201210.05
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Luxembourg – Belgium: Tax Treaty

CONVENTION BETWEEN BELGIUM AND LUXEMBOURG FOR THE AVOIDANCE OF DOUBLE TAXATION AND THE REGULATION OF CERTAIN OTHER QUESTIONS RELATING TO TAXES ON INCOME AND CAPITAL

I. Scope of the Convention

Article 1 – Personal scope

This Convention shall apply to persons who are residents of one or both of the States.

Article 2 – Taxes covered

1. This Convention shall apply to taxes on income and on capital imposed on behalf of each Contracting State or of its political subdivisions or local authorities, irrespective of the manner in which they are levied.

2. There shall be regarded as taxes on income and on capital all taxes imposed on total income, on total capital, or on elements of income or of capital, including taxes on gains from the alienation of movable or immovable property, taxes on the total amounts of wages or salaries paid by employers, as well as taxes on capital appreciation.

3. The existing taxes to which the Convention shall apply are:

(1) in the case of Belgium :

(a) individual income tax (l’impôt des personnes physiques);
(b) company tax (l’impôt des sociétés);
(c) income tax on legal entities (l’impôt des personnes morales);
(d) income tax on nonresidents (l’impôt des nonrésidents)

including prepayments, additional prepayments and surcharges on the said taxes and prepayments as well as the additional municipal tax on individual income tax

(hereafter referred to as “Belgian tax”);

(2) in the case of Luxembourg:

(a) individual income tax (l’impôt sur le revenu des personnes physiques);
(b) company tax (l’impôt sur le revenu des collectivités);
(c) the special tax on directors’ fees (l’impôt special sur les tantièmes);
(d) capital tax (l’impôt sur la fortune);
(e) municipal trade tax (l’impôt commercial communal d’après les bénéfice et capital d’exploitation);
(f) municipal payroll tax (l’impôt communal sur le total des salaires);
(g) land tax (l’impôt foncier)

(hereafter referred to as “Luxembourg tax”).

4. The provisions of the Convention which relate to the taxation of profits of enterprises shall also apply by analogy to payroll taxes.

5. The Convention shall also apply to any identical or substantially similar taxes which are subsequently imposed in addition to, or in place of the existing taxes. The competent authorities of the Contracting States shall notify to each other at the end of each year any changes which have been made in their respective laws.

II. Definitions

Article 3 – General definitions

1. In this Convention, unless the context otherwise requires:

(i) the term “Belgium”, used in a geographical sense, means the territory of the Kingdom of Belgium; it includes any territory outside the national sovereignty of Belgium which is or shall be delimited according to the Belgian legislation on the continental shelf and in accordance with international law, as a territory with respect to which Belgium may exercise rights over the sea bed and its subsoil and its natural resources;
(ii) the term “Luxembourg”, used in a geographical sense, means the territory of the Grand Duchy of Luxembourg;
(iii) the terms “a Contracting State” and “the other Contracting State” mean Belgium or Luxembourg, as the context requires;
(iv) the term “person” comprises an individual and a company;
(v) the term “company” means any body corporate or any entity, which is treated in the State of which it is a resident as a body corporate for the purposes of taxation of income or capital, as well as an association, a partnership and limited partnership under Luxembourg law;
(vi) the terms “enterprise of a Contracting State” and “enterprise of the other Contracting State” mean respectively an enterprise carried on by a resident of a Contracting State and an enterprise carried on by a resident of the other Contracting State;
(vii) the term “competent authority” means:

(a) in the case of Belgium, the competent authority under the national law, and
(b) in the case of Luxembourg, the Minister responsible for direct taxation or his authorised representative.

2.As regards the application of the Convention by either of the Contracting States, any term not otherwise defined shall, unless the context otherwise requires, have the meaning which it has under the laws of such State relating to the taxes which are subject of the Convention.

Article 4 – Fiscal domicile

1. For the purposes of this Convention, the term “resident of a Contracting State” means any person who, under the law of that State, is liable to taxation therein by reason of his domicile, residence, place of management or any other criterion of a similar nature; it also means any partnership, limited partnership and “société civile” under Luxembourg law, the place of effective management of which is located in Luxembourg and any company under Belgian law — not being a company limited by shares — which has elected that its profits be subject to individual income tax.

2. Where by reason of the provisions of paragraph 1 an individual is a resident of both Contracting States, then the following rules apply:

(i) he shall be deemed to be a resident of the State in which he has a permanent home available to him. If he has a permanent home available to him in both Contracting States, he shall be deemed to be a resident of the Contracting State with which his personal and economic relations are closest (centre of vital interests);
(ii) if the Contracting State in which he has his centre of vital interests cannot be determined, or if he has not a permanent home available to him in either Contracting State, he shall be deemed to be a resident of the Contracting State in which he has an habitual abode;
(iii) if he has an habitual abode in both Contracting States or in neither of them, he shall be deemed to be a resident of the State of which he is a national;
(iv) notwithstanding the provisions of paragraphs 1, 2 and 3:

(a) persons employed aboard inland waterways transport conveyances operating in international traffic and whose only habitual abode is on board these transport conveyances shall be considered to be residents of the Contracting State in which the place of the effective management of this transport enterprise is situated;
(b) persons who have their only habitual abode aboard a boat which they operate shall be considered as residents of the Contracting State of which they are a national;
(v) if a person mentioned in sub-paragraphs (iii) or (iv) is a national of both Contracting States or of neither of them, the competent authorities of the Contracting States shall settle the question by mutual agreement.

3. Where by reason of the provisions of paragraph 1 a company is regarded as being a resident of both Contracting States, then it shall be deemed to be a resident of the Contracting State in which its place of effective management is situated.

