BELGIUM Trends and Developments Contributed by: An Weyn and Aurore Sultus, Arteo
For entities established outside the EEA, these are legal constructions if they fall within the scope of the general definition of a legal construction. For certain non-EEA entities, the legislator has also provided in rebuttable legal presumptions that they should be treated as legal constructions. Such is the case for entities established in a jurisdiction that is included in the EU list of non-cooperative jurisdictions or the list of jurisdictions with no or low taxation. Insurance contracts are also targeted if certain condi - tions are met. An insurance contract comes within the scope of the look-through taxation if it is entered into by contributing assets from the aforementioned legal constructions or if it invests in such assets. Multi-layer investment structures Any legal construction held directly or indirectly by a Belgian tax resident founder is subject to look-through taxation. This means that Belgian tax residents who indirectly hold investments in foreign entities that qualify as legal constructions are also targeted by look-through taxation. For each of these interposed entities, it would need to be checked whether they qualify as a legal construction, which requires a recal - culation of the taxable basis according to the Belgian rules. Definition of founder The term “founder” is broadly defined to include not only the individuals that have founded the legal con - struction but also those who have transferred assets to it, as well as their heirs. The term also includes the individuals that hold legal or economic rights to the structure or its assets, either directly or indirectly through a chain of intermediate structures. In addition, individuals identified as ultimate beneficial owners of a legal construction in a beneficial owner - ship’s register are presumed to be the founder of the legal construction. This presumption is rebuttable. No minimum participation threshold is set in order to qualify as a founder, so that very minority investors may also have to undergo look-through taxation.
Exclusions from look-through taxation – UCIs and listed entities (Alternative) undertakings for collective investment may benefit from an exclusion unless more than 50% of the ownership rights are held by just one investor, or by several investors who are related persons. If the undertaking for collective investment is excluded from the scope of Cayman tax, then it serves as a blocker, resulting in any investment held by the under - taking being excluded as well. Listed entities are also excluded from the look- through taxation provisions, and they also function as a blocker. Substance exclusion A so-called “substance carve-out” applies to legal constructions with sufficient substance. For the exclu - sion to apply, the following conditions must be met. • The legal construction must be established in a country that has entered into a double tax treaty or a tax agreement providing for the exchange of information with Belgium. • Legal constructions are considered to be active if they carry out a genuine economic activity in their country of establishment, by means of premises, personnel and equipment. The activity may not be limited to the management of the founder’s private assets and must consist of offering goods or ser - vices on a given market. Carrying on an economic activity is thus subject to a very restrictive definition. It is highly debatable wheth - er this restricted definition will stand up to a challenge before the EFTA Court and the Court of Justice in the context of the EU freedom of establishment and the free movement of capital. The substance exclusion must be formally claimed in the annual tax return of the founder and does not prevent the application of the reporting obligation, as described below.
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