Belgium applies “formal interpretation” when doing foreign management and control test
Belgium applies “formal interpretation” when doing foreign management and control test
On 23 November 2017, the Brussels Court of Appeal has applied a very “formal interpretation” when doing the foreign management and control test.
The facts were as follows:
A Belgium Group has a holding company in Luxembourg (“LuxCo”). LuxCo does not have its own personnel whilst LuxCo’s address was located at the office of a Luxembourg trustA comprehensive look at trusts in international tax law, including definitions, practical examples, key cases, and synonyms. office. Most of the LuxCo Directors were Belgium tax resident individuals that were also working for the Belgium tax resident affiliates of the Group. As a result of these facts, the Belgium tax authorities were keen to treat LuxCo as a company subject to Belgium corporate taxCorporate Tax refers to the tax imposed by governments on the income or capital of corporations. Corporations, considered separate legal entities, are taxed on their profits, meaning the income generated from their operational activities, investments, and other financial undertakings. This tax is generally a key revenue source for governments, helping to fund public services, infrastructure, and other essential functions. The... as it would actually be managed and controlled “in Belgium”.
However, the Brussels Court of Appeal does not follow the line of reasoning of the Belgium tax authorities. Indeed, after an in-depth factual analysis, it appeared that, although some LuxCo Board decisions were prepared “in Belgium”, it could be evidenced that the various items put on the LuxCo Board of Directors agenda were actually debated “in Luxembourg” and that sometimes the final Board decision “in Luxembourg” deviated from what had been prepared before “in Belgium”. As a result, LuxCo qualifies as a Luxembourg tax resident company for Belgium tax purposes.
