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REIT taxable basis determination

Real Estate Tax Alert

The central tax administration has issued a circular recently, in the context of the determination of the taxable basis of a Belgian REIT (‘sicafi’ / ‘vastgoedbevak’; ‘GVV’ / ‘SIR’) (Ci.RH.421/630.783, dd. 23.06.2014). The conclusions hereof are also relevant for investment companies (‘beveks’ / ‘sicavs’) and pension funds (‘OFPs’).

In summary:

The circular clarifies whether or not withholding tax (“WHT”), which is withheld on dividends received by a Belgian REIT, should be treated as a disallowed expense or not for purposes of the determination of the taxable basis of a REIT. As you know, the taxable basis of a Belgian REIT is comprised of disallowed items (non – deductible costs) and non – arm’s length benefits received. In practice, there was some uncertainty as to the question whether, under the Law of 30 July 2013, whereby a REIT (or a sicav/bevek) can no longer recover WHT on Belgian dividends received, such WHT should be regarded as a disallowed item or not. Indeed, as such WHT is no longer recoverable under the Law of 30 July 2013, it must normally be recorded as a cost in the profit and loss account, therefore giving rise to the question whether such cost is "deductible" or not.

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