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Belgium Publishes Law Providing Withholding Tax Exemption on Dividends Received in Relation to a Foreign Company Spin-Off

On 6 May 2019, Belgium published in the Official Gazette the Law of 28 April 2019 on various tax provisions. One of the main measures of the Law is the amendment of Article 264 of the Income Tax Code, which provides for an exemption from withholding tax on dividends in certain cases.

The amendment is the addition of an exemption for dividends (shares) allocated or attributed to Belgian residents by a foreign distributing company in relation to a spin-off, where the foreign company contributes a branch of activities to a new or existing company in exchange for shares. Previously, such distributions are generally considered subject to tax.

For the exemption to apply:

  • The shares or units of the companies involved must be listed on a stock exchange of a State with which Belgium has entered into a tax treaty or other agreement providing for the exchange of information;
  • The companies involved must be resident in a State with which Belgium has entered into a tax treaty or other agreement providing for the exchange of information;
  • The distribution must be in relation to the shares acquired in exchange for the contribution of its branch of activities;
  • The contribution of activities and the distribution must be part of a single restructuring operation; and
  • The spin-off must be considered fiscally neutral or exempt in the State of residence of the contributing/distributing company.

The exemption is effective from 1 January 2019 and applies to dividends paid or credited from that date.

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