BELGIUM Law and Practice Contributed by: Wim Aerts, Dorothée Vermeiren and Stijn Van Walleghem, Clifford Chance
be interpreted “economically” – ie, designating the entity that actually benefits from the interest paid to it, even if national laws lack clear defini - tions and/or tax administrations used to interpret the concept of beneficial ownership in a more “legalistic” way (as was the case in Belgium). The economic interpretation can therefore be expected to prevail, certainly when applying EU tax exemptions (such as the IRD), but in many cases also when applying pure national law exemptions and national anti-abuse rules. Similarly, some double-tax treaties (eg, the treaty with Luxembourg) are subject to the “principal purpose test” (PPT) as set out in Article 7 (1) of the MLI. The PPT allows participating states to disregard a “transaction” when concluded with the sole purpose of benefiting from a provision of a double tax treaty. Whether or not the PPT is met is a factual exercise, mainly depending on how the relevant investor is managed and/ or organised. 4.2 Other Taxes, Duties, Charges or Tax Considerations Belgian VAT will only apply to the extent the recipient of the services (ie, the lender or the counterparty, as the case may be) is established in Belgium for Belgian VAT purposes. Under the Belgian VAT rules, any fees charged to a recipi - ent established in Belgium will be subject to 21% Belgian VAT, except in case an exemption would apply. Services related to the granting or the negotiations of loans are fully exempt from Belgian VAT. This exemption is interpreted restrictively in Belgium and is limited to the grant and negotiation activities that are directly con - nected and essential to the granting/conclusion of a loan. The VAT exemption does not apply to standalone technical services such as advertis - ing and marketing services or pure compliance
work, even if rendered in the context of a loan agreement. No Belgian stamp duty applies on loans opera - tions and usual banking activities. Documentary duties are however payable on certain financial agreements. The duties are payable at the rate of EUR0.15 on loan and credit agreements and on pledge agreements, if executed in Belgium. They are payable at a flat amount of EUR50 for most notarial deeds. The taking of security (for example by way of a mortgage on a Belgian property) may be sub - ject to certain costs (for instance, the taking of a mortgage gives rise to registration duties and other costs and fees for an amount of approxi - mately 1.4% of the secured amount). Registra - tion duties may also apply on transfers of Bel - gian mortgage loans. A Belgian mortgage means a security interest over real estate situated in Belgium, regardless of where the borrower is located. 4.3 Tax Concerns for Foreign Lenders Please see 4.1 Withholding Tax and 4.2 Other Taxes, Duties, Charges or Tax Considerations . In addition, Belgian borrowers may be subject to certain conditions and reporting obligations in relation to interest paid to a lender acting out of so-called Non-Cooperative Jurisdictions (in essence a foreign lender which is not subject to tax or subject to a tax regime which is deemed to be notably more advantageous than the Belgian corporate tax regime). The Belgian tax authori - ties may require the Belgian borrower to provide evidence that the payments were made in the context of a real and genuine business transac - tion and to a foreign entity that cannot be con - sidered artificial. If the Belgian borrower were to fail to deliver adequate evidence, the Belgian
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