New tax treaty between Belgium and the Netherlands

Introduction

On 21 June 2023, the Netherlands and Belgium signed a new tax treaty. Both countries are currently in the process of drafting a memorandum of understanding, after which the new tax treaty will be shared with the parliaments of both countries for approval and thus ratification. Since the new tax treaty will not enter into force before parliamentary approval in both countries, the new tax treaty is expected to enter into force on 1 January, 2025 at the earliest.

One of the elements that has been amended in the new tax treaty concerns the substantial interest booking ('the general interest booking'). The new AB booking may have a detrimental consequence for a natural person who has emigrated to Belgium with a substantial interest in a Dutch company, where the protective assessment in respect of that substantial interest has already been waived.

Current AB booking

The current tax treaty includes an AB booking. This booking means that the Netherlands may also levy taxes on benefits relating to the transfer of a substantial interest in a Dutch company by a natural person as a resident of Belgium. However, this booking only applies if there is still an outstanding protective assessment with regard to that substantial interest. In other words: if the protective assessment in question has already been waived, the Netherlands hasn't got the right to tax benefits in respect of the transfer of a substantial interest in a Dutch company by a natural person as a resident of Belgium. In that case, the main rule is that only Belgium may levy tax on these benefits from the disposal of shares.

In the case of emigration before 15 September 2015, the remission of such a protective assessment took place after ten years. In the case of emigration from 15 September 2015 onwards, such a preservative assessment is in principle perpetual.

New ab-booking

In the new, not yet applicable, tax treaty with Belgium, the text of the AB booking has been amended. The AB booking in the new tax treaty reads as follows:

'Where a natural person has been a resident of one of the Contracting States and has become resident in the other Contracting State, the provisions of paragraph 4 shall not prevent the first State from taxing under its domestic law in respect of increases in the value of shares, profit participation certificates, purchase options and usufruct over shares in, profit shares and claims against a company which relates to the period during which that person is resident in the other Contracting State, the provisions of paragraph 4 shall not prevent the first State from taxing under its domestic law in respect of the increase in the value of shares, profit participation certificates, options for purchase and usufruct over shares in, profit shares and claims in respect of a company which relates to the period during which that company is natural person was a resident of the former State. In such a case, the increase in the value of assets taxed in the first State shall not be included in the basis of assessment when the increase in the value of the assets by the other State is determined.'

In the new general administrative clause, the explicit connection with an outstanding protective assessment has been removed. The new AB booking means that the Netherlands may levy taxes on benefits relating to the transfer of a substantial interest in a Dutch company by a natural person as a resident of Belgium, regardless of whether a protective assessment is still outstanding with regard to that substantial interest. In addition, the right to tax in the Netherlands is limited to the increase in value of the substantial interest in question during the period that that natural person was resident in the Netherlands. Ergo: if a precautionary assessment has already been waived with regard to that substantial interest, then we see the risk that this precautionary assessment will revive, as it were.

If, on the basis of the new AB booking, the Netherlands is allowed to levy taxes in such a case, it will also wish to exercise its right to levy taxes on the basis of the Income Tax Act 2001 (hereinafter: "the Income Tax Act"). This is because a natural person who is a resident of Belgium with a substantial interest in a Dutch company is a non-resident taxpayer for income tax purposes in the Netherlands and in addition, as a result of the remission of the relevant protective assessment (assuming remission of the entire preserved income), the relevant acquisition price of the substantial interest has been reduced back to the original acquisition price of the substantial interest. There is then a risk that the Netherlands will levy income tax at a maximum rate of 33% (top rate 2024) on the increase in value of that substantial interest during the period that that natural person was resident in the Netherlands.

Summary

Currently, a natural person who is a resident of Belgium with a substantial interest in a Dutch company is not liable to income tax in the Netherlands upon the disposal of that substantial interest without an outstanding protective assessment in respect of that substantial interest.

Under the new tax treaty, a natural person as a resident of Belgium with a substantial interest in a Dutch company may be liable to pay income tax in the Netherlands upon the disposal of that substantial interest, even if the protective assessment in respect of that substantial interest has already been waived. This is due to the AB booking in the new tax treaty.

Fence

If you emigrated to Belgium before 15 September 2015 with a substantial interest in a Dutch company and you are still in possession of the substantial interest as a resident of Belgium, the new tax treaty between Belgium and the Netherlands may have an impact on you. In that case, it is advisable for you to map out the possible impact.

To do so, please contact your Deloitte advisor or the people below.

Learn more

Jordi Severijn's                           Kenneth Odekerken 
Partner Senior Manager
T: +31 88 288 2268 T: +3188 288 3462   
jseverijns@deloitte.nl kodekerken@deloitte.nl