In a number of recent judgements, the Court of Appeal in Brussels has confirmed previous case law of the court of first instance that the subscription tax on Luxembourg SICAVs is in violation of the double taxation treaty. Tiberghien Lawyers was one of the first to raise this issue 15 years ago and is therefore pleased with the verdicts.
‘It’s worth investigating the possibilities of reclaiming this tax (and Belgian withholding tax),’ say Lawyers Yannick Cools and Bart De Cock of Tiberghien Lawyers.
Foreign regulated institutions for collective investment are subject to the Belgian annual tax on collective investment institutions (the so-called “subscription tax” that is part of the Belgian Code of Succession Duties). This tax is owed on the total net outstanding amounts in Belgium, (presently) at a rate of .0925 percent.
This tax has long been a thorn in the side of foreign collective investment undertakings, and has been disputed for some time (especially by Luxembourg SICAVs).
Court of Appeal
In November 2018, the Brussels Court of Appeal ruled in two judgements that the subscription tax is not owed by a Luxembourg SICAV.
‘First of all, the Court of Appeal is of the opinion that a Luxembourg SICAV falls under the scope of the Belgian-Luxembourg double taxation treaty for personnel. A Luxembourg SICAV can therefore invoke the provisions of this treaty. In addition, according to the court of appeal, the tax must be regarded as a wealth tax, the taxing jurisdiction of which belongs to the state of residence (in this case Luxembourg) on the basis of Article 22 of the double taxation treaty’, according to the Tiberghien lawyers.
The Belgian State has in the meantime appealed the ruling to the Court of Cassation, which means that a final judgement may be delayed for a few years. In the meantime, however, Luxembourg SICAVs can safeguard their rights as much as possible by claiming a refund of the tax. Given the 5-year limitation period, taxes can still be reclaimed from 2015 onwards.
Claim for refund
This case law also has important consequences for the possible recovery of withholding tax (currently 30 percent) on Belgian dividends and interest. Under the double taxation treaty, a Luxembourg company can benefit from a reduced withholding tax rate. If the position of the Court of Appeal is maintained, the withholding tax that has been overpaid will also qualify for reimbursement.