Belgian investors can finally reclaim the flat-rate foreign tax credit (FBB) on French dividends, ending decades of legal disputes. A recent ministerial statement confirms compliance with court rulings, ensuring long-awaited tax relief.
What is this about? Belgian private investors subject to corporate income tax who hold a French shares and receive dividends from it are currently facing double taxation on these dividends. First, France withholds a source tax of 12.8 percent, and then Belgian withholding tax of 30 percent is deducted from the remaining amount.
According to the existing double taxation treaty between France and Belgium, these Belgian investors are entitled to a flat-rate foreign tax credit, known as “FBB”, for forfaitair buitenlands belastingkrediet, amounting to 15 percent of the net dividend “at the border.”
Below is a numerical example based on a French dividend of 100 euros gross. Since 2018, France has reduced the rate of the French withholding tax to 12.80 percent. Previously, it was 30 percent but could be reduced to 15 percent under the double taxation treaty with Belgium. Through the FBB, taxpayers can recover almost half of the withheld withholding tax (RV) or the applied taxation of 30 percent.
Over 35 years of legal struggle
For a long time, the Belgian tax authorities argued that the FBB was not applicable. However, after years of legal battles and several rulings from the Court of Cassation in favor of the taxpayer, the tax administration is now finally burying the hatchet regarding French dividends.
The question of whether Belgian private savers and taxpayers subject to corporate income tax could still claim the FBB credit on dividends of French origin after the major reforms of the FBB under the law of December 7, 1988, led to more than 35 years of legal disputes. Numerous proceedings were fought before various judicial bodies, including national courts, the Court of Justice of the European Union, the Constitutional Court, and the French Conseil d’État.
As early as June 16, 2017, the Court of Cassation confirmed that the crediting of the FBB on French dividends was lawful. This stance was later reiterated in the Court of Cassation rulings of October 15, 2020, and February 25, 2021.
However, it was only in early 2021 that the Belgian tax administration, albeit with great reluctance and under strict conditions, declared that it would follow this case law. In practice, the tax authorities accepted the application of this credit only for French dividends reported in the personal income tax return, meaning that they were collected in a foreign account.
For French dividends collected in a Belgian account and only subject to the final withholding tax without further mention in the personal income tax return, the tax authorities remained uncooperative and systematically rejected objections, partly due to two completely contradictory rulings on this matter from the Ghent Court of Appeal.
Even in this situation, the knot was ultimately untied in favor of the taxpayer by a Court of Cassation ruling on November 23, 2023. The Court of Cassation confirmed that taxpayers who collected French dividends in a Belgian account with withholding of final withholding tax are also entitled to credit the FBB.
All’s well that ends well for the taxpayer
Until now, there had been no indications from the tax authorities that they would comply with this latest Court of Cassation ruling, until earlier this month when we read the following communication from the new minister of Finance, Jan Jambon, of the Flemish nationalist alliance NVA: “Legal certainty for the taxpayer is an important part of the coalition agreement. Therefore, I fully support the tax administration’s decision to finally bury the hatchet in this matter and come to a constructive solution for the taxpayer.”
Furthermore: “As long as the existing Belgium-France double taxation treaty remains in force, the Belgian state will be required to refund an FBB of 15 percent to recipients of French dividends who have paid withholding tax in both France and Belgium.” Is this due to a new spring or a new minister of Finance? In any case, it is encouraging to hear that legal certainty for taxpayers is important to minister Jambon.
Recovering the FBB in practice
The recovery of the FBB can still be done through a request for reimbursement of withheld withholding tax to the competent service of the FPS Finance. The recovery can go back up to five years, counting from January 1 of the year in which the withholding tax was paid.
Consequently, a refund request can be submitted until the end of 2025 for dividends received and subject to withholding tax since January 1, 2021. In principle, dividends credited to the account in December 2020 but whose withheld withholding tax was only transferred to the Treasury on January 15, 2021, may also qualify.
If the French dividends were collected in an account outside Belgium, the recovery period could be one to two years longer because the five-year period only starts from the date of the tax assessment notice related to the declaration of these incomes in the personal income tax return.
For French-source dividends collected in 2024, the crediting can be done through the personal income tax return—assessment year 2025—including dividends collected through a Belgian bank account that were subject to final withholding tax.
Dirk Coveliers is a partner at the law firm Lallemand, Legros & Joyn (LLJ) and a member of the Investment Officer expert panel. He is also the editor-in-chief of the “Journal of Investment Taxation.”
This article provides general information and should not be considered as advice for any specific situation.