4. If the place of effective management of an inland waterways transport enterprise is aboard a ship, then the enterprise shall be deemed to be a resident of the Contracting State of which the sole or principal entrepreneur is a resident.

Article 5 – Permanent establishment

1. For the purposes of this Convention, the term “permanent establishment” means a fixed place of business in which the business of the enterprise is wholly or partly carried on.

2. The term “permanent establishment” shall include especially:

(i) a place of management;
(ii) a branch;
(iii) an office;
(iv) a factory;
(v) a workshop;
(vi) a mine, quarry or other place of extraction of natural resources;
(vii) a building site or construction or assembly project which exists for more than six months.

3. The term “permanent establishment” shall not be deemed to include:

(i) the use of facilities solely for the purpose of storage, display or delivery of goods or merchandise belonging to the enterprise;
(ii) the maintenance of a stock of goods or merchandise belonging to the enterprise solely for the purpose of storage, display or delivery;
(iii) the maintenance of a stock of goods or merchandise belonging to the enterprise solely for the purpose of processing by another enterprise;
(iv) the maintenance of a fixed place of business solely for the purpose of purchasing goods or merchandise, or for collecting information, for the enterprise;
(v) the maintenance of a fixed place of business solely for the purpose of advertising, for the supply of information, for scientific research or for similar activities which have a preparatory or auxiliary character, for the enterprise.

4. A person acting in one of the Contracting States on behalf of an enterprise of the other Contracting State — other than an agent of an independent status to whom paragraph 5 applies — shall be deemed to be a permanent establishment in the first-mentioned State if he has, and habitually exercises in that State, an authority to conclude contracts in the name of the enterprise, unless his activities are limited to the purchase of goods or merchandise for the enterprise.

5. An enterprise of one of the Contracting States shall not be deemed to have a permanent establishment in the other Contracting State merely because it carries on business in that other State through a broker, general commission agent or any other agent of an independent status, where such persons are acting in the ordinary course of their business.

An agent who acts on behalf of an insurance enterprise and habitually exercises an authority to conclude contracts in the name of that enterprise is not covered by this provision.

6. The mere fact that an enterprise which is a resident of one of the Contracting States controls or is controlled by an enterprise which is a resident of the other Contracting State, or which carries on business in that other Contracting State (whether through a permanent establishment or otherwise), shall not of itself constitute either enterprise a permanent establishment of the other.

III. Taxation of income

Article 6 – Income from immovable property

  1. Income from immovable property may be taxed in the Contracting State in which such property is situated.
  2. The term “immovable property” shall be defined in accordance with the law of the Contracting State in which the property in question is situated. The term shall in any case include property accessory to immovable property, livestock and equipment used in agriculture and forestry, rights to which the provisions of general law respecting landed property apply, usufruct of immovable property and rights to variable or fixed payments as consideration for the working of, or the right to work, mineral deposits, sources and other natural resources; ships, boats and aircraft shall not be regarded as immovable property.
  3. The provisions of paragraph 1 shall apply to income derived from the direct use, letting, or use in any other form of immovable property.
  4. The provisions of paragraphs 1 and 3 shall also apply to the income from immovable property of an enterprise and to income from immovable property used for the performance of professional services.

Article 7 – Business profits

  1. The profits of an enterprise of one of the Contracting States shall be taxable only in that State unless the enterprise carries on business in the other Contracting State through a permanent establishment situated therein. If the enterprise carries on business as aforesaid, the profits of the enterprise may be taxed in the other State but only so much of them as is attributable to that permanent establishment.
  2. Notwithstanding the provisions of paragraph 3, where an enterprise of one of the Contracting States carries on business in the other Contracting State through a permanent establishment situated therein, there shall in each Contracting State be attributed to that permanent establishment the profits which it might be expected to make if it were a distinct and separate enterprise engaged in the same or similar activities under the same or similar conditions and dealing wholly independently.
  3. In the determination of the profits of a permanent establishment, there shall be allowed as deductions expenses which are incurred for the purposes of the permanent establishment including executive and general administrative expenses so incurred, whether in the State in which the permanent establishment is situated or elsewhere.
  4. In the absence of regular accounts or other proof of the amount of profits of an enterprise of one of the Contracting States attributable to its permanent establishment situated in the other Contracting State, tax may be charged in that other State in accordance with the law of that State, account being taken of the normal profits of similar enterprises of the same State carrying on the same or similar activities under the same or similar conditions.In cases provided for in the preceding paragraph, the profit attributable to the said permanent establishment may also be determined on the basis of an apportionment of the total profits of the enterprise between the various sections thereof, in so far as this conforms to the principles set forth in this Article.If the provisions of this paragraph lead to double taxation of the same profits, the competent authorities of the two Contracting States shall consult together with a view to the avoidance of such double taxation.
  5. No profits shall be attributed to a permanent establishment by reason of the mere purchase by that permanent establishment of goods or merchandise for the enterprise.
  6. For the purposes of the preceding paragraphs, the profits to be attributed to the permanent establishment shall be determined by the same method year by year unless there is good and sufficient reason to the contrary.
  7. Where profits include items of income which are dealt with separately in other Articles of this Convention, then the provisions of those Articles shall not be affected by the provisions of this Article, in relation to the taxation of those items of income.

Article 8 – Profits of shipping, inland waterways transport and air transport enterprises

Contrary to the provisions of Article 7, paragraphs 1 to 6:

(i) Profits from the operation of ships or aircraft in international traffic shall be taxable in the Contracting State in which the place of effective management of the enterprise is situated.
(ii) Profits from the operation of boats engaged in inland waterways transport shall be taxable in the Contracting State in which the place of effective management of the enterprise is situated.

