Impact of the new tax treaty between the Netherlands and Belgium

Source Taxes

In the new tax treaty, the source tax on dividends is only taxable in the state of residence of the recipient (if the shares are held for at least one year with an interest of <10%). The current treaty allows the source country to levy up to 5%. The source tax on interest will no longer be levied by the source country. However, under the new treaty, Belgium still has no obligation to credit the Dutch dividend tax. Only for source taxes on interest and royalties does the new treaty stipulate that crediting is possible under certain circumstances. Companies should analyze their dividend structures to determine if existing dividend flows are optimally structured. Since source tax on dividends is abolished under certain conditions, it is important for companies to review their shareholding structure, especially if they have an interest of less than 10% or have held the shares for less than a year. Additionally, it is advisable to reassess existing interest and royalty structures. With the abolition of source tax on interest, there are opportunities to structure intra-group financing more efficiently. Reviewing and adjusting existing agreements is important to ensure they comply with the new regulations.

Anti-Abuse Provisions and Profit Taxes

The new treaty has expanded the concept of a permanent establishment, allowing profit tax to be levied earlier in the country where activities are carried out. This aligns with the OECD's BEPS project. Additionally, the treaty includes a general anti-abuse provision that allows treaty benefits to be denied if a structure or transaction aims to avoid taxes. Companies are advised to review their business structures and transactions against the new anti-abuse provisions. Conducting a risk analysis helps determine if existing structures may fall under these provisions.

Teachers, Professors, Athletes, and Artists

Under the new treaty, teachers and professors working across borders will generally pay taxes in the country where they work. This means they will more often pay taxes in the same country where they owe social security contributions. Athletes and artists will no longer have to pay taxes in the other country for short-term performances across the border. They will pay taxes on the relevant income in the country where they reside. Employers with cross-border employees, such as teachers, professors, athletes, and artists, are advised to map out their personnel policies and tax obligations. Adjusting employment contracts and payroll administration may be necessary to comply with the new tax rules.

Treaty Access

The current treaty stipulates that the treaty only applies to natural persons and legal entities if they are subject to taxation. The new treaty states that the treaty applies if the legal entity is a resident of the Netherlands for corporate tax purposes. This means that the person does not necessarily have to be subject to taxation. As a result, associations and foundations, for example, also have access to treaty benefits. Companies and organizations should review their legal status and tax situation to determine if they can benefit from the new rules. Legal entities that previously may not have enjoyed treaty benefits, such as associations and foundations, may now be eligible under the new treaty.

Impact on Dutch-Belgians

A significant change concerns the substantial interest reservation. This may be relevant if you emigrated to Belgium before September 15, 2015, with a substantial interest in a Dutch company and still hold this substantial interest as a resident of Belgium. If you emigrated before September 15, 2015, you may have faced a deferred tax assessment with a limited duration of 10 years. After this period, the assessment is (or will be) waived in principle. After the waiver, the Netherlands can, in principle, no longer levy taxes on the disposal of the substantial interest under the treaty.

However, the new tax treaty brings a significant change. The Netherlands gains the right to tax the disposal of the substantial interest to the extent that the value increase of the substantial interest occurred during the period you were a resident of the Netherlands. It no longer matters how long you have been away from the Netherlands or whether a deferred tax assessment is still open. This means that under the new treaty, the Netherlands may also levy taxes on the disposal of the substantial interest concerning the Dutch value increase after the waiver. As a result, you may be taxed at the Dutch Box 2 rate of up to 31% in 2025, whereas this is not currently the case. Therefore, if a deferred tax assessment regarding that substantial interest has already been waived, we see the risk that this deferred tax assessment may effectively be revived.

Belgian Developments

Additionally, there are many developments in Belgium under the new Belgian government, such as the solidarity contribution (capital gains tax) on shares and the exit tax. These developments may have implications for companies with substantial assets in Belgium.

Impact

It is essential to assess the potential impact of the new tax treaty between Belgium and the Netherlands, along with the Belgian developments. This is especially important if you emigrated to Belgium before September 15, 2015, with a substantial interest in a Dutch company and still hold this substantial interest as a resident of Belgium. Companies should also analyze their dividend structures, interest and royalty flows, and organizational form. Employers with cross-border employees should review their employment contracts and payroll administration to comply with the new tax rules.