Recent judgments issued by the Brussels Court of Appeal confirmed that the Belgian Taxe d’Abonnement is inconsistent with the Tax Treaty preventing double taxation between Belgium and Luxembourg.
Belgium is the only EU Member State collecting a tax on the assets invested by domestic investors into foreign investment funds. This tax must be paid annually on the basis of the rates of 9,25 bips on retail share classes and 1 bips on institutional share classes. The rates are applicable to the net asset collected during the previous calendar year in the framework of a public offer in Belgium (3 eligibility criteria are provided).
The recent judgments state that (i) a Luxembourg SICAV falls within the scope of the Tax Treaty between Belgium and Luxembourg, and (ii) this tax must be regarded as net wealth tax which should therefore be collected in the Grand-Duchy as domicile jurisdiction on the basis of the Luxembourg tax rules.
The Belgian State has lodged an appeal which will take another few years to have a definitive position. However, in the meantime, it is recommended for Luxembourg SICAVs to safeguard their rights by applying for recovery. Please note that a 5-year limitation period apply.
SICAV vs FCP
The judgments refer to SICAV only. SICAVs are legal persons as investment company with a fixed establishment; rather, common funds are contractual funds with no personality. As a consequence, common funds are tax-transparent and may not be treated equally to investment companies from a tax perspective.
Investment funds from other jurisdictions
The judgments only refer to the Tax Treaty between Luxembourg and Belgium: they are therefore not directly applicable to foreign investment funds domiciled in other jurisdictions (French UCIT, Irish UCITS, etc.).
The existence of a Tax Treaty between Belgium and the domicile jurisdiction of an investment fund is the minimum requirement for a possible future opportunity to follow the Luxembourg case, subject however to an application be lodged with a Belgian Court and the time of proceeding (may be very long).
Please feel free to contact us should you need to receive the details of Belgian tax advisors/law firms specifically focused on this matter.