Article 9 – Associated enterprises

Where

an enterprise of one of the Contracting States participates directly or indirectly in the management, control or capital of an enterprise of the other Contracting State, or
the same persons participate directly or indirectly in the management, control or capital of an enterprise of one of the Contracting States and an enterprise of the other Contracting State,

and in either case conditions are made or imposed between the two enterprises in their commercial or financial relations which differ from those which would be made between independent enterprises, then any profits which would, but for those conditions, have accrued to one of the enterprises, but, by reason of those conditions, have not so accrued, may be included in the profits of that enterprise and taxed accordingly.

Article 10 – Dividends

1. Dividends paid by a company which is a resident of one of the Contracting States to a resident of the other Contracting State shall be taxable only 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 the tax so charged shall not exceed:

(a) 10% of the gross amount of the dividends if the recipient is a company (with the exception of “sociétés civiles”, partnerships, limited partnerships and co-operative societies) whose direct holding, since the beginning of its financial year, in the capital of the company (with the exception of “sociétés civiles”, partnerships, limited partnerships and cooperative societies) paying the dividends is at least 25% or has a purchase price of at least 250 million francs;
(b) in all other cases, 15% of the gross amount of dividends.

The provisions of sub-paragraph (a) shall also apply if the dividends are paid to several companies (with the exception of “sociétés civiles”, partnerships, limited partnerships and co-operative societies) whose cumulative holdings, since the beginning of their respective financial years, in the capital of the company (with the exception of “sociétés civiles”, partnerships, limited partnerships and cooperative societies) paying the dividends are at least 25% or have a purchase price of at least 250 million francs and if one of the recipient companies holds more than 50% of the authorised capital of each of the other recipient companies. This paragraph shall not affect the taxation of company profits out of which dividends are paid.

3. The term “dividends” as used in this Article means income from shares, “jouissance” shares or “jouissance” rights, founders’ shares or other rights, not being debt-claims, as well as income from other corporate rights assimilated to income from shares by the taxation law of the State of which the company making the distribution is a resident.

The term also means :

(i) income — even in the form of interest — which is taxable as income from capital invested by participants in companies, other than joint stock companies, resident in Belgium;
(ii) shares in profits received by a sleeping partner by reason of his holding in an enterprise in Luxembourg.

4. The provisions of paragraphs 1 and 2 shall not apply if the recipient of the dividends, being a resident of one of the Contracting States, has in the other Contracting State, of which the company paying the dividends is a resident, a permanent establishment with which the holding by virtue of which the dividends are paid is effectively connected. In such a case, the provisions of Article 7 shall apply; the provisions shall not hinder the levying of taxes at source on those dividends under the laws of that other Contracting State.

5. Where a company which is a resident of one of the Contracting States derives profits or income from the other Contracting State, that other State may not impose any tax on the dividends paid by the company to residents 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 that other State; this provision shall not prevent that other State from taxing dividends relating to a holding which is effectively connected with a permanent establishment maintained in that other State by a resident of the first-mentioned State.

Article 11 – Interest

1. Interest arising in one of the Contracting States and paid to a resident of the other Contracting State shall be taxable only in that other State.

2. However, such interest may be taxed in the Contracting State in which it arises, and according to the law of that State, but the tax so charged may not exceed 15% of the amount of the interest.

3. Contrary to the provisions of paragraph 2, interest may not be taxed in the Contracting State in which it arises, if it is paid to an enterprise of the other Contracting State. The preceding sentence shall not apply to:

(i) interest from bonds and other debentures, with the exception of securities representing commercial debt-claims;
(ii) interest paid by a company resident in one of the Contracting States to a company resident in the other Contracting State owning directly or indirectly at least 25% of the voting stock or shares of the first-mentioned company.

4. The term “interest” as used in this Article means, apart from the exception mentioned in the second sentence infra, income from debt-claims of every kind whether or not secured by mortgage and whether or not carrying a right to participate in profits, and, in particular, interest from deposits, public funds, bonds, including “primes et lots” thereon and all other income assimilated to income from money lent or deposited by the tax law of the source state. This term shall not include income deemed to be dividends by virtue of Article 10(3) sub-paragraph (ii).

5. The provisions of paragraphs 1 and 3 shall not apply if the recipient of the interest, being a resident of one of the Contracting States, has in the other Contracting State in which the interest arises a permanent establishment with which the debt-claim from which the interest arises is effectively connected. In such a case, the provisions of Article 7 shall apply; these provisions shall not prevent the levying of taxes at source on such interest, in accordance with the law of the other Contracting State.

6. Interest shall be deemed to arise in one of the Contracting States when the payer is that State itself, a political subdivision, a local authority or a resident of that State. Where, however, the payer of the interest, whether he is a resident of one of the Contracting States or not, has in one of the Contracting States a permanent establishment for which the loan giving rise to the interest was contracted and which pays interest directly to the creditor, then such interest shall be deemed to arise in the Contracting State in which the permanent establishment is situated.

7. Where, owing to a special relationship between the payer and the recipient or between both of them and some other person, the amount of the interest paid, having regard to the debt-claim for which it is paid, exceeds the amount which would have been agreed upon by the payer and the recipient in the absence of such relationship, the limitation of tax rates and the exemption laid down in paragraphs 2 and 3 shall apply only to the last-mentioned amount. The excess part of the payments shall be taxable according to the law of the Contracting State in which the interest arises.

