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Belgium has ratified the Multilateral Instrument

The federal law containing assent with the multilateral instrument (MLI) which implements the tax treaty related measures of the OECD Action Plan on Base Erosion and Profit Shifting (BEPS) in existing bilateral tax treaties has been published in the Belgian Official Gazette of 18 July 2019. The publication marks the final step in the process of ratification of the MLI.

The MLI will apply for Belgium at the earliest as from 1 January 2020 for withholding tax purposes and in principle as from taxable periods starting on or after 1 April 2020 for other tax purposes.

It will already apply to the treaties concluded with the countries which have also already ratified the MLI and which are on the list of Covered Treaties established by both Belgium and the partner state (status per 28 June 2019):

 

Australia

Austria

Finland

France

Georgia

India

Ireland

Israel

Lithuania

Luxembourg

Malta

New Zealand

Poland

Russia

Serbia

Singapore

Slovak Republic

Slovenia

Sweden

United Arab Emirates

United Kingdom


Ultimately, more than 50 treaties could be modified. The provisions in the MLI are also expected to influence tax treaties that Belgium will conclude in the future.

The MLI contains minimum standards (which must be implemented) and recommendations (which are optional). The main consequences of the MLI for Belgium are as follows:

 

Extension of the definition of permanent establishment: broadening of the definition with commissionaires and introduction of anti-fragmentation rules in respect of preparatory or auxiliary activities

Introduction of a principal purpose test to counter treaty abuse

Provision for a minimum standard for a mutual agreement procedure. Belgium has also opted for the arbitration procedure


Businesses should consider the consequences of the MLI for their current structure and flows. In this respect, the existence of a Covered Treaty and the positions of both Belgium and the other jurisdiction should be verified.

 

 

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Jos Goubert
Director

Tax Knowledge Dept.
Brussels

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