The Ongoing Saga of the Belgian Net Asset Tax and Its Compatibility with the Luxembourg-Belgian Double Tax Treaty
30 Aug 2023
Executive Summary
For several years, debates have raged over whether the Belgian Net Asset Tax (NAT), also known as the "Belgian taxe d'abonnement" can be levied on Luxembourg-based SICAVs under the Luxembourg-Belgian Double Tax Treaty (DTT). Recent judgments from the Court of Appeal of Brussels have reopened the discussion, offering new perspectives for Luxembourg SICAVs.
Background
Historically, various Court of Appeal decisions have sided with taxpayers, asserting that:
- Luxembourg SICAVs fall within the personal scope of the DTT, thereby gaining access to its provisions.
- The NAT qualifies as a wealth tax, which is covered by the DTT.
These decisions implied that Belgium could not impose the NAT on Luxembourg SICAVs, as the DTT allows only Luxembourg to levy wealth taxes on them.
However, the landscape changed in 2022 when the Supreme Court issued two seemingly contradictory judgments:
- On March 25, 2022, the Court ruled that the NAT does not qualify as a wealth tax, thereby not conflicting with the DTT.
- On April 21, 2022, the Court decided that while the NAT is a wealth tax, it is not included in the DTT's exhaustive list of such taxes, allowing Belgium to levy it.
These cases have been referred back to the respective Courts of Appeal for final decisions, expected in 2024.
Latest Developments
On April 25, 2023, the Court of Appeal of Brussels issued four new judgments, which:
Confirm that Luxembourg SICAVs have access to the DTT.
State that the NAT is within the scope of taxes covered by the DTT.
Reiterate that the NAT qualifies as a wealth tax.
These judgments suggest that Luxembourg SICAVs could challenge their NAT obligations, as Article 22 of the DTT generally allows only the Residence State (Luxembourg, in this case) to tax wealth. However, Belgium can still appeal these decisions to the Supreme Court.
What Lies Ahead
While the debate over the NAT is far from settled, these new judgments offer new hope for Luxembourg SICAVs. Besides the NAT, they also open the door for these entities to request refunds on Belgian withholding taxes on dividends or interest sourced from Belgium.
For additional details or clarification, please do not hesitate to contact the undersigned.
Luc Buelens
