Belgium – Favorable decision by the Brussels  Court of Appeals regarding treaty access by Luxembourg SICAVs

News

Belgium – Favorable decision by the Brussels Court of Appeals regarding treaty access by Luxembourg SICAVs

20 February 2019

Operational Tax News

In its decision dated 29 November 2018, the Court of Appeals of Brussels (“Court of Appeals”) concluded that the application of the Belgian Annual Tax on Collective Investment Vehicles (“ATCIV”) to a Luxembourg SICAV was contrary to the Double Tax Treaty (“DTT”) signed between Belgium and Luxembourg.

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Background

The Belgian ATCIV is an annual tax on total net assets of investment funds. Its current rate is 0.0925% although a reduced rate of 0.01% may apply in certain cases.

It was first implemented in 1994 and initially applied to Belgian investment funds only. In 2004, its scope was expanded to non-Belgian funds that were publicly offered for distribution in Belgium. Those funds became subject to the ATCIV on the portion of their total net assets attributable to Belgian investors.

A Luxembourg SICAV initially challenged the application of the ATCIV claiming the incompatibility of this tax with (i) EU law, and (ii) the scope of the DTT. Following a favorable decision by the Tribunal of First Instance in 2011, the Belgian State lodged an appeal with the Brussels Court of Appeals.

At first, the Court of Appeals decided to refer the case to the Court of Justice of the European Union (“CJEU”) for a preliminary ruling regarding the compatibility of the ATCIV with the EU Law. The CJEU ruled that the ATCIV was not in breach of the EU Law (with the exception of certain minor incompatibilities).

Despite this setback, the Court of Appeals confirmed the decision of the Tribunal of First Instance and concluded that (i) the Luxembourg SICAV should be considered as a “resident” of Luxembourg within the meaning of the DTT, and that (ii) the ATCIV is a wealth tax covered by the DTT whose taxation rights should be exclusively allocated to the other contracting state (i.e. Luxembourg).

Refund opportunities

The decision is favorable to Luxembourg SICAVs that have suffered the ATCIV, but also the withholding tax (“WHT”) on Belgian-sourced dividends or interest as it now appears that Luxembourg SICAVs could have been entitled to DTT benefits. In light of this, Luxembourg SICAVs may consider requesting the application of reduced treaty rates going forward and request a refund of excess WHT paid in the past. Luxembourg SICAVs that have suffered the ATCIV may also consider applying for a refund.

The case is likely to be referred to the Supreme Court but despite this, Luxembourg SICAV may consider filing protective claims in an effort to safeguard their rights as the Supreme Court proceedings are likely to take several years. Given the applicable statute of limitations, such refund requests may cover the excess Belgian WHT and ATCIV supported since 2015 in the event they are filed before the end of 2019.

Contacts

Eric Centi
Partner - Tax
Global Financial Services Industry
ecenti@deloitte.lu
T +352 45145 2162

Benjamin Collette
Financial Services Industry Leader
bcollette@deloitte.lu
T +352 45145 2809

Nenad Ilic, CFA
Director - Tax
Global Financial Services Industry
neilic@deloitte.lu
T +352 45145 2046

David Sourrouille
Senior Manager
Deloitte Solutions
dsourrouille@deloittesolutions.lu
T +352 27331 5206

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