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Belgium abolishes dividend withholding tax for treaty countries

The Belgium government announced, on 27 October 2006, that it plans to abolish dividend withholding tax in respect of payments made to corporate shareholders resident in treaty countries from January 2007.

The corporate shareholder must have a shareholding of at least 15% in the Belgian subsidiary and have held this for an uninterrupted period of 12 months – the same conditions as apply under the EU Parent Subsidiary Directive. Currently, this withholding tax exemption is only available for dividend payments made to corporate shareholders resident in the EU.

The domestic exemption is not subject to a limitation on benefits provision as is the case in the treaty arrangements, and the 15% participation requirement is more favourable than some of the new treaties Belgium has concluded.

The proposal will make the withholding tax exemption accessible for all qualifying treaty country corporate investors. Using Belgium as a holding location for investments into Europe will allow them to repatriate European profits exempt from dividend withholding taxes, without a limitation on benefits.

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