DT3459 - DT: Belgium: double taxation agreement SI87 2053, Article 10: Dividends

(1) Dividends derived from a company which is a resident of a Contracting State by a resident of the other Contracting State may be taxed in that other State.

(2) However, such dividends may also be taxed in the Contracting State of which the company paying the dividends is a resident, and according to the law of that State, but if the beneficial owner of the dividends is a resident of the other State, the tax so charged shall not exceed:

(a) 5 per cent. of the gross amount of the dividends if the recipient is a company which controls directly or indirectly at least 25 per cent. of the voting power in the company paying the dividends;

(b) 10 per cent. of the gross amount of the dividends in all other cases.

This paragraph shall not affect the taxation of the company in respect of the profits out of which the dividends are paid.

(3) As long as an individual resident in the United Kingdom is entitled under United Kingdom law to a tax credit in respect of dividends paid by a company which is resident in the United Kingdom, paragraph (2) of this Article shall not apply to dividends derived from a company which is a resident of the United Kingdom by a resident of Belgium. In these circumstances the following provisions of this paragraph shall apply:

(a)

(i) Where a resident of Belgium is entitled to a tax credit in respect of such a dividend under sub-paragraph (b) of this paragraph tax may also be charged in the United Kingdom and according to the laws of the United Kingdom on the aggregate of the amount or value of that dividend and the amount of that tax credit at a rate not exceeding 20 per cent.

(ii) Where a resident of Belgium is entitled to a tax credit in respect of such a dividend under sub-paragraph (c) of this paragraph tax may also be charged in the United Kingdom and according to the laws of the United Kingdom on the aggregate of the amount or value of that dividend and the amount of that tax credit at a rate not exceeding 5 per cent.

(iii) Except as provided in sub-paragraphs (a)(i) and (a)(ii) of this paragraph dividends derived from a company which is a resident of the United Kingdom and which are beneficially owned by a resident of Belgium shall be exempt from any tax in the United Kingdom which is chargeable on dividends.

(b) A resident of Belgium who receives a dividend from a company which is a resident of the United Kingdom shall, subject to the provisions of sub-paragraphs (c) and (d) of this paragraph and provided he is the beneficial owner of the dividend, be entitled to the tax credit in respect thereof to which an individual resident in the United Kingdom would have been entitled had he received that dividend, and to the payment of any excess of that tax credit over his liability to tax in the United Kingdom.

(c) The provisions of sub-paragraph (b) of this paragraph shall not apply where the recipient of the dividend is, or is associated with, a company which either alone or together with one or more associated companies, controls, directly or indirectly, at least 10 per cent. of the voting power in the company paying the dividend. In these circumstances a company which is a resident of Belgium and receives a dividend from a company which is a resident of the United Kingdom shall, provided it is the beneficial owner of the dividend and subject to the provisions of sub-paragraph (d) of this paragraph, be entitled to a tax credit equal to one half of the tax credit to which an individual resident in the United Kingdom would have been entitled had he received that dividend, and to the payment of any excess of that tax credit over its liability to United Kingdom tax. For the purposes of this sub-paragraph, two companies shall be deemed to be associated if one controls, directly or indirectly, more than 50 per cent. of the voting power in the other company, or if a third company controls more than 50 per cent. of the voting power in both of them.
(d)

(i) The provisions of neither sub-paragraph (b) nor sub-paragraph (c) of this paragraph shall apply unless the recipient of a dividend shows (if required to do so by the competent authority of the United Kingdom on receipt of a claim by the recipient to have the tax credit set against United Kingdom income tax chargeable on him or to have the excess of the credit over that income tax paid to him) that the shareholding in respect of which the dividend was paid was acquired by the recipient for bona fide commercial reasons or in the ordinary course of making or managing investments and it was not the main object nor one of the main objects of that acquisition to obtain entitlement to the tax credit referred to in sub-paragraph (b) or sub-paragraph (c), as the case may be.

(ii) Belgium may, on or before 30 June in any calendar year, give the United Kingdom, through the diplomatic channel, notice of termination of this sub- paragraph and, in such event, it shall cease to have effect in relation to dividends paid on or after 6 April in the calendar year next following that in which such notice is given.

(4) The term `dividends` as used in this Article means income from shares, jouissance shares or jouissance rights, mining shares, founders' shares or other rights participating in profits, as well as income from other corporate rights which is subjected to the same taxation treatment as income from shares by the taxation law of the Contracting State of which the company making the distribution is a resident; it includes, in the case of a company other than a company with share capital, which is a resident of Belgium, payments to members of the company by way of income on invested capital and, in the case of the United Kingdom, any item (other than interest or royalties relieved from tax under the provisions of Article 11 or Article 12 of this Convention) which, under the laws of the United Kingdom and in accordance with this Convention, is treated as a distribution of a company.

(5) The provisions of paragraphs (1), (2) or, as the case may be, (3) of this Article shall not apply if the recipient of the dividends, being a resident of a Contracting State, carries on business in the other Contracting State, of which the company paying the dividends is a resident, through a permanent establishment situated therein, or performs in that other State independent personal services from a fixed base situated therein, and the holding in respect of which the dividends are paid is effectively connected with such permanent establishment or fixed base. In such a case the provisions of Article 7 or Article 14 of this Convention, as the case may be, shall apply.

(6) Where a company is a resident of a Contracting State, the other Contracting State may not impose any tax on the dividends paid by the company to a resident of the first-mentioned State, or subject the company's undistributed profits to a tax on undistributed profits, even if the dividends paid or the undistributed profits consist wholly or partly of profits or income arising in such other State. The provisions of this paragraph shall not prevent that other State from taxing dividends related to a holding which is effectively connected with a permanent establishment or a fixed base operated in that other State by a resident of the first-mentioned State.