Belgian resident individuals who receive foreign dividends are not able to claim a tax credit for any foreign dividend withholding tax. This results in double taxation in situations where a dividend withholding tax is effectively withheld in the source state. In respect of French dividends this, for instance, entails a total tax burden of 37.95%.
Notwithstanding the fact that in the “Kerckhaert en Morres” case (C-513/04 of 14 November 2006) the ECJ ruled that the Belgian tax treatment of foreign dividends is compatible with the free movement of capital, Belgian individuals are still challenging the fact that they are subject to double taxation.
Instead of fruitlessly challenging the rules of the residence state (Belgium), Belgian individuals, more successfully, turned to the rules source state. On 7 May 2014, the French Council of State (Conseil d’Etat) rules in the “Reynaers” case (no. 356760) that the French legislation violates free movement of capital in as much as foreign individuals are taxed differently (heavier). More recently, on 4 March 2016 the Dutch Supreme Court ruled in the “Miljoen” case (no. 12/04717) that the Dutch legislation also violates the free movement of capital on similar grounds.
Both cases however demonstrate that situations of double taxation remain in place to the extent that French or Dutch residents would be subject to tax on such dividends. The issue of double taxation is thus not settled yet and this clearly remains to be the case.
The Minister of Finance stated on 23 August 2016, in a reply to a parliamentary question, that it will not take any initiative to mitigate this type of double taxation, explicitly referring to the above mentioned case law of the ECJ, even not in the framework of the Belgian tax treaty policy and, for instance, the current negotiations with France on a new income tax treaty (Q&A Chamber 2015-2016, no. 54-086, 278).