Article 12 – Royalties

  1. Royalties arising in one of the Contracting States and paid to a resident of the other Contracting State shall be taxable only in that other State.
  2. The term “royalties” as used in this Article means payments of any kind received as a consideration for the use of, or the right to use, any copyright of literary, artistic or scientific work including cinematograph films, and films or tapes destined for radio or television, any patent, trade mark, design or model, plan, secret formula or process, or for the use of, or the right to use, industrial, commercial, or scientific equipment, not being immovable property as defined in Article 6, and for information concerning industrial, commercial or scientific experience.
  3. The provisions of paragraph 1 shall not apply if the recipient of the royalties, being a resident of one of the Contracting States, has in the other Contracting State, in which the royalties arise, a permanent establishment with which the right or property giving rise to the royalties is effectively connected. In such a case, the provisions of Article 7 shall apply.
  4. Royalties shall be deemed to arise in one of the Contracting States if the payer is that State itself, a political subdivision, a local authority or a resident of that State. Where, however, the payer whether he is a resident of one the Contracting States or not, has in one of the Contracting States a permanent establishment for which the contract giving rise to payment of royalties was concluded and which pays royalties directly to the recipient, then such royalties shall be deemed to arise in the Contracting State in which the permanent establishment is situated.
  5. Where, owing to a special relationship between the payer and the recipient or between both of them and some other person, the amount of the royalties paid, having regard to the use, right or information for which they are paid, exceeds the amount which would have been agreed upon by the payer and the recipient in the absence of such relationship, the provisions of paragraph 1 shall apply only to the last-mentioned amount. In that case, the excess part of the payments shall remain taxable according to the law of the Contracting State in which the royalties arise.
  6. Where, in the case referred to in paragraph 5, the debtor is an enterprise which is in fact dependent upon or under the control of the enterprise receiving the royalties or vice-versa, or where these two enterprises are, in fact, dependent upon or under the control of a third enterprise or of enterprises which are legally separate but dependent on the same group, the normal amount of royalties may be determined by taking into account the cost, increased by a normal profit, of their acquisition, their finishing, and protection of the rights, property or information giving rise to the royalties, where the normal amount cannot be determined by using other, more adequate criteria, in particular, comparison with royalties determined at arm’s length for similar services between quite independent enterprises.

Article 13 – Capital gains

  1. Gains from the alienation of immovable property, as defined in paragraph 2 of Article 6, may be taxed in the Contracting State in which such property is situated.
  2. Gains from the alienation of movable property forming part of the business property of a permanent establishment which an enterprise of one of the Contracting States has in the other Contracting State or of movable property pertaining to a fixed base available to a resident of one of the Contracting States in the other Contracting State for the purpose of performing professional services, including such gains from the total alienation of such a permanent establishment (alone or together with the whole enterprise) or of such a fixed base, may be taxed in that other State. The rules laid down in Article 7, paragraphs 2 and 3 shall apply to the fixing of the amount of such gains.However, gains from the alienation of movable property mentioned in Article 22, paragraph 3 shall only be taxable in the Contracting State where the property itself is taxable by virtue of that Article.
  3. Gains from the alienation of any other property shall be taxable only in the State of which the alienator is a resident. This rule shall apply, in particular, to gains from the alienation of a holding, not being a part of the business property of a permanent establishment mentioned in paragraph 2, first sentence, in an enterprise carried on by a joint stock company or other corporation (“société de capitaux”).

Article 14 – Independent personal services

  1. Income derived by a resident of one of the Contracting States in respect of professional services or other independent activities of a similar character shall be taxable only in that State unless he has a fixed base regularly available to him in the other State for the purpose of performing his activities. If he has such a fixed base, the income may be taxed in the other State but only so much of it as is attributable to that fixed base.
  2. The term “professional services” includes especially independent scientific, literary, artistic, educational or teaching activities as well as the independent activities of physicians, lawyers, engineers, architects, dentists and accountants.

Article 15 – Dependent personal services

1. Subject to the provisions of Articles 16, 18, 19 and 20, salaries, wages and other similar remuneration derived by a resident of one of the Contracting States in respect of an employment shall be taxable only in that State unless the employment is exercised in the other Contracting State. If the employment is so exercised, such remuneration as is derived therefrom may be taxed in that other Contracting State.

2. Notwithstanding the provisions of paragraph 1, remuneration derived by a resident of one of the Contracting States in respect of an employment exercised in the other Contracting State shall be taxable only in the first-mentioned State if:

(i) the remuneration is paid for employment exercised in the other State for a period or periods not exceeding in the aggregate 183 days in the fiscal year — including normal holidays — and
(ii) the remuneration is paid by, or on behalf of, an employer who is not a resident of the other State, and
(iii) the remuneration is not borne directly by a permanent establishment or a fixed base which the employer has in the other State.

3. Notwithstanding paragraphs 1 and 2 and subject to the reservation contained in paragraph 1 of this Article, remuneration in respect of an employment exercised aboard a ship or aircraft in international traffic or aboard a boat engaged in international inland waterways transport shall be deemed to relate to activities carried out in the Contracting State in which the place of effective management of the enterprise is situated and shall be taxable in that State.

Article 16 – Directors’ fees

  1. 1. Directors’ fees, attendance fees and similar payments derived by a resident of one of the Contracting States in his capacity as a member of the “conseil d’administration” or of the “conseil de surveillance” or other similar body of a company whose capital is divided into shares or of another corporation (société de capitaux) which is resident in the other Contracting State, shall be taxable in that other State.
    This provision shall also apply to directors’ fees, attendance fees and similar payments mentioned in paragraph 1 which are received by an active partner in a partnership limited by shares resident in one of the Contracting States.
  2. However, normal payments which persons mentioned in paragraph 1 receive in another capacity shall be taxable, where appropriate, in accordance with the provisions laid down either in Article 14 or Article 15, paragraph 1.

Article 17 – Artistes and athletes

Notwithstanding the provisions of Articles 14 and 15, income derived by public entertainers, such as theatre, motion picture, radio or television artistes, and musicians, and by athletes, from their personal activities as such may be taxed in the Contracting State in which these activities are exercised.

