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Belgium-Bahrain

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Tax Treaty between Belgium and Bahrain has Entered into Force

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.

Taxes Covered

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.

Withholding Tax Rates

  • Dividends - 0% if, at the moment of payment, the beneficial owner has directly held at least 10% of the paying company's capital for an uninterrupted period of at least 12 months; otherwise 10%
  • Interest - 0% for interest paid on commercial debt-claims resulting from deferred payments for goods, merchandise or services supplied by an enterprise; interest paid on export loans/credits granted, guaranteed or insured by the government of a Contracting State; and interest paid on debt-claims or loans to a banking enterprise or paid on deposits made with a banking enterprise; otherwise 5%
  • Royalties - 0%
  • Capital Gains - generally exempt, except for gains from the alienation of immovable property, and gains from the alienation if movable property forming part of the business property of a permanent establishment

Double Taxation Relief

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.

Limitation on Benefits

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.

Protocol

The protocol, signed 23 November 2009, replaces Article 26 Exchange of Information, bringing it in line with the OECD standard for information exchange.

Effective Date

The treaty and amending protocol both apply from 1 January 2015.

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