What are the rules and how will they impact you?

In brief

At the end of last year, the Belgian Parliament adopted a new Program law, which includes new rules on the controlled foreign company (CFC) regime in Belgium applicable as of tax assessment year 2024.

In this webinar, we briefly explain the new rules, how they will impact you, and what the remaining uncertainties are.

Key takeaways

Belgium originally implemented Model B (the transactional approach) of the CFC rules under the EU anti-tax avoidance directive (ATAD) but this reform entails a shift to an entirely different model, i.e., Model A (an entity approach), with far-reaching consequences. Whereas the former CFC regime was not of particular concern provided that the foreign entity was duly remunerated under TP rules, the scope of application of the new CFC model is very broad and can target any controlled foreign entity which is not subject to at least half the taxation that would have been applied if it were a Belgian entity.

This triggers various uncertainties, for example when the CFC is subject to certain tax rules which are internationally recognized, but implemented differently or subject to different conditions than in Belgium. Furthermore, even though the CFC profit to be included is limited to the passive income of the CFC, the definition of such income is very broad and includes amongst others rental income and income from financial and operational lease, income from asset management, and financial activities in general and income from distribution of products and services if the entity adds little economic value.

As a result, we foresee that situations may be caught which were not originally targeted by the EU ATAD. Furthermore, a specific CFC reporting obligation has been introduced into Belgian law which, depending on how it is to be interpreted, could go further than expected as well.

Speakers: Alain Huyghe, Julie Permeke, Philippe Lion

Do not hesitate to reach out to us if you would like to obtain a recording of this webinar.