31 October 2010
ATOZ NEWS: Tax, ATOZ and Taxand Intelligence | October 2010
by: Keith O’Donnell
I am pleased to introduce this new and improved version of our newsletter. It is intended to provide you with significant updates on bi-monthly basis. It will contain a combination of tax news: technical issues that you have grown accustomed to, as well as commentary on developing issues and the firm. We will continue issuing other news flashes on hot and focused tax topics that merit your immediate attention.
The next few months will also be interesting. The discussions around the finance bill for 2011 have been animated, although on relatively marginal topics related mainly to personal taxes. We are also following with interest the announcement that an expatriate regime may be introduced. We will update you as these items develop.
In this edition, we have covered: SICAR for Belgian Investors, thoughts on corporate tax optimization and Taxand’s view on 2011 global real estate tax trends. I hope you enjoy it!
The SICAR: an attractive Luxembourg investment vehicle for Belgian investors
The Belgian Ruling Commission took recently position on the application of the Belgian participation exemption regime to income from a Luxembourg SICAR. The Ruling Commission considered that the SICAR qualifies as Investment Company under Belgian law and that dividends and capital gains from the SICAR could be exempt in Belgium.
Several Belgian investors (resident companies and individuals) intended to establish a Luxembourg SICAR. Based on the Belgian participation exemption regime, in case of an investment in a so-called "investment company", the Belgian exemption only applies if at least 90% of the profits are distributed and if these profits are taxed in the source state at a rate of at least 15%.
Position of the Belgian Ruling Commission
The Ruling Commission analysed these conditions based on the SICAR regime and came to the conclusion that:
- the SICAR qualifies as an "investment company" in the case at hand;
- dividends received by Belgian resident Companies from the Luxembourg SICAR can be exempt in Belgium;
- capital gains realized by Belgian resident Companies on a share buy-back from the Luxembourg SICAR can also be exempt in Belgium;
- dividends received by Belgian resident individuals from the investment in the Luxembourg SICAR qualify for the application of the reduced withholding tax (roerende voorheffing) of 15% (standard rate is 25%) and the anti-abuse provisions do not apply.
Even though each specific investment made by Belgian residents in a Luxembourg SICAR will require a careful review prior for the investors to being comforted that the income out of the SICAR should be exempt in Belgian, the position recently taken by the Belgian ruling commission is very good news and makes the SICAR a very attractive investment vehicle for Belgian investors:
SICARs are subject to tax on their income as any Luxembourg resident company, but they benefit from an exemption from corporate income and municipal business tax on income from transferable securities (valeurs mobilières) as well as on income from the sale, contribution or liquidation of these assets. This mainly includes dividends, interest and capital gains. SICARs are also exempt from withholding tax on dividend distributions to Belgian investors.
SICARs are regulated investment vehicles and thus subject to the control of the Luxembourg supervisory authority of the financial sector ("CSSF"). For more information on the SICAR, you can refer to our SICAR Brochure and/or contact our SICAR team: http://www.atoz.lu/IMG/pdf/ATOZ_034_Brochure_SICAR_BD.pdf
Given the volatile economic environment, corporate tax planning is now, more than ever, under attack. Governments are looking for ways to reduce their budget deficit and are questioning corporate taxation laws and tax optimization structures. As experts in the field of taxation we are here to challenge their position and claim that tax optimization is as much of a corporate right as the individual rights of life, liberty and pursuit of happiness.
For a high level summary of our most recent white paper and contribution to the tax optimization debate: "L’optimisation fiscale est un droit" please click here: http://www.atoz.lu/-Reports-.html
In real estate, where tax-takes are even higher, the difference between winning and losing can often be shaped by tax strategy. With possibly challenging tax regimes and changes to tax law tax planning is more than ever a crucial strategy for real estate investment firms. If you’re looking to invest in real estate, make sure you improve your game and do your tax homework ahead of time, choose your real estate locations with care and seek professional tax advice to maximise your investment.
To