The Double Taxation Relief (Taxes on Income) (Belgium) Order 1987

Made: 26th November 1987

At the Court at Buckingham Palace, the 26th day of November 1987 Present, The Queen’s Most Excellent Majesty in Council

Now, therefore, Her Majesty, in exercise of the powers conferred upon Her by section 497 of the said Income and Corporation Taxes Act 1970, and of all other powers enabling Her in that behalf, is pleased, by and with the advice of Her Privy Council, to order, and it is hereby ordered, as follows:—

1

This Order may be cited as the Double Taxation Relief (Taxes on Income) (Belgium) Order 1987.

2

It is hereby declared—

• (a) that the arrangements specified in the Convention set out in the Schedule to this Order have been made with the Government of the Kingdom of Belgium with a view to affording relief from double taxation in relation to income tax, corporation tax or capital gains tax and taxes of a similar character imposed by the laws of Belgium;

• (b) that those arrangements include provisions with respect to the exchange of information necessary for carrying out the domestic laws of the United Kingdom and the laws of Belgium concerning taxes covered by the arrangements including, in particular, provisions about the prevention of fiscal evasion with respect to those taxes; and

• (c) that it is expedient that those arrangements should have effect.

SCHEDULE — CONVENTION BETWEEN THE GOVERNMENT OF THE UNITED KINGDOM OF GREAT BRITAIN AND NORTHERN IRELAND AND THE GOVERNMENT OF THE KINGDOM OF BELGIUM FOR THE AVOIDANCE OF DOUBLE TAXATION AND THE PREVENTION OF FISCAL EVASION WITH RESPECT TO TAXES ON INCOME AND CAPITAL GAINS

ARTICLE 1 — Personal scope

This Convention shall apply to persons who are residents of one or both of the Contracting States.

ARTICLE 2 — Taxes covered

ARTICLE 3 — General definitions

ARTICLE 4 — Residence

ARTICLE 5 — Permanent establishment

ARTICLE 6 — Income from immovable property

ARTICLE 7 — Business profits

ARTICLE 8 — Shipping, inland Waterways transport and air transport

ARTICLE 9 — Associated enterprises

ARTICLE 10 — Dividends

ARTICLE 11 — Interest

ARTICLE 12 — Royalties

ARTICLE 13 — Capital gains

ARTICLE 14 — Independent personal services

ARTICLE 15 — Dependent personal services

ARTICLE 16 — Directors' fees

Directors' fees and other similar payments derived by a resident of a Contracting State in his capacity as a member of the board of directors or other similar organ of a company which is a resident of the other Contracting State may be taxed in that other State. In relation to remuneration of a director of a company derived from the company in respect of the discharge of day-to-day functions of a managerial or technical nature, the provisions of Article 15 of this Convention shall apply as if the remuneration were remuneration of an employee in respect of an employment and as if references to “employer” were references to the company.

ARTICLE 17 — Artistes and athletes

ARTICLE 18 — Pensions

Subject to the provisions of paragraph (1) of Article 19 of this Convention, any pension and other similar remuneration paid to a resident of a Contracting State in consideration of past employment shall be taxable only in that State.

ARTICLE 19 — Government service

ARTICLE 20 — Students

Payments which a student or business apprentice who is or was immediately before visiting a Contracting State a resident of the other Contracting State and who is present in the first-mentioned State solely for the purpose of his education or training receives for the purpose of his maintenance, education or training shall not be taxed in that State, provided that such payments arise from sources outside that State.

ARTICLE 21 — Offshore activities

ARTICLE 22 — Other income

ARTICLE 23 — Elimination of double taxation

ARTICLE 24 — Non-discrimination

ARTICLE 25 — Mutual agreement procedure

ARTICLE 26 — Exchange of information

ARTICLE 27 — Members of diplomatic or permanent missions and consular posts

ARTICLE 28 — Miscellaneous rules

ARTICLE 29 — Entry into force

ARTICLE 30 — Termination

Signed

G I de Deney — Clerk of the Privy Council

Explanatory note

(This note is not part of the order)

The Convention with Belgium set out in the Schedule to this Order replaces the Convention signed on 29th August 1967 (S.I. 1970/636).

