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3.2. Practical Aspects of Tax Residence

There is little case law available dealing with the interpretation of the fiscal residence criteria in practice. Factual circumstances are analyzed in each case in order to determine the place of effective management. In Belgian tax law, the registered office forms a rebuttable presumption of fiscal residence. If the address in the deed of incorporation is located in Belgium, the company implicitly indicates that the place of effective management is located there and this is used by the tax administration to subject the company to Belgian corporate income tax on its worldwide income. The taxpayer has to refute this presumption by proving that its place of effective management is located elsewhere.

The principal establishment is a factual concept and is the place from where the company is administered and controlled. Elements taken into account are the place where the company’s management has its offices, where the general meetings of shareholders are held, where the board of directors meets. If the registered office and the principal establishment are in two different states, then the residence of the company is determined by the principal establishment.

The company’s seat of management or administration both refer to the place of effective management and both are used as synonyms of the principal establishment (this term was included against the Council of State’s advice in the ITC). The term is said to elucidate on the term of principal establishment as to underline that the company’s residence is determined by its “principal establishment of management or administration’ and not its “principal exploitation establishment” or “principal trading establishment”. The principal establishment is the place where the decisions controlling the company are taken and where the company’s general interest is looked after.

The place where the board of directors meets could be a first indication of the POEM but this indication is merely a rebuttable presumption. Emphasis lays on where decisions are taken. There is no difference between board meetings held “on paper” and board meetings physically held at the registered office solely approving decisions taken. Corporate bodies should exercise their functions autonomously and should not be subordinated to the foreign shareholder.

The tax administration has listed factors which it takes into account in determining the residence of a company in published tax rulings. The following factors are considered important:

  • the place where the majority of the administrators resides;
  • availability of information in the country of incorporation to resident administrators;
  • the exclusion of responsibility of administrators;
  • the place where important decisions are taken;
  • the place where the company has the main bank account;
  • the place where the company’s books are kept;
  • dual residence of the company;
  • financial means of the company to realize its object

The tax administration did not indicate whether there are any decisive factors nor did it establish some sort of hierarchy among the various factors in determining the POEM.