BELGIUM Law and Practice Contributed by: Robin Minjauw and Anouk Van der Mast, Tiberghien
1. Sources and Principles 1.1 Domestic Sources of International Tax Law The main sources of international tax law in Belgium are: • constitutional principles (eg, the principle of legal - ity); • EU law (eg, the Parent-Subsidiary Directive, the Interest and Royalties Directive and the Anti-Tax Avoidance Directives); • domestic legislation (eg, the Income Tax Code (ITC 92)); • administrative guidance (eg, circular letters); • case law; and • tax treaties. Belgium has established a comprehensive network of approximately 100 bilateral tax treaties (in force). 1.2 Hierarchy of Sources Belgium adheres to the principle of treaty supremacy, pursuant to which duly ratified and officially published international agreements override conflicting domes - tic legislation. This hierarchical principle is equally applicable in tax matters. 1.3 OECD Model/United Nations Influence on Treaty Practice Belgium, as founding member state of the OECD, predominantly aligns its treaty policy with the OECD Model Tax Convention. The OECD Model serves both as a reference point in treaty negotiations and as a tool for interpreting tax treaties. The Belgium Model Tax Convention (last updated in 2010) is therefore widely inspired by the OECD Model. The protocol to the Bel - gian Model Tax Convention explicitly confirms this by stipulating that the OECD Commentaries should be followed when interpreting the relevant tax treaty. While Belgian tax treaties predominantly follow the OECD Model, the UN Model Convention also has a notable influence, particularly in Belgian tax treaties concluded with developing countries. Such treaties most frequently include the construction permanent establishment provision, the service permanent estab -
lishment provision and the withholding tax on royalties provision, as provided in the UN Model. 1.4 Multilateral Instrument Belgium is a signatory to the Multilateral Convention to Implement Tax Treaty Related Measures to Prevent Base Erosion and Profit Shifting (MLI). Belgium signed the MLI on 7 June 2017 and deposited the instrument of ratification with the OECD on 26 June 2019. The MLI entered into force for Belgium on 1 October 2019. The MLI provisions entered into effect for withholding taxes levied as from 1 January 2020, provided that the MLI had also entered into force in the contracting state. With respect to all other taxes (including the corporate income tax), the MLI entered into effect for taxable periods beginning on or after 1 April 2020. Belgium designated 99 bilateral tax treaties as Cov - ered Tax Agreements (CTAs) at the time of signing the MLI. The number of tax treaties that are actually modified by the MLI is, however, lower, as the MLI only applies if both contracting states have ratified it and have designated the tax treaty as a CTA.
2. Territoriality, Residence and Permanent Establishment
2.1 General Principle of Territorial Taxation In Belgium, the general principle of territorial taxation distinguishes between residents and non-residents. Residents, whether individuals or companies, are taxed on their worldwide income, meaning income from both Belgian and foreign sources, while non-res - idents are taxed only on Belgian-source income (eg, immovable property income or profits from a Belgian permanent establishment). 2.2 Tax Residence of Individuals In Belgium, an individual is considered a Belgian tax resident if they have established either their domicile in Belgium or, if no domicile exists, the seat of their wealth in Belgium. Tax residency is determined based on factual circumstances, meaning nationality is irrel - evant.
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