Administrative circular on municipal Charge in Belgium
Without the intervention of a Belgian financial intermediary, the exemption provided by Article 313 BITC is not applicable and consequently, the foreign business sourced income must be included in the belgian taxable income. Taxpayers from Belgium are required to include movable income (dividends, interest , etc.) in their annual taxable income, except for movable income for which withholding tax has already been retained and paid to the Belgian tax authorities, which exception is laid down in Article 313 of the Belgian income tax code (BITC). In respect of foreign sourced movable income, Belgian withholding tax is in only retained by the belgian tax authority if it is paid through a Belgian financial intermediary. According to Article 465 BITC, the municipal belgian authorities have the right to levy an additional charge on the individual income tax for the belgian citizens. This additional charge will be only levied on the income tax due according to the annual tax return filed by the individuals, and therefore not on the Belgian withholding tax suffered. On July the first 2010, the ECJ held in the Dijkman case (C-233/09) that the already mentioned legal cases is in breach of the free movement of capital Article 63, as movable income from investments in other EU Member States that is not paid through an intermediary established in Belgium is subject to a supplementary municipal tax, whereas such income from investments placed in Belgium, because it is subject to withholding tax at source, is not subject to the supplementary municipal mentioned tax and, therefore, ot included in the taxable income. As a consequence, municipal charges can only be levied when foreign source movable income is paid directly to a Belgian individual taxpayer without the need of a Belgian financial intermediary. Or what is the same, if the individual taxpayer want to avoid the municipal charge, it is necessary that the foreign movable income is paid through the intervention of a Belgian financial agent.
In the published Administrative Circular (Ci.RH.331/607.620) dated 19 October 2010, the Belgian Tax Authorities confirm that foreign source movable income paid to a Belgian resident individual without the intervention of a Belgian financial intermediary, will be excluded from the tax base for the yearly calculation of the additional municipal charges. In relation to past years, the Belgian tax authorities affirm that any requested “ex officio” relief on basis of the decision of the ECJ will be accepted provided all other conditions in relation to this request are complied with. For the pending court cases, the Belgian tax authorities will adhere to this above mentioned position and will suggest a relief for the said municipal charge.
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