Individual investors taxed twice for French dividends
According to the treaty concluded between Belgium and France, dividends distributed by French companies may be taxed in both Belgium and France, while the French withholding tax may not exceed 15%.
The treaty stipulates a maximum French withholding tax rate. If French internal law indicates a lower rate, less than this maximum rate shall be withheld.
As the French withholding tax has dropped to less than 15% since 2018, the French withholding tax for dividends paid to Belgian residents will vary depending on when the dividend was declared.
- +The French withholding tax is 15% for dividends declared before 2018 (provided certain conditions are met).
- +The French withholding tax is 12.8% for dividends declared from 2018.
The received net dividend is subsequently taxed in Belgium at a rate of 30%.
How is this double taxation avoided?
To prevent double taxation, the treaty between Belgium and France provides for a tax credit for the French withholding tax. Thanks to this specific provision, Belgium is obliged to apply a tax credit with a minimum rate of 15% of the net amount.
Stubborn Belgian tax authorities give up the fight
Belgium was condemned for its refusal to grant the tax credit as early as 2017. The tax authorities were unwilling to abide by that ruling, however. This resulted in multiple taxpayers again making their way to the courts in protest.
Two recent judgments by the Belgian Supreme Court (Court of Cassation) and the Ghent Court of Appeal addressed the issue once more. Both rulings favoured the Belgian taxpayer:
- In 2018 the Brussels Court of Appeal again ruled that Belgium must grant the 15% tax credit. Though the tax authorities submitted an appeal against this judgment to the Supreme Court, it was denied on 15 October 2020. - On 15 December 2020 the Ghent Court of Appeal confirmed the obligation to grant the tax credit and ruled that it must be granted, even if the French dividends were not included in the personal tax return (because the bank already withheld the tax).
Following these judgments, the minister has decided to admit the 15% tax credit.
How can you claim this tax credit?
For dividends received in the past, you can apply for ex-officio tax relief. Such claims are restricted to the last five years. Regarding future dividends, what to do will depend on how the tax authorities decide to implement the granting of the tax credit.
|Belgian dividend||French dividend before 2018||French dividend from 2018|
|Gross dividend||€ 100||€ 100||€ 100|
|French withholding tax||- € 15||- € 12,8|
|Belgian tax||- € 30||- € 25,5||- € 26,16|
|Tax credit||+ € 12,75||+ € 13,08|
|Net dividend||= € 70||= € 72,25||= 74,12|
What does the future hold?
The newest double taxation treaty between Belgium and France will no longer provide for the 15% minimum rate. As soon as this new treaty goes into force, Belgian shares will once again be more fiscally attractive than French shares. After all, a French dividend of €100 will result in a net amount of €61.04, while the net result for a Belgian dividend will be €70.
If you have any questions about received French-source dividends or believe you are entitled to a tax credit, be sure to contact our international tax experts.