Article 18 – Pensions

  1. Subject to the provisions of Article 19, pensions and other similar remuneration paid to a resident of one of the Contracting States in consideration of past employment shall be taxable only in that State.
  2. Pensions and other allowances, whether regular or not, paid pursuant to the social laws of one of the Contracting States by that State or one of its political sub-divisions or local authorities or by a body corporate incorporated under the public law of that State, shall be taxable in that State.

Article 19 – Governmental functions

  1. Remuneration, including pensions, paid directly or out of funds created by one of the Contracting States, its political subdivisions or local authorities in respect of services rendered to that State, a political subdivision or a local authority thereof may be taxed in that State. This provision shall not apply if the recipient of such income is a national of the other State without at the same time being a national of the first-mentioned State.
  2. Paragraph 1 shall not apply to remuneration or pensions in respect of services rendered in connection with any trade or business carried on by one of the Contracting States, a political subdivision or a local authority thereof.

Article 20 – Teachers, students and apprentices

  1. Remuneration, of whatever nature, which a professor or other member of the teaching profession, who is resident in one of the Contracting States, and who is present temporarily in the other Contracting State for the purpose of teaching there or for the purpose of carrying out scientific research for a period not exceeding two years at a university or other officially recognised institution or scientific research receives, shall only be taxable in the first-mentioned State.
  2. Payments which a student or apprentice who is or was formerly a resident of one of the Contracting States and who is present in the other Contracting State for the purpose of his education or training receives for his maintenance, education or training shall not be taxable in that other State, provided that such payments are made to him from sources outside that other State.

Article 21 – Income not expressly mentioned

Items of income of a resident of one of the Contracting States which are not expressly mentioned in the foregoing Articles shall not be taxable in the other Contracting State if, in accordance with the law of the first-mentioned State, such income is taxable there.

IV. Taxation of capital

Article 22

  1. Capital represented by immovable property, as defined in paragraph 2 of Article 6, may be taxed in the Contracting State in which such property is situated.
  2. Subject to the provisions of paragraph 3, capital represented by movable property forming part of the business property of a permanent establishment of an enterprise, or by movable property pertaining to a fixed base used for the performance of professional services, may be taxed in the Contracting State in which the permanent establishment or fixed base is situated.
  3. Ships and aircraft operated in international traffic and boats engaged in inland waterways transport, and movable property used in the operation of such ships, aircraft and boats, may only be taxed in the Contracting State in which the place of effective management of the enterprise is situated.
  4. All other elements of capital of a resident of a Contracting State shall only be taxable in that State. This rule shall apply in particular to a holding, which does not form part of the property of a permanent establishment mentioned in paragraph 2, in an enterprise run by a company whose capital is divided into shares or other corporation (société de capitaux).

V. Provisions for the avoidance of double taxation

Article 23

1. With respect to residents of Luxembourg double taxation shall be avoided as follows:

(i) income arising in Belgium — except the income mentioned in sub-paragraph (ii) below — and items of capital situated in Belgium which may be taxed in that State in accordance with the foregoing Articles, are exempt from tax in Luxembourg. This exemption does not prevent Luxembourg from taking into account the thus exempted income and capital for the determination of the rates of tax. In case the provisions of Luxembourg law would be modified in such a manner as to allow that losses sustained by a permanent establishment situated in a State with which Luxembourg has concluded a Convention for the avoidance of double taxation may be deducted from the net taxable income in that fiscal year and may be carried over to be deducted from net income of later tax years, and if, in that case, the losses sustained by an enterprise in Luxembourg from a permanent establishment in Belgium are effectively set off against the income taxable in Luxembourg, then the exemption provided for in the preceding paragraph shall not apply in Luxembourg to profits from other tax periods which can be allocated to that establishment to the extent that those profits are also exempted from taxes in Belgium on account of a carry-over of those losses;
(ii) the tax levied in Belgium in accordance with this Convention:

(a) on dividends to which Article 10, paragraph 2 applies, with the exception of income from capital invested in a partnership, or a limited partnership resident in Belgium; and
(b) on interest to which Article 11, paragraph 2 applies is deducted from the tax relating to such income which is levied in Luxembourg. The amount thus deducted may not, however, exceed either the amount of tax which bears the same proportion to the income received in Belgium or an amount corresponding to the tax deducted at source in Luxembourg on similar income allocated to residents of Belgium. The said tax levied in Belgium may be deducted from taxable income in Luxembourg to the extent only that it exceeds the tax deducted at source in Luxembourg from similar income allocated to residents of Belgium;
(iii) notwithstanding sub-paragraph (ii)(a), dividends and distributions on liquidation paid by a company whose capital is divided into shares resident in Belgium to which Article 10, paragraph 2 applies and which are received by a corporation resident in Luxembourg whose direct holding since the beginning of its financial year, in the capital of the company paying the dividends, is at least 25% or has purchase price of at least 250 million francs are subject to sub-paragraph (i), first paragraph. In that case, the tax deducted at source in Belgium may neither be deducted from said income which is exempt in Luxembourg nor from the Luxembourg tax.The above mentioned stocks and shares of a company resident in Belgium shall, under the same conditions, also be subject to sub-paragraph (i), first paragraph. The provisions of the foregoing two paragraphs shall also apply where the holdings of several corporations resident in Luxembourg together make up at least 25% of the paid-in capital of a company whose capital is divided into shares or have a purchase price of at least 250 million francs, and one of the corporations holds more than 50% of the paid-in capital of each of the other corporations resident in Luxembourg.

