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Circular on dividend withholding tax refund following Tate & Lyle Investments case – published — Orbitax Tax News & Alerts

Recently, the Belgian administration published Circular Ci. RH.233.609.958 (No. AA Fisc No. 26/2013) on the granting of a refund of dividend withholding tax following the decision of the European Court of Justice (ECJ) in Tate & Lyle Investments (Case C-384/11).

In the case, the ECJ, inter alia, decided that the free movement of capital must be interpreted as precluding legislation, whereby dividends distributed by a resident company to resident and non-resident receiving companies which hold less than 10% in the capital of the distributing company but with an purchase value of at least EUR 1.2 million (from 2010, EUR 2.5 million), are subject to withholding tax, while a mechanism exists to reduce subsequent tax levies, but only if the receiving company is a resident.

The Circular provides that unjustifiably collected dividend withholding tax will be refunded to foreign companies if the following cumulative conditions are met:

-   the foreign company cannot obtain a credit or refund in its state of residence;
-   the company would have benefited from the Belgian participation exemption if it would have been established in Belgium. This means that the company for an uninterrupted period of 1 year should have had the full ownership of shares with a value of EUR 2.5 million (EUR 1.2 million before 1 January 2010);
-   the company, for an uninterrupted period of 1 year, had the full ownership of the shares at the time the dividend was granted or was made payable; and
-   the company is established in another EU Member State or a country with which Belgium has a tax treaty providing for exchange of information.

The amount of the refund is equal to the dividend withholding tax less:

-   the amount of the credit or refund granted by the residence state of the company; and
-   5% of the gross distributed dividends which are taxable under the Belgian participation exemption.

With respect to withholding tax withheld in the previous 5 years, an appeal can be lodged within 6 months from 28 June 2013.

Note. With retroactive effect from 1 July 2013, the Belgian administration has introduced a new article 185bis(2) and (3) as a result of which both Belgian and foreign investment funds will no longer be entitled to a credit or refund of dividend withholding tax