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EC Takes Belgium To Court For 'Discriminatory' Tax Measures

by Ulrika Lomas,, Brussels

25 November 2013

The Court of Justice is to hear the European Commission's case against two "discriminatory" Belgian tax laws.

The Commission has decided to bring an action before the Court, concerning the manner in which Belgium taxes certain income of foreign cooperative societies and those pursuing a social objective, as well as interest paid to foreign companies.

At present, Belgium grants a withholding tax exemption for the first tranche of dividends either paid by cooperative societies or allocated or distributed by societies pursuing a social objective. Only societies authorized in Belgium and cooperatives established under Belgian law are able to take advantage of this tax break.

The Commission alleges that this discourages investment in comparable foreign bodies. This therefore constitutes an unjustified restriction on the free movement of capital, as established in European Union (EU) treaties. In October, 2012, the Commission formally requested that the Belgian authorities amend the relevant provisions.

Belgium is also under fire for its decision to charge withholding tax on interest from debt-claims not represented by securities and paid to foreign investment companies, and on interest relating to securities deposited or registered in an account with financial institutions established outside the country. No such levy is imposed on Belgian investment companies or financial institutions established in Belgium.

The Commission believes that this could discourage cross-border investment, and places restrictions on the freedom to provide services and on the free movement of capital. Belgium was asked to overhaul this system in February.

The Court of Justice is to deal with the cases because Belgium has yet to provide the Commission with a response to its demands.

TAGS: compliance | tax | investment | European Commission | tax compliance | Belgium | interest | revenue guidance | law | ministry of finance | tax authority | tax planning | withholding tax | tax breaks | dividends | revenue statistics | European Union (EU) | services | Europe

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