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Withholding tax on outgoing dividends and interest in Belgium

Asked in Investment for Belgium

Since 2007, Belgium has extended the EU parent-subsidiary directive on exemption of withholding tax on intra-EU dividends and interest to all countries having a double tax treaty with Belgium. See, for example,

This extended version of the EU directive is not mentioned on the country page of Belgium. Is there any particular reason for this ?
Posted by Dirk.De.Ruyver on May 13, 2014 at 02:16


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I cannot say about the particular sections of this website (because I am not the manager/updater of those sections).

However the text you are referring to has nothing to do with the EU, it has to do with the international tax treatment. I would say that most countries don't withhold (just like Belgium).

Even if there is no withholding tax from Belgium, there could be a (flat) tax in the parent's jurisdiction ANYWAY. This is covered by a sister website of the current lowtax.net called TreatyPro, and recaps all the effective tax rates to pay (with the minimum holding requirements):


As you will see: some rates for EU countries are higher than those provided in the EU parent-subsidiary directive, thus rendering all those treaties obsolete for EU countries.

The text of LowTax.net here:

"If the parent corporation is not an EU entity or if these conditions are not otherwise satisfied then a standard withholding tax rate of 25.75% applies on outgoing dividends unless that rate has been reduced (usually to 15% or less) by the provisions of a double taxation treaty. Belgium has over 100 double taxation treaties in place. (Denmark has 69 and the UK has over 100)."

is saying exactly what you "discovered": what counts is the effective tax rate paid (whether it accounts for a withholding tax in Belgium or not, and for the flat rate of the parent).
Posted by prominee.com on May 13, 2014 at 06:49 and edited on Nov 23, 2017 at 11:11


Dirk.De.Ruyver - Thank you for your kind reply to my question.

When discussing withholding tax rates on dividends paid in EU member states to companies in or outside the EU, I agree that one should consider :

a) the EU Parent Subsidiary Directive (90/435/EC), which abolishes withholding taxes on dividends in the EU member states (under certain conditions)
b) international tax treatment, in particular fiscal treaties between EU member states and non-EU member states.

However, in the case of withholding taxes on outgoing dividends from Belgium, one should also consider the unilateral decision of Belgium to extend the EU Parent Subsidiary Directive to all countries that concluded a fiscal treaty with Belgium. This is mentioned in the Belgian tax survey 2013, published by the Belgian Federal Public Service (Ministry) of Finances, on page 136, as follows :

"Dividends allocated by a subsidiary to its parent company are exempted from withholding tax
inasmuch as the parent company is located in a Member State of the European Union or in a
State with which Belgium has concluded a double taxation convention. To benefit this
exemption, the parent company shall maintain or have maintained, during an uninterrupted
period of at least one year, a minimum share of 10% in the capital of its subsidiary.
The system of exemption from withholding tax on participation dividends also applies to
dividend payments to a contracting State (non-Member of the European Union)."

The tax survey concerned can be downloaded from the website of the Belgian Federal Public Service of Finances :

This is a third element which is not taken into account nor by the website of Lowtax, nor by your sister website TreatyPro (www.treatypro.com/treaty_tables/Belgium.asp), as far as I can see.

Take the example of Japan for instance. TreatyPro correctly mentions that the fiscal convention between Japan and Belgium provides for a 5% withholding tax where the payee is a company holding at least 25% of the paying company's voting stock for six months before payment of the dividend, otherwise 15%. This results from article 10 in the fiscal convention between Japan and Belgium.

However, due to the unilateral decision of the Belgian Government mentioned above, the dividends paid by a Belgian company to its parent company in Japan will not result in any withholding tax in Belgium, as long as the parent has maintained a minimum share of 10% in the capital of the Belgian company uninterruptedly for at least one year. As a result, the real withholding tax paid in Belgium will be zero, not 5%, nor 15%. This element, I do not find back, nor on the website of LowTax neither on the website of TreatyPro.

I sincerely would appreciate your comments.

Commented on May 13, 2014 at 12:49
prominee.com - Let me try again based on your example: the Belgium-Japan treaty.

The subsidiary company B in Belgium has more than 25% of its stock owned by the parent company A in Japan. As you correctly wrote: the tax treaty between Belgium and Japan states that the TAX rate is 5% for dividends for such shareholding.

Situation A: Belgium has a 15% withholding tax.
Company B in Belgium pays a 100'000 EUR dividend to the parent company A in Japan.
15% (15'000 EUR) of those dividends are withheld in Belgium, so that 85% (85'000 EUR) are received by parent company A in Japan.
Companies A and B overpaid 10% (10'000 EUR) of tax.
Parent company A in Japan fills for either:
* a refund from the Japanese tax office for overpayment of 10'000 EUR ;
* can use the 10'000 EUR credit against its own tax to pay (as if they already paid 10'000 EUR of Japanese tax) ;
* claim deduction of the 10'000 EUR against taxable income ;
* a "credit for foreign withholding tax" to be used for later years as they please.

Situation B: Belgium has no withholding tax.
Company B in Belgium pays a 100'000 EUR dividend to the parent company A in Japan.
100% of those dividends are received by parent company A in Japan.
Parent company A in Japan pays the Japanese Tax Office the 5% (5'000 EUR) due.

In either situation A or B: the rates stated in the tax treaties are consistent, and there is no double taxation (thanks god!).
TreatyPro is right.
Of course: having no withholding tax makes your life easier.

