Belgium-France tax treaty: soon the
end of double taxation of dividends?
February 2021 – Belgian residents who receive dividends of French origin are subject to Belgian withholding tax and French withholding tax. This is not unusual. This is also the case for other dividends of foreign origin. However, the Franco-Belgian double taxation treaty provides for a tax reduction... and the Belgian tax authorities refused to apply it. The Court of Cassation called the tax authorities to order.
What double taxation?
We begin by explaining what double taxation treaties are. Belgium has concluded some ninety conventions with other countries that determine which country can levy tax when income is received in the first country by a resident of the other country. This can be salaries received abroad as a Belgian or dividends received from foreign companies.
If, as a Belgian resident, you receive dividends in France, you are liable to pay tax in Belgium on these dividends. However, under the treaty, France also has the right to apply a reduced withholding tax. Until a few years ago, this was 15%. Currently, it is still 12.8%.
If you receive a dividend of 100 today, you will still have 87.2 once you cross the border.
Then you will also have to pay tax in Belgium at a rate of 30%. This means that you will still have 61.04.
Tax credit - QFIE
The convention between Belgium and France also expressly provides that Belgium must grant a tax credit of at least 15% to compensate for the French withholding tax. This tax credit (its full name is Quotité Forfaitaire d'Impôt Étranger) was previously granted in several situations, but due to the abusive use of this tax credit, it was largely abolished in 1988.
The problem, however, is that the right to the QFIE on French dividends is not in Belgian law but in the convention between Belgium and France. And treaty law takes precedence over domestic law.
Imagine that a few years ago you received a 100 dividend. The French withholding tax then amounted to 15%... you went home with 85.
You declare this amount (or the bank withholds the withholding tax for you): the Belgian tax authorities collect 25.50 (30% of 85).
However, according to the agreement, the Belgian tax authorities must grant you at least 15% QFIE on the net amount you have received (i.e. on the 85). The tax authorities should therefore grant you a tax credit of 12.75. Or not?
Court of Cassation
On 15 October 2020, the Court of Cassation ruled in such a situation. And it was not the first time. In 2017, the issue of QFIE had already been referred to the Court of Cassation. And in both cases, the Court decided that the taxpayer was entitled to a tax credit of 15% on the net amount of the dividend.
For dividends received in the past, there are two possibilities. Either you have already lodged a claim against the assessment made and you can expect the administration to actually refund the QFIE. Or you have not yet lodged a claim and can still do so, but you can only go back one year, i.e. to the dividend received this year. An administrative directive will certainly follow which will specify who has to do what. It is in your interest to take the necessary administrative steps as quickly as possible to safeguard your rights.
What about next year?
An agreement does not change overnight. But - chance or not - the agreement with France has recently been renegotiated and should in fact already be ready. It only has yet to be published and ratified by both countries.
One of the changes made to the convention concerns precisely the provisions on the QFIE. The new agreement is expected to enter into force in the course of 2022, so that no tax credit will be possible and you will then be left with only 60% of a French dividend of 100.
