically constitutes abuse. The relevant article was annulled because it left no room to demonstrate that third parties with smaller shares than fifty percent did not participate solely for tax reasons.
Importance of retroactive annulment
Equally important as the substantive correction of the Cayman tax is that these annulments by the Court have retroactive effect, as is generally the case for Constitutional Court rulings.
Far too often, the Court has deviated from this principle in tax cases and explicitly maintained the effects of annulled provisions for the past.
Examples include the one-time contribution charged to the gas sector (2008), the tax of four percent on investment income above twenty thousand twenty euro (2013), the Turtel tax (2017), the value added tax exemption for online gambling (2018), the fairness tax (2018), the value added tax exemption for certain paramedical professions (2019), and the annual tax on securities accounts (2019). Each time, it was simply and almost casually argued that retroactive effect would cause budgetary and administrative difficulties.
In this ruling, the Court stressed that member states are required to give priority to European Union law and may not maintain the effects of provisions found to conflict with Union law. Moreover, it was not shown that the annulment would have such wide-ranging consequences that maintaining the effects would be necessary.
Hopefully, this marks a favorable shift and gives encouragement to the ongoing lawsuits against the non-retroactive annulment of the first version of the securities accounts tax.
Dirk Coveliers is a lawyer and member of the expert panel of Investment Officer. He is also editor-in-chief of the Journal of Investment Taxation (KnopsPublishing). This article contains only general explanations and cannot serve as advice for a specific situation.