Catch-all provision in legislation on non-dom taxation: from now on only between related parties!

The so-called "catch-all clause" of Art. 228, § 3 of the Belgian Income Tax Code will be thoroughly reformed after July 1th 2016. From now on, the provision would only take effect between related parties, and the 'de minimis rule', whereby only income over the threshold of 38,000 euros is taxable, will be scrapped.

Existing legislation

In 2013, the so-called catch-all provision of Art. 228, § 3 was included in the Belgian Income Tax Code. The intention was to ensure that the rules on non-dom taxation could effectively tax certain types of income earned by non-doms from Belgian residents in cases where Belgium is authorised to levy tax. This can take place either in the presence or in the absence of a Double Taxation Agreement; if the beneficiary does not prove that his/her income is effectively taxed in his/her place of residence.

Up until 2013, certain types of income remained untaxed, because Belgian law on the taxation of non-doms did not include a provision to effectively levy taxes on these types of income. For example, a fee paid by a Belgian company to a Ghanaian national for technical assistance supplied in Belgium.

Currently, the catch-all is applied to income that exceeds the threshold of 38,000 euros per year. After applying a flat rate of 50% for costs, a tax rate of 33% is applied and the tax is deducted at source by the payer by means of a discharging professional withholding tax.

Restriction on scope

It emerges from the new bill that henceforth the legislation itself will stipulate that the catch-all provision will only apply to income that constitutes a counter-performance for services that have been supplied. (In practice, it is already accepted that the supply of goods is excluded.)

Moreover, it will henceforth be the case that those services must be supplied to a Belgian legal entity or a natural person (resident) acting in the course of his/her professional activities. The new catch-all provision can therefore never apply to services that are supplied to individuals.

However, the main difference is that the new catch-all provision can only apply if the service-provider (non-dom) is directly or indirectly in any relationship of interdependence with the Belgian customer. Finally, the new bill intends to eliminate the minimum threshold of 38,000 euros.

Please don't hesitate to contact us if you have any questions about the (new) catch-all provision!