Provision is made for business profits not arising through a permanent establishment to be taxed only in the country of the taxpayer’s residence. Profits attributable to a permanent establishment may be taxed in the country in which the permanent establishment is situated (Articles 5 and 7). Shipping and air transport profits are to be taxed only in the country in which the place of effective management is situated (Article 8). The Convention includes rules for determining taxable profits when a company in one country is related to a company in the other (Article 9).

The Dividends Article (Article 10) takes account of the imputation system of company taxation in the United Kingdom. Where a United Kingdom company pays a dividend to a Belgian company controlling 10 per cent or more of its voting power, the Belgian company receiving the dividend will be entitled to a tax credit equal to one half of the tax credit which would be payable to a United Kingdom resident individual less a sum of not more than 5 per cent of the aggregate amount of the dividend and the half tax credit. Where the recipient is an individual resident of Belgium or a Belgian company controlling less than 10 per cent of the voting power of the United Kingdom company, the tax credit payable will be equal to the tax credit which would be payable to a United Kingdom resident individual less a sum not exceeding 20 per cent of the aggregate of the dividend and the tax credit. The Article provides that entitlement to a tax credit may be withdrawn where the recipient of a dividend cannot show, if required to do so, that the shareholding was acquired for bona fide commercial reasons or in the ordinary course of making or managing investments and it was not the main object nor one of the main objects of that acquisition to obtain entitlement to the tax credit. The Dividends Article also provides that the rate of Belgian withholding tax on dividends paid to a United Kingdom company controlling at least 25 per cent of the voting power of the Belgian company paying the dividend will be limited to a maximum of 5 per cent. In all other cases the Belgian withholding tax will not be more than 10 per cent.

Interest may be taxed in the country in which it arises, but the rate will normally be limited to 15 per cent where the beneficial owner of the interest is a resident of the other country (Article 11). Royalties are, in general, to be taxed only in the country of the taxpayer’s residence (Article 12). The earnings of temporary business visitors are, subject to certain conditions, to be taxed only in the country of the taxpayer’s residence (Articles 14 and 15). Fees received by a resident of one country in his capacity as a director of a company resident in the other may be taxed in the latter country (Article 16). Income derived from the activities of artistes and athletes may be taxed in the country in which these activities are exercised (Article 17). Pensions, other than public service pensions, are to be taxed only in the country of the taxpayer’s residence (Article 18). Public service salaries and pensions are normally to be taxed by the paying country only (Article 19). Payments made to visiting students and business apprentices are, in general, to be exempt from tax in the country visited (Article 20).

Income from immovable property and gains derived from such property may be taxed in the country in which the property is situated (Articles 6 and 13). Capital gains arising from the disposal of movable property are normally to be taxed only in the country of the taxpayer’s residence. Gains arising from the disposal of assets of a permanent establishment or fixed base which the taxpayer has in the other country may be taxed in the other country.

Special rules are included to cover income and profits from activities connected with offshore oil and gas exploration or exploitation (Article 21). Trading profits arising from such activities are deemed to arise through a permanent establishment or a fixed base and may therefore be taxed in the country in which the activities are carried on. Employees are, in general, to be taxed only in the country in which the employment is exercised. Different rules apply to supply vessels, tugboats and their crews.

Where income continues to be taxable in both countries, relief from double taxation will be given by the country of the taxpayer’s residence in respect of tax imposed by the other country (Article 23). There are provisions safeguarding nationals and enterprises of one country against discriminatory taxation in the other country (Article 24). Provision is made for consultation and exchange of information between the taxation authorities of the two countries (Articles 25 and 26).

The Convention will enter into force fifteen days after both countries have notified each other of the completion of their legislative procedures and it will have effect in the following calendar year.

Footnotes

[^f00001]: 1970 c. 10; section 497 was amended and extended by sections 98(2) and 100(1) of the Finance Act 1972 (c. 41), section 10 of the Capital Gains Tax Act 1979 (c. 14) and section 70 of the Finance Act 1987 (c. 16)