Brussels, 22/01/2007 (Agence Europe) - The European Commission has decided to refer Belgium to the European Court of Justice because the country taxes dividends paid by foreign companies to private Belgian investors (inbound dividends) at a higher rate than dividends paid by Belgian companies to the same investors. The Commission has in fact revealed that a case of double taxation exists in Belgium for inbound dividends, which is not the case for national dividends. Drawing on the “Kerckhaert-Morres” decision of the Court (C-513/04), the Commission considers that this difference in treatment is contrary to the freedom of establishment and free movement of capital guaranteed by the EC treaty.
In Belgium, private Belgian investors receiving domestic dividends either pay a final tax withheld by the company or they are taxed at a special income tax rate of, in principle, 25%. Inbound dividends are first subject to a withholding tax of up to 15% in the source State on the basis of the double taxation agreement between Belgium and that State, and then suffer Belgian income tax at the special income tax rate of 25% without getting a credit for the foreign tax. (mb)