European Commission requests Belgium to end discriminatory rules regarding taxation of investment companies

Christophe Coudron • 07/12/2010

An important exception to this exemption is provided by article 19bis I.T.C. Redemption and liquidation bonuses paid out by investment companies are taxed at 15% to the extent that the bonus originates from income from receivables (either interest income or capital gains on receivables) when the following conditions are met:

  • - the bonus is paid out by an investment company which invest over 40% of its assets in bonds or other receivables;
  • - the investment company is either an E.U. fund holding an E.U. passport (according to E.C. Directive 85/611) or the fund is located outside the E.U. Contrary to funds which are located outside the E.U., funds which are located in the E.U. only fall under the scope of article 19bis I.T.C. if they hold an E.U. passport.

The aforementioned rule also applies to redemption and liquidation bonuses paid out by investment funds lacking fiscal transparency which invest over 40% of their assets in bonds.

The European Commission has now informed the Belgian government that it must end the unequal treatment of funds located in the E.U. on the one hand (which only fall under the scope of article 19bis I.T.C. if they hold an E.U. passport) and funds located in the E.E.A.-States which are not E.U. Member - States (Norway, Liechtenstein and Iceland) on the other hand (which always fall under the scope of article 19bis I.T.C., regardless of whether they hold an E.U. passport or not).

The European Commission considers this unequal treatment to be contrary to the freedom of capital (article 40 E.E.A. agreement) and the free rendering of services (article 36 E.E.A.).

We refer to the communication of the European Commission IP/10/1253.

Christophe Coudron