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11 May 2018

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Tax Treaty between Belgium and Norway has Entered into Force

The new income tax treaty between Belgium and Norway entered into force on 26 April 2018. The treaty, signed 23 April 2014, replaces the 1988 tax treaty between the two countries.

Taxes Covered

The treaty covers Belgian individual income tax, Corporate income tax, Income tax on legal entities, and Income tax on non-residents, and covers the following Norwegian taxes:

  • National tax on income;
  • Municipal tax on income;
  • County municipal tax on income;
  • National tax relating to income from the exploration for and the exploitation of submarine petroleum resources; and
  • National tax on remuneration to non-resident artistes.

Service PE

The treaty provides that a permanent establishment will be deemed constituted when an enterprise from one Contracting State performs services in the other State:

  • through an individual who is present in that other State for a period or periods aggregating more than 183 days within any 12-month period, and more than 50%  of the gross revenues attributable to active business activities of the enterprise during this period or periods are derived from the services performed in that other State through that individual; or
  • for a period or periods aggregating more than 183 days within any 12-month period, and these services are performed for the same project or connected projects through one or more individuals who are present and performing such services in that other State.

Withholding Tax Rates

  • Dividends - 0% if the beneficial owner directly holds at least 10% of the paying company's capital for an uninterrupted period of at least 12 months; 5% if the beneficial owner is a qualified pension fund, otherwise 15%
  • Interest - 10%, although the following are exempt:
    • Interest beneficially owned by a Contracting State, a political subdivision or a local authority thereof;
    • Interest paid in connection with a credit sale of goods, merchandise, equipment, or services;
    • Interest paid in respect of loans granted by a banking enterprise, except when represented by bearer instruments;
    • Interest paid in respect of a credit or loan granted or extended by an enterprise to another enterprise; and
    • Interest paid to a qualified pension fund.
  • Royalties - 0%

Capital Gains

The following capital gains derived by a resident of one Contracting State may be taxed by the other State:

  • Gains from the alienation of immovable property situated in the other State; and
  • Gains from the alienation of movable property forming part of the business property of a permanent establishment in the other State.

Gains from the alienation of other property by a resident of a Contracting State may only be taxed by that State.

Offshore PE

Article 20 (Offshore Activities) includes the provision that a permanent establishment will be deemed constituted if an enterprise resident in one Contracting State carries on offshore activities in the other State in connection with the exploration or exploitation of the seabed or subsoil or their natural resources situated in that other State, if such activities continue for a period or periods aggregating more than 30 days in any 12-month period. In determining whether the 30-day period is exceeded, substantially similar activities of an associated enterprise are considered.

Double Taxation Relief

Norway applies the credit method for the elimination of double taxation, while Belgium generally applies the exemption method. However, subject to the provisions of Belgian law, Belgium will apply the credit method for interest and royalty income and in certain cases for dividend income.

Limitation on Benefits

The beneficial provisions of Articles 10 (Dividends), 11 (Interest), 12 (Royalties), and 20 (Other Income) will not apply if the main purpose or one of the main purposes of any person concerned with the creation or assignment of the shares, debt-claims, or other rights in respect of which the income is paid was to take advantage of those Articles by means of that creation or assignment. The limitation is included in each of those Articles.

In addition, the final protocol signed with the treaty includes the provision that the benefits of the treaty will not apply for income paid or derived in connection with an artificial arrangement.

Effective Date

The new treaty applies from 1 January 2019. The 1988 treaty between the two countries as amended by the 2009 protocol ceases to be effective from the date the new treaty is effective.

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