- Introduction of CFC Regulations: Circular 2024/C/82 discusses the implementation of a revised Controlled Foreign Company (CFC) scheme in Belgium, following the transposition of the EU’s Anti Tax Avoidance Directive (ATAD) into Belgian law through the Programme Law of December 22, 2023.
- CFC Qualification Criteria: The circular outlines the conditions for a foreign company or establishment to qualify as a CFC, which include participation and valuation conditions. A CFC is defined based on the taxpayer’s control, with specific criteria regarding ownership percentages and the tax regime in the foreign jurisdiction.
- Taxable Profit Determination: The taxable profit attributed to a CFC is determined as if it were established in Belgium, incorporating adjustments for passive income and undistributed profits. The process involves multiple steps, including assessing the income derived from the CFC and applying relevant fractions to limit the taxable amount.
- Exemptions from Taxation: Taxpayers can claim exemptions from CFC taxation if they demonstrate substantial economic activity by the CFC or if the CFC’s passive income constitutes less than one-third of its total income. Specific exemptions are also available for financial enterprises under certain conditions.
- Measures Against Double Taxation: The circular establishes provisions for offsetting foreign taxes paid by the CFC against Belgian corporate tax liabilities. It also addresses the treatment of capital gains on shares of CFCs and the implications for dividends distributed from CFC profits, ensuring that previously taxed profits are appropriately deducted to avoid double taxation. The amended CFC scheme is set to apply from the fiscal year 2024.
Source Fisconet
