by Febe Louage and Hannelore Durieu
As you may have already read in our previous article, Belgium and France recently negotiated a new double taxation convention. Although the new convention will not come into effect before 2023, we thought it would be useful to provide an overview of the key changes that will apply to Belgian residents. In this article, we’ll be taking a closer look at investments in France, looking separately at how things will change for interest payments, dividends and capital gains on shares.
If a natural person or company domiciled in Belgium receives interest payments from France, this income must always be taxed in the country where the recipient is domiciled. However, under the old convention, the country of origin also had the right to levy withholding tax up to a maximum of 15%. This capped withholding tax has been removed from the new double taxation convention – under the new convention, interest from France paid to a Belgian resident will only be taxed in Belgium.
If you or your company are domiciled in Belgium and receive dividends from France, the convention states that they must be taxed in Belgium and France can apply a capped withholding tax. Under the new convention, the withholding tax that may be applied in France is reduced from 15% to 12.8%.
In practice, this reduction in the withholding tax will not affect private individuals, who have already been benefiting from the lower rate since the reduction of the French domestic tariff to 12.8% in 2018.
What will have a significant impact is the abolition of the flat-rate foreign tax on French dividends. We explained in an earlier article that under the old convention, Belgium was required to offset the French withholding tax. As a result, a resident of Belgium would end up with a greater net residue from a French dividend. However, under the new convention, Belgium is no longer required to make this offset, and the French dividends will once again be taxed more heavily.
Companies in Belgium will not only benefit from the reduction in tariff in the new convention (from 15% to 12.8%); they will also enjoy complete exemption from French withholding tax, if they able to are meet certain criteria. Namely, to benefit from this exemption, the Belgian company must have, or plan to have, at least 10% participation in the capital of the French company for a period of 365 days.
The French dividends issued to the Belgian company are subject to corporate tax in Belgium. If the criteria for the dividend-received deduction are met, the dividends received will be exempt from corporate tax in Belgium. If, on the other hand, the dividend-received deduction does not apply to the Belgian company, then the French withholding tax can be offset against the Belgian corporate tax.
There has been some discussion about dividends received by a Belgian company from a French SCI: should they be taken into account for the dividend-received deduction in Belgium, or not? The new convention explicitly resolves this question: these dividends should indeed be taken into account if the Belgian company is itself taxed on the SCI’s (société civile immobilière) operating results.
Please see our earlier article for more details about taxation on sociétés à prépondérance immobilière (assets > 50% of the value of the asset). We will just note here that capital gains tax does not apply if the real estate company is listed in a regulated EEA stock exchange.
For Belgians relocating to France or French relocating to Belgium who directly or indirectly hold a significant share in a company based in their original country of residence (a right to at least 25% of the company’s profits), the new double taxation convention states that the capital gain may still be taxed in the original country, providing the following conditions are met:
It is clear that the new double taxation convention introduces some important changes for Belgians with investments in France. If you have any questions about this issue, please do get in touch with our experts.
In our opinions, we rely on current legislation, interpretations and legal doctrine. This does not prevent the administration from disputing them or from changing existing interpretations.
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