BELGIUM Trends and Developments Contributed by: An Weyn and Aurore Sultus, Arteo
Gift tax Belgium’s gift tax rates are considerably lower than its inheritance tax rates, with gift tax rates in direct line going from 3% to 3.3%, depending on the region in which the donor lives. From a Belgian tax perspective, gift tax is a registra - tion tax under Belgian law. The registration procedure – triggering gift taxes – is compulsory for: • gift deeds passed before Belgian notaries; and • gift deeds passed before foreign notaries if the donor is a Belgian resident on the date that the gift occurs. If the gift can be formalised without requiring a notarial deed, then no gift tax is due. However, if a donor dies in the five years following such a non-registered gift and qualifies as a tax resident of the Flemish or Wal - loon Regions at the time of death, inheritance taxes will be due, taking into account the value of the gifted assets. In the Brussels Metropolitan Region, the same rule applies to donors who die in the three-year period following the gift. Look-through taxation for natural persons After the Belgian government had already introduced an obligation in 2013 for individuals to disclose the existence of certain “legal constructions” of which they were the founders, a look-through taxation regime – also known as the “Cayman tax” – became applicable in Belgium at the beginning of 2015. Several legislative amendments followed in the following years. Look-through taxation regime Pursuant to the look-through taxation provisions, the natural persons who must be considered as the found - ers of the targeted legal construction are obliged to pay tax on the income obtained by the legal construc - tion. The income of a legal construction thus becomes taxable in the hands of the Belgian resident founder as if they had received it directly, even if the income is not actually distributed to the founder. Definition of legal constructions A distinction must be made between the following dif - ferent types of legal constructions:
• trusts and trust-like arrangements; and • foreign entities with legal personality.
The latter legal entities only come within the scope of the look-through taxation if they are situated in a jurisdiction where they are either not liable to income tax or are liable to an effective income tax that is lower than 15% of the entity’s taxable income as determined according to the rules applicable as if the entity were subject to Belgian income taxation. The 15% test is to be applied on an annual basis, so that the income of the same legal entity may be taxable under the look-through taxation in one year but not in the fol - lowing. The 15% test does not apply to trusts, which are within scope of the look-through taxation anyway, regardless of whether or not they are subject to tax. Legal entities situated in the European Economic Area (EEA) qualify as legal constructions only if they fall under any of the following targeted categories. • (Alternative) undertakings for collective invest - ment in accordance with the UCITS directive or the AIFM directive that are held more than 50% by one investor, or by several investors who are related persons (up to the fourth degree of kinship). The ownership test is to be assessed at the level of each compartment. A presumption based on the existence of related persons will apply when the asset manager receives specific instructions from the shareholders of a compartment or if no inde - pendent asset manager has been appointed. • Legal entities that are opaque for Belgian income tax purposes but are treated as transparent according to the tax legislation of the jurisdiction where they are established (hybrids). However, if the partners of the hybrid entity pay a minimum 1% income tax in the country of establishment on the partner’s share in the taxable income of the hybrid entity (as determined in accordance with Belgian corporate income tax rules), then they are not in scope. • The last category targets entities that are either not subject to corporate income tax or subject to an amount of income tax lower than 1% of the taxable income as determined in accordance with Belgian corporate income tax rules.
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