Supreme court confirms availability of tax credit on French dividends not mentioned in a tax return
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Partner
Belgium
I am a leading lawyer in tax litigation and tax controversy in Belgium and a teaching professor (tax litigation) at two Belgian universities. I also have complementary experience in other areas of tax law such as restructurings, tax planning for companies, due diligences, advance tax rulings, local taxes, stock option plans, international employment.
Under the current version of the double tax treaty between Belgium and France, individuals who are residents of Belgium can claim a foreign tax credit (“Forfaitair Buitenlandse Belasting” “FBB” – “Quotité Forfaitaire d’impôt étranger” “QFIE”) as a relief against double taxation on dividends and interest received. The relief must be granted, and this was ruled by the Belgium supreme court a few years ago, although the foreign tax credit provisions were cancelled under Belgium domestic tax law. Undoubtedly the precise provisions of the double tax treaty take precedence (ruling of June 16, 2017).
Despite this case law, the Belgium tax administration denied the credit if the dividend, first taxed in France, was subject in Belgium to withholding tax – usually tax ex officio levied by the Belgian bank on the net dividend received. The withholding tax is final and the individual need not mention such income in his/her tax return anymore. In terms of the tax administration, if the individual did not declare that income, he is deemed to have accepted that the withholding tax was the final tax treatment of the income; and no further advantage will be granted anymore.
The Belgium supreme court however rejected the tax administration’s standpoint by decisions issued on 23 November 2023. However, this was insufficient in the eyes of the tax administration, which informed the taxpayers concerned that it was not convinced and awaited the result of another supreme court procedure before bowing down, as the case may be. The supreme court did issue its ruling in this other case (Judgment of June 21, 2024). The ruling does not leave the room for doubt: the court decides that in the event of the relevant income omitted in the tax return, a taxpayer having suffered double taxation of a dividend in France and Belgium may request a tax credit. The provisions of the double tax treaty, says the court, take precedence over domestic tax law, including procedural rules.
If you, as a Belgian tax resident, have been subject to a double tax on dividends of interest derived from a debtor located in France, you may claim foreign tax credit for the last 5 years through an administrative procedure. The recoverable amount is 15 % of the income after French tax. The same applies for dividends or interest income derived from a jurisdiction with which Belgium has a similarly drafted double tax treaty (e.g., Israël).