2. With respect to residents of Belgium, double taxation shall be avoided in the following manner:

(i) income from Luxembourg — except the income mentioned in sub-paragraphs (ii)and (iii)– and items of capital situated in Luxembourg, which may be taxed in that State in accordance with the foregoing Articles, are exempt from tax in Belgium. This exemption does not prevent Belgium from taking into account the income and capital thus exempted for the determination of the rates of tax;
(ii) with respect to dividends to which Article 10, paragraph 2 applies, interest to which Article 11, paragraphs 2 or 7 applies and the excess part of royalties mentioned in Article 12, paragraph 5, the fixed amount of the foreign tax for which provision is made in Belgium law, shall be credited in accordance with the conditions and at the rates laid down in that law, either against individual income tax connected with those dividends — except distributions on liquidation — or against individual income tax or company tax connected with the said interest and excess parts of royalties which may be taxed in Luxembourg under the law of that State, as well as under Article 11, paragraphs 2 or 7 and Article 12, paragraph 5;
(iii) where a company which is a resident of Belgium owns stocks or shares in a corporation which is resident in Luxembourg, the dividends — including distributions on liquidation — paid to it by the latter corporation and to which Article 10, paragraph 2 applies, shall be exempted in Belgium from company tax to the extent that such an exemption would have been granted if the two companies had been residents of Belgium. This provision does not prevent those dividends being subject to the prepayment on income from movable capital (précompte mobilier) which is due under Belgian law;
(iv) where a company which is a resident of Belgium has had the full ownership during the whole of the financial year of a corporation which is resident in Luxembourg and which is subject in that State to company tax, of stock or shares of that corporation, it may likewise be exempted from the prepayment on income from movable capital chargeable in accordance with Belgian law on the dividends from these stocks or shares, provided that it so requests in writing within the time limit for the filing of its annual return; on further distribution to its own shareholders of the dividends thus exempted, they may not be deducted from the dividends which are subject to the prepayment on income from movable capital. This provision shall not apply where the first-mentioned company has elected that its profits be charged to individual income tax.In the case that the provisions of Belgian law, which exempt from company tax the net dividends received by a company resident in Belgium from another company resident in Belgium would be modified in such a manner that that exemption would be limited to dividends received from holdings of a certain size in the capital of the second company, then the provisions of the preceding paragraph shall only apply to dividends distributed by companies resident in Luxembourg relating to holdings of the same size in the capital of those companies;
(v) where, in accordance with Belgian law, losses sustained by a permanent establishment in Luxembourg of an enterprise resident in Belgium, are effectively deducted from the profits of that enterprise for purposes of the taxation in Belgium, then the exemption provided for in sub-paragraph (i) shall not apply to profits from other tax periods which can be allocated to that establishment to the extent that those profits are also exempted from Luxembourg tax on account of a carry-over of those losses.

VI. Special provisions

Article 24 – Non-discrimination

1. The nationals of one of the Contracting States shall not be subjected in the other Contracting State to any taxation or any requirement connected therewith which is other or more burdensome than that to which nationals of that other State in the same circumstances are or may be subjected.

2. The term “nationals” means:

(i) all individuals possessing the nationality of one of the Contracting States;
(ii) all companies set up in accordance with the legislation in force in one of the Contracting States.

3. Stateless persons shall not be subjected in one of the Contracting States to any taxation or any other requirement connected therewith which is other or more burdensome than that to which nationals of that State in the same circumstances are or may be subjected.

4. An individual resident in Belgium who, in accordance with Articles 7 and 14 to 19, may be taxed in Luxembourg on more than 50% of his business profits is, at his own request, taxed in Luxembourg on his income which in accordance with Articles 6, 7 and 13 to 19 of the Convention, is taxable there, at the average rate of tax, taking into account status and family burdens and total income, which would be applicable to him if he were a resident in Luxembourg.

5. The taxation on a permanent establishment which an enterprise of one of the Contracting States has in the other Contracting State shall not be less favourably levied in that other State than the taxation levied on enterprises of that other State carrying on the same activities.

6. Enterprises of one of the Contracting States, the capital of which is wholly or partly owned or controlled, directly or indirectly, by one or more residents of the other Contracting State, shall not be subjected in the first-mentioned State to any taxation or any requirement connected therewith which is other or more burdensome than that to which other similar enterprises of that first-mentioned State are or may be subjected.

7. In this Article the term “taxation” means taxes of every kind and description.

Article 25 – Mutual agreement procedure

  1. Where a resident of one of the Contracting States considers that the actions of one or both of the Contracting States result or will result for him in double taxation not in accordance with this Convention, he may, notwithstanding the remedies provided by the national laws of those States, present his case in writing to the competent authority of the State of which he is a resident, stating the grounds for claiming revision of the taxation. To be admitted the claim must be submitted within a period of two years from the date of notification of the taxation or the withholding at source of the tax which he thinks is not in accordance with the Convention.
  2. The competent authority mentioned in paragraph 1 shall endeavour, if the objection appears to it to be justified and if it is not itself able to arrive at an appropriate solution, to resolve the case by mutual agreement with the competent authority of the other State, with a view to the avoidance of taxation not in accordance with this Convention.
  3. The competent authorities of the Contracting States shall endeavour to resolve by mutual agreement any difficulties or doubts arising as to the application of this Convention.
  4. The competent authorities of the Contracting States may communicate with each other directly for the purpose of reaching an agreement in the sense of the preceding paragraphs.

Article 26 – Exchange of information

1. The competent authorities of the Contracting States shall exchange such information as is necessary for the carrying out of the provisions of the Convention and of the domestic laws of the Contracting States concerning the taxes covered by the Convention, in so far as the taxation thereunder is in accordance with the Convention.

Any information so obtained shall be treated as secret; besides the taxpayer or his representative, it may only be disclosed to persons or authorities who are concerned with the collection of the taxes which are the subject of the Convention and claims and remedies related thereto.

