BELGIUM Law and Practice Contributed by: Wim Aerts, Dorothée Vermeiren and Stijn Van Walleghem, Clifford Chance
5%, 10% or 15% and, in addition, various other exemptions may apply. The most important exemptions for interest on corporate loans are the following. • Interest payments made by a Belgian compa - ny to a lender that qualifies as a “professional investor” within the meaning of Article 105, 3° of the Royal Decree implementing the income tax code (RD/BITC). Belgian companies and Belgian establishments of foreign companies subject to tax in Belgium on their Belgian immovable income qualify as “professional investors”. • Interest on loans granted by financial insti - tutions located in the European Economic Area, or in a country with which Belgium has concluded a double-tax treaty. • Interest on loans granted by non-bank lend - ers resident in Luxembourg, the Netherlands, Germany, Switzerland, the UK and the US that are subject to the relevant double-tax treaty with Belgium, subject to certain condi - tions and formalities. • Interest accounted for between related EU (or Swiss) qualifying resident companies. For the purpose of the application of this exemption, two companies are “related” if: (a) one of the companies holds (directly or indirectly) a participation of at least 25% in the share capital of the other company for an uninterrupted period of at least one year; or (b) a third EU (or Swiss) resident company holds (directly or indirectly) at least 25% in the share capital of both the borrowing entity and lending entity, for an uninter - rupted period of one year. • Interest paid by a Belgian company to a foreign investment company that (i) qualifies as an Alternative Investment Fund (AIF), (ii)
is established in a member state of the EEA, and (iii) does not issue its shares in Belgium (subject to conditions and formalities). • Interest paid by certain qualifying Belgian entities (such as listed holding companies, certain public entities or internal banks), sub - ject to a number of conditions and formalities. Typically, private credit providers are structured through qualifying fully exempt treaty jurisdic - tions. For entities that do not qualify under the loan exemptions, and depending on the details of the transaction, it is sometimes advisable to perform a bond issue rather than granting a cor - porate loan in order to benefit from “larger” with - holding tax exemptions (namely, the X/N Clear - ing System or registered bonds). In addition, a number of important structuring considerations need to be kept in mind. • The definition of “interest” under Belgian tax law is broad and includes any income that is received by the lender in order to remunerate “the granting of capital by the lender at the debtor’s disposal”. Any fee payments under the underlying loans need therefore to be carefully considered as potentially treated as interest for Belgian tax purposes. • In recent years, there have been an increas - ing number of challenges by the Belgian tax authorities of withholding tax exemptions on interest payments flowing through intermedi - ary financing companies based on a deemed absence of beneficial ownership or necessary substance and/or the application of the EU or national anti-abuse rules. Although Belgian domestic law does not con - tain a clear definition or even guidance on the concept of “beneficial ownership”, following the Danish cases, it is clear that this concept should
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