Dividends paid to Swiss companies - tax exemption | KPMG | BE

Dividends paid to Swiss companies can benefit from internal withholding tax exemption as from 1 January 2017

Dividends paid to Swiss companies - tax exemption

Belgium has extended the scope of the withholding tax exemption for dividends in its internal tax law since 1 January 2007. Dividends paid to companies in non-EU tax treaty countries can benefit from the exemption if that treaty or any other treaty provides for the exchange of information necessary for the application of the national legislation. So far, the tax treaty with Switzerland did not meet that condition.

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However, Switzerland has recently ratified the OECD/Council of Europe convention on mutual administrative assistance in tax matters. It will enter into force as from 1 January 2017. This convention provides for such an exchange of information [1].

As a result, dividends paid to a Swiss company can benefit from the extended internal withholding tax exemption as from 1 January 2017, provided that the following conditions are met:

 

  • The parent company holds/will hold a participation of at least 10% for at least 1 year in the subsidiary’s capital
  • The Belgian company has a legal form as mentioned in the annex to the EU Parent-Subsidiary Directive and the Swiss company has a similar legal form
  • The subsidiary is a tax resident of Belgium and the parent is a tax resident of Switzerland
  • Both companies are subject to corporate tax or to a similar tax and do not enjoy a tax regime diverging from the common tax regime

 

In addition, dividends from participations of less than 10%, but at least 2,5 MEUR can benefit from the reduced withholding tax of 1,6995% under similar conditions (implementation of the Tate & Lyle case law of the Court of Justice of the European Union).

So far, dividends paid to a Swiss company could only benefit from an exemption of withholding tax based on the agreement concluded between the EU and Switzerland in 2004.

This exemption is only granted if the following conditions are met:

  • The parent company holds a direct participation of at least 25% in the capital of the subsidiary for at least 2 years
  • The subsidiary is a tax resident of Belgium and the parent is a tax resident of Switzerland
  • Both companies pay corporate tax without being exempt
  • Both companies are limited companies

 

A comparison shows that, as from 1 January 2017, the conditions for the withholding tax exemption of dividends will become much more beneficial.

 

[1]  Belgium and Switzerland have also concluded an amendment to their tax treaty which also contains such a provision, but that treaty will not enter into force in the immediate future (ratification still pending).

© 2017 KPMG Tax and Legal Advisers, a Belgian Civil Cooperative Company with Limited Liability (burg. CVBA/SCRL civile) and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (“KPMG International”), a Swiss entity. All rights reserved.

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