2. In no case shall the provisions of paragraph 1 be construed so as to impose on one of the Contracting States the obligation:
a. to carry out administrative measures at variance with the laws or the administrative practice of that or of the other Contracting State;
b. to supply particulars which are not obtainable under the laws or in the normal course of the administration of that or of the other Contracting State;
c. to supply information which would disclose any commercial, industrial, or professional secret or trade process, or information, the disclosure of which would be contrary to public policy (ordre public).

Article 27 – Miscellaneous provisions

  1. No provision in this Convention shall restrict the taxation of a company which is a resident of Belgium in the case of redemption of its own stocks or shares or in the case of distribution of its capital.
  2. The provisions of this Convention shall not restrict the fiscal privileges of members of diplomatic or consular officials under the general rules of international law or under the provisions of special agreements.
  3. For the purpose of the Convention, members of diplomatic or consular missions of one of the Contracting States accredited to the other Contracting State or a third State, and who are nationals of the sending State, shall be deemed to be residents of that State if, for purposes of taxes on income and capital, they are subject to the same obligations as residents of that State.
  4. The Convention shall not apply to international organisations, to their bodies or their officials, not to persons who are members of a diplomatic or consular mission of a third State when they are staying in one of the Contracting States and are, for purposes of taxes on income and capital, not treated as residents of either Contracting State.
  5. The competent authorities of each of the Contracting States shall consult together on the subject of administrative measures which are necessary for carrying out the provisions of the Convention and in particular on the subject of the proof to be given by residents of either State as to why they should benefit from the tax exemptions and reductions in the other State provided for in this Convention.
  6. The Minister of both Contracting States or their authorised representatives who are responsible for the levying of direct taxes shall communicate directly with each other in relation to the application of the Convention.

VII. Final provisions

Article 28 – Entry into force and termination of previous Conventions

1. This Convention shall be ratified and the instruments of ratification shall be exchanged at Brussels as soon as possible.

2. This Convention shall enter into force upon the fifteenth day after that on which the instruments of ratification are exchanged and shall apply:

(i) in Belgium:

(a) to taxes withheld at source on income normally credited or payable on or after the first day of January of the year in which the instruments of ratification are exchanged;
(b) to other taxes levied on income for any tax period ending on or after the thirty first day of December of the year in which the instruments of ratification are exchanged;
(ii) in Luxembourg:

(a) to taxes withheld at source on income credited to the recipients thereof on or after the first day of January of the year in which the instruments of ratification are exchanged;
(b) to other taxes relating to the tax year being the year in which the instruments of ratification are exchanged and any subsequent tax year.

3. The Convention between Belgium and the Grand Duchy of Luxembourg for the avoidance of double taxation in relation to direct taxes and for the guarantee of reciprocal aid between the two countries in matters of recovery of taxes, signed at Brussels on March 9, 1931 and amended by Additional Protocol of February 7, 1952 and thereafter by Exchange of Notes of March 9 and 11, 1965 and November 16 and December 14, 1965, as well as the executive provisions of that Convention which were the subject of agreements of July 22, 1938, March 25, 1948 and December 28, 1949, shall terminate and cease to apply to the Belgian and Luxembourg taxes mentioned in Article 2(3) of this Convention relating to income and items of capital to which it applies by virtue of paragraph 2, sub-paragraphs (i) and (ii) of this Article.

Article 29 – Termination

This Convention shall remain in force indefinitely, however, either of the Contracting States may, on or before the thirtieth day of June of any calendar year beginning from the fifth year after the year in which ratification took place, give, through diplomatic channels, written notice of termination to the other Contracting State. In the event of denunciation taking place before the first day of July of that year, the Convention shall apply for the last time:

(i) in Belgium:

(a) to taxes withheld at the source on income normally credited or payable on or before the thirty first day of December of that year;
(b) to other taxes on income from tax periods normally ending on or before the thirty first day of December of the year following that in which denunciation took place;
(ii) in Luxembourg:

(a) to taxes withheld at source on income credited to the recipients thereof on or before the thirty first day of December of that year;
(b) to other taxes relating to the tax year, being the year in which denunciation took place.

In witness whereof the plenipotentiaries of both States have signed this Convention and thereto affixed their seals.

Done in duplicate on the 17th September, 1970 at Luxembourg, in the French and Dutch languages, both texts being equally authoritative.

FINAL PROTOCOL

At the moment of signing the Convention for the avoidance of double taxation and the regulation of certain other questions relating to taxes on income and capital concluded this day between Belgium and Luxembourg, the undersigned Plenipotentiaries have agreed that the following provisions shall constitute an integral part of the Convention.

1. Holding companies

Ad Article 3(1), sub-paragraphs (iv) and (v) and Article 4(1) and (3)

Notwithstanding those provisions, the Convention shall not apply to income or capital of holding companies resident in Luxembourg which enjoy special fiscal privileges by virtue of the Luxembourg Law of July 31, 1929 and the Decree Law of December 27, 1937 or any other similar law which shall come into force in Luxembourg after the signing of the Convention, nor to income which a resident of Belgium receives from such companies, nor to holdings of such a resident in such companies.

2. Residence for tax purposes

Ad. Article 4(1)

The expression “under the law of that State” in this provision means the law of that State as amended or supplemented by international agreements.

3.
Income from immovable property in Belgium

Ad Article 6

As long as the supplementary prepayment on income from immovable property (complement de précompte immobilier) payable in Belgium on the cadastral income from immovable property subject to tax in Belgium in accordance with Article 6 will be levied at a fixed rate of more than 10%:

(a) the said supplementary prepayment on income from immovable property payable by residents of Luxembourg who, in accordance with Articles 148 and 149 of the Income Tax Code, are subject to the income tax on non-residents, shall be refunded to the extent that the said prepayment together with the creditable portion of the prepayment on income from immovable property exceeds the income tax on non-residents due by those persons concerned;
(b) the said supplementary tax on income from immovable property payable by other residents of Luxembourg may be reduced to the extent that the total burden of the said supplementary prepayment and the portion of the prepayment on income from immovable property which may be credited shall not amount to more than the portion of the income tax on non-residents computed fictitiously on the total income derived from or arising in Belgium which would correspond to the same proportion of the aforesaid cadastral income.

