Catch-all clause in legislation on non-dom taxation: from now on only between interdependent parties

With the Act of 18 December 2016 (Belgian Official Gazette 20 December 2016), the so-called "catch-all clause" of Art. 228, § 3 Belgian Tax Code was thoroughly reformed. The new Act is retroactively applicable from 1 July 2016. The clause will henceforth only apply between interdependent parties. The 'de minimis rule', whereby income is only taxable above the limit of EUR 38,000 has been abolished.

Existing legislation

In 2013, the so-called catch-all clauseof Art. 228, § 3 was included in the Belgian Income Tax Code. The intention was for the non-dom taxation regulations to make provision for the taxation of certain types of income earned by non-residents from Belgian residents. This is based on a double taxation treaty or in the absence of a DTC , if the recipient has failed to prove that the income has been effectively taxed in his State of residence.

Up until 2013, certain types of income remained untaxed, because the Belgian Income Tax Code on the taxation of non-doms did not make provision for this type of income to be taxed. For example, a fee paid by a Belgian company to a Ghanaian national for technical assistance supplied in Belgium.

Until recently, the catch-all clause applied to income in excess of the threshold of EUR 38,000 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 final withholding tax with discharging effect.

Restriction on scope

Henceforth, the new catch-all clause can only apply to income that constitutes the counter-performance for the supply of services. In practice, it has already been accepted that supplies of goods are excluded.

Moreover, it will henceforth be the case that those services must be supplied to a Belgian legal entity, a permanent establishment or a natural person (or resident) acting in the course of his/her professional activities. The new catch-all clause can therefore no longer apply to services that are supplied to individuals.

However, the main difference is that the new catch-all clause can only apply if the service-provider (non-dom) is directly or indirectly in any relationship of interdependence with the Belgian customer.

Finally, the minimum threshold of EUR 38,000 has been abolished.

If you have questions about this (new) catch-all clause, please do not hesitate to contact us via contact@vdl.be.