New catch-all clause only applicable between related parties
Changes to the catch all clause
The scope of the catch all clause will be narrowed as it will only be applicable when the service provider has a direct or indirect link of mutual dependence with the recipient of the service. Regarding the interpretation of “direct or indirect link of mutual dependence”, the explanatory notes refer to art. 26 BITC (abnormal and benevolent advantages) and stipulate that this can constitute both legal and economic control.
The draft also explicitly confirms administrative practice, limiting the scope of the catch all clause to income which constitutes profits or benefits from the provision of services. However, the “de minimis regime”, whereby wage withholding tax is only due on the gross amount exceeding 38.000 EUR/service provider/year, will be withdrawn.
In addition, the catch all clause will no longer be applicable to services provided to an individual who does not act within the framework of his professional activity.
The new catch all clause
Following the new version of article 228, §3 BITC, a wage withholding tax of (net) 16,5% is due on profits and benefits, which are not already considered as taxable in Belgium in the other provisions of the BITC applicable to non-resident taxpayers, from services provided by a non-resident to
- An individual tax resident, in the framework of a professional activity producing profits or benefits
- A taxpayer subject to corporate tax
- A legal entity
- A Belgian establishment
with whom the service provider has a direct or indirect link of mutual dependence.
The tax will only apply to the extent that
- either, that income is taxable in Belgium according to a tax treaty;
- or, if no tax treaty exists, the taxpayer does not prove that the income has been effectively taxed in the beneficiary’s residence state.
The draft law has been sent to the Council of State for advice. The new clause is scheduled to apply as from 1 July 2016.