4. Profits of permanent establishments of insurance enterprises

Ad Article 7(4)

The competent authorities of both Contracting States may, in particular, consult together in the case mentioned in that provision for the purpose of determining the taxable profits of the permanent establishment of an insurance enterprise on the basis of an allocation of its total profits between its various permanent establishments taking into account premiums and other mutually agreed upon criteria.

5. Prevention of double taxation in Luxembourg

(1) Ad Article 23(1), sub-paragraph (1)

Income taxable in Belgium in accordance with Article 9 is not covered by that provision.

(2) Ad Article 23(1), (sub-paragraphs (i) and (ii))
(a) Where a resident of Luxembourg is a partnership, a limited partnership or a “société civile”, the provisions of Article 23(1), (sub-paragraphs i and ii) shall apply to the partners thereof, whether or not they are residents of Luxembourg, to the extent that they are taxable in that State on income which they receive from the said partnership or “société civile” or from their holding in the capital thereof.
(b) Where a resident of Luxembourg is a partner in a partnership or limited partnership which is resident in Belgium, the provisions of Article 23(1), sub-paragraph (i), shall apply to the portion of profits and items of capital of the partnership which are taxable in Luxembourg by virtue of the law of that State and which in accordance with the Convention are taxable in Belgium in the hands of the said partnership or partner.
(3) Ad Article 23(1)

Double taxation of the excess part of interest mentioned in Article 11(7) and the excess part of royalties mentioned in Article 22(5) shall be avoided in accordance with the provisions of the Convention relating to income to which that excess part may be assimilated under the law of Luxembourg.

6. Prevention of double taxation in Belgium

(1) Ad Article 23(2), sub-paragraph (i)

Income taxable in Luxembourg in accordance with Article 9 is not covered by that provision.

(2) Ad Article 23(2), sub-paragraphs (i) and (ii)
(a) Where a resident of Belgium is a company whose capital is not divided into shares, and is resident in Belgium:

1. the exemption provided for in sub-paragraph (i) shall also apply to members therein, whether or not they are residents of Belgium, to the extent that their income or items of capital of the said company which is taxable in Luxembourg in accordance with the Convention is also taxable in Belgium in the hands of these members as income other than income from invested capital, under Belgian law;
2. the deduction provided for in sub-paragraph (ii) shall apply to the same extent to partners in a partnership which has elected to have its profits subjected to individual income tax.
(b) the exemption provided for in sub-paragraph (i) shall not apply to income of a resident of Belgium who is a partner in partnership, limited partnership or who is a member of a “société civile” which is resident in Luxembourg if such income does not constitute taxable income in that latter State under the law thereof.

7. Carry-over of losses sustained by a permanent establishment

Ad Article 24(1) and (5)

Where an enterprise of a Contracting State has a permanent establishment in the other Contracting State, the provisions in force in that other State relating to carry-over of losses shall be applicable there in relation to the taxation of that permanent establishment under the same conditions as for enterprises of that other State.

8. Dividends received by a permanent establishment resident in a Contracting State, of a company which is resident in the other State

Ad Article 24(5)

By virtue of that provision, where a company which is a resident of one of the Contracting States has in the other Contracting State a permanent establishment with which a holding in the capital of a company which is a resident of one of the States is effectively connected, the dividends pertaining, to that holding as well as the holding itself are exempt in that other State from the taxes referred to in Article 2, to the extent that they would be exempt under the law of that other State if the holding was by a company resident in that State and of the same type as that on which the permanent establishment is dependent. However, where a company whose capital is divided into shares or a limited liability company, which is a resident of Belgium, has a permanent establishment in Luxembourg and where that permanent establishment has, since the commencement of the financial year during which the dividends were paid to it, a direct and uninterrupted holding of at least 25% of the capital of a corporation which is a resident of Luxembourg, Luxembourg tax on income from capital shall be withheld on the dividends relating to that holding at a rate of 10% of their gross amount.

9. Permanent establishments maintained in Belgium by companies which are residents of Luxembourg or by groups of persons with their place of effective management in Luxembourg

Ad Article 24(5)

Companies which are residents of Luxembourg and groups of persons with their place of effective management in Luxembourg which have a permanent establishment in Belgium, are subject in the latter State to the same rules as those which apply to similar, foreign companies and groups of persons of the profits which they realise there.

However, the tax due on those profits under Belgian law may not exceed the total of the various taxes, calculated at the normal rate which would be due by a company which is a resident of Belgium on the profits and income distributed to its shareholders (actionnaires or associés) in the event that those profits would be taxed in the same way as those of a company which is a resident of Luxembourg or a body which has its place of effective management in that State.

By virtue of that provision, the tax which would be levied on profits distributed by a company resident in Belgium shall be calculated at the rate of 10% on half of the difference between the profit of the permanent establishment and the amount obtained by applying to this profit the normal rate, in principal, of the company tax on distributed profits of companies which are residents of Belgium.

10. Application of domestic law relating to the ending of tax evasion and fiscal fraud

No provision of this Convention shall be interpreted as preventing one of the Contracting States from applying the provisions of its own law for the avoidance of tax evasion and fiscal fraud.

Done at Luxembourg, the 17th day of September, 1970 in duplicate, in the French and Dutch languages, both texts being equally authentic.


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