Last summer the government announced to improve the effectiveness of the so-called Cayman tax, i.e. the rules on the transparent tax treatment of income obtained by offshore investment entities, through the amendment of the two royal decrees listing the targeted EEA and non-EEA entities.
On 3 December 2018, the royal decree amending the royal decree targeting EEA entities has been published in the Belgian State Gazette.
Income obtained as of 1 January 2018 by the following types of entities established in the EEA is taxed in the hands of taxpayers subject to the personal income tax and legal entities tax:
- collective investments entities which are held by one person or by several persons who are related to each other;
- entities that are not transparent for Belgian income tax purposes, but that are transparent according to the tax legislation of the residence state and whereby thus the income is taxed in the hands of the partners or shareholders; and
- entities, not covered under 1° and 2°, which are not effectively subject to income tax in the residence state or of which the tax is lower than 1% of the income (to be established in accordance with Belgian rules).
However, entities listed under 2° and 3° are not considered transparent if the main purpose of the entity is to perform activities which generate income which would be exempt under an income tax and capital tax treaty should it be obtained directly by a taxpayer subject to the personal income tax or legal entities tax.
In addition, entities listed under 2° are also not considered transparent if the partners or shareholders pay a tax of at least 1% of the income in the residence state (to be established in accordance with Belgian rules).
The draft royal decree in respect of non-EEA entities has not been published yet.