On June 21, 2023, Belgium and the Netherlands finalized an updated double tax treaty, marking a significant shift from the 2001 version. The revisions made in this agreement will significantly impact the financial services industry. Here's an overview of the key changes affecting fund managers.
The new treaty primarily focuses on income tax and removes its connection with wealth taxes. This adjustment particularly affects Dutch residents—both individuals and entities—holding securities accounts of at least EUR 1,000,000 in Belgium or through a Belgian financial institution. Previously, they were exempt from the Belgian annual tax on securities accounts, but this exemption will no longer apply once the new treaty takes effect. Moreover, Dutch investment funds under Belgian financial authorities might face liability for the Belgian annual tax on Undertakings for Collective Investments, especially if held by Belgian investors.
Individuals receiving dividends will continue to face a withholding tax of up to 15%. However, companies holding a minimum 10% participation for over a year will enjoy complete exemption under specific conditions. This change isn't expected to significantly impact the current scenario, as most dividend payments were already exempt under the Parent Subsidiary Directive. Additionally, the new treaty offers a full withholding tax exemption on dividends for qualifying pension funds, based on specific criteria.
Clarifications in distinguishing between Exempt Investment Institutions and Fiscal Investment Institutions under Dutch tax law will impact withholding tax rates for dividends and interest payments.
While a memorandum of understanding is in preparation, the new treaty is expected to undergo approval by the Belgian and Dutch parliaments, potentially taking effect from January 1, 2025. The implications of these treaty changes for fund managers and the wider financial services industry are significant. As these changes progress, we'll continue to provide guidance on navigating them effectively.
Our work focuses on providing outsourced withholding tax recovery services to safeguard your investments from over-taxation and save your time from burdensome processes.
