According to a recent announcement by the Belgian Federal Public Service Finance, the income and capital tax treaty with Bahrain and amending protocol entered into force 11 December 2014. The treaty was signed 4 November 2007 and the amending protocol was signed 23 November 2009. The treaty is the first of its kind between the two countries.
The treaty covers Bahraini income tax, and Belgian individual income tax, corporate income tax, income tax on legal entities, income tax on non-residents on income sourced in Belgium, the supplementary crisis contribution, and any prepayments and surcharges.
Bahrain applies the credit method for the elimination of double taxation, while Belgium generally applies the exemption method. However, subject to the provisions of Belgian law, Belgium will apply the credit method for interest and royalty income.
Article 28 Limitation on Benefits includes the provision that the benefits of the treaty in regard to Article 10 Dividends, Article 11 Interest and Article 12 Royalties will not apply if it was the main purpose or one of the main purposes of any person concerned with the creation of a right or debt-claim in respect of which dividends, interest or royalties are paid was to take advantage of those articles of the treaty.
The protocol, signed 23 November 2009, replaces Article 26 Exchange of Information, bringing it in line with the OECD standard for information exchange.
The treaty and amending protocol both apply from 1 January 2015.
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