Hint: in the light of all this, and if your parent company is in Japan and wants to invest in Europe, you can use TreatyPro here:
to find out the best countries to open an EU subsidiary in:
* 0% on dividends remitted from France to Japan, corporate tax rate @ 33%, total: 33%
* 0% on dividends remitted from Netherlands to Japan, corporate tax rate 25%, total: 25%
* 0% on dividends remitted from the UK to Japan, corporate tax rate @ 21%, total: 21%
* 10% on dividends remitted from Bulgaria to Japan, corporate tax rate @ 10%, total: 20%.

Thanks, I enjoyed answering you again. Commented on May 14, 2014 at 00:40
Dirk.De.Ruyver -
Thanks again for explaining. I really appreciate. I appreciate particularly your explanation in situation A and B.

I believe for Belgium, situation B is now quite common. In situation B, you mention that Japan will levy a 5% withholding tax on the dividends coming in from Belgium. However, I have difficulties to understand why that would be the case. The Treaty to avoid Double Taxation between Japan and Belgium mentions under article 10, paragraph 2, that Belgium can levy up to 5% on Belgian dividends paid to Japanese companies. This paragraph does not mention that Japan can levy up to 5% withholding tax on dividends paid from Belgium to Japanese companies. In general, I thought that dividend withholding taxes are only levied in the country that is the source of that revenue.

Paragraph 1 of article 10 of the Japan-Belgium Tax Treaty does give the right to Japan to levy taxes on dividends paid by Belgium to Japanese companies. The Japanese authorities have introduced a foreign dividend exemption of 95% in this regard. Only 5% of the foreign dividend income will be taxed against the normal corporate tax rate in Japan (which is dependent, among other things, on the size of the Japanese company). I believe that Japan is using this FDE system in compliance with paragraph 1 of article 10 of the Japan-Belgium Tax Treaty.

So, in case of situation B where Belgium has no withholding tax on dividends to a Japanese parent company, the 100,000 euro dividend that the Belgian company B is paying to its parent company A in Japan, will not be subject to a withholding tax nor in Belgium nor in Japan, but the Japanese parent company will have to pay corporate tax in Japan on 5,000 euro, which is 5% of the dividend received from Belgium. This FDE system is also applied to dividends from other countries, except if a fiscal treaty provides for a different system.

I believe therefore that the actual situation in Belgium is similar to the one in Netherlands and France : 0% withholding tax on dividends remitted from Belgium to Japan, corporate tax rate @ 33.99%

In your conclusion, you mention that a Japanese parent company, when deciding on the best location to open a EU subsidiary, should take into account the withholding tax levied on the dividends paid to the Japanese parent company and on the corporate tax rate in the EU member state. I believe that the Japanese parent company should at least also take into account the taxable income base on which corporate tax is levied in the EU member states. Some countries allow far more deductions from the taxable income base than others. Belgium, with fiscal deduction systems like the notional interest deduction, is one of them. Whether you pay 25% on a taxable income base of 100, or 33.99% on a reduced taxable income base of 50 does make a difference.

If I am mistaken, please feel free to correct me. Any clarifications are much welcome.
Commented on May 14, 2014 at 02:36
prominee.com - You got it: now Belgium is in situation B at the moment. But maybe in 5 years they will revert to situation A.

You are also right about the withholding tax: it is a tax at source. The 5% paid by the Japanese parent (you've done your research well) is not a withholding tax, but it is part of the FDE rule, and is in line with paragraph 1 of article 10. The rate of taxation is given at paragraph 2 of the same article.
Situation B (cont'd):
- Dividends are not subject to corporate income tax in the Japanese parent A (so you don't have to care about its rate) because the FDE rule applies and we are not in situation A anymore.
- FDE rule: 95% of the 100'000 EUR are exempted, so the tax due is the remaining (flat) 5%: 5'000 EUR.
Again, this rate is consistent with the Treaty (no double taxation and rate is 5%).

The tax rates in a tax treaty apply no matter what tricky tools/rules are at the back of them: withholding from source, foreign tax credit system, foreign dividend exemption, non-taxable dividend from foreign subsidiaries, non-deductible foreign tax on dividend paid by foreign subsidiaries...

If you look here @ Illustration 1 on page 2 you will understand that it doesn't matter how much you shuffle your tools/rules around, in all cases the net tax due will be the same and will be consistent with the rates in the treaties:

Situation C: France/Netherlands-Japan
100'000 EUR dividend from a French/Dutch subsidiary company B to a Japanese parent A (with the minimum required shareholding amount).
Japanese parent A receives 100% of dividend from France/Netherland, without any withholding tax: 100'000 EUR.
What happens to the 100'000 EUR now inside the Japanese parent A?
Answer: FDE does NOT kick in, but it is the specific article of the treaty that applies (French case: Article 10 paragraph 3b, Dutch case: Article 10 paragraph 3a) and dividends are 100% exempted from the taxable income in Japanese parent A... (finding the local japanese law that applies is out of the scope of this free answer).

Don't make our lives more complicated than they are by looking at the tricks behind-the-scenes, please use TreatyPro ;-).

As for the best location for an EU subsidiary: of course you can have more factors, every situation/priority is different. If your #1 priority is business allowable/deductible expenses: Luxembourg is the member state to go (from private company jets to entertainment, anything is a deductible expense).
On the top of what I wrote already, I believe that most expenses in a company are the salaries, thus the minimum wage of 1'500 EUR/month in Belgium is to be compared to the 158 EUR/month in Bulgaria... You can hire 9 Bulgarians for the price of one Belgium staff. Commented on May 15, 2014 at 01:02

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Thank you so much. I really enjoyed our conversation.
Posted by Dirk.De.Ruyver on May 19, 2014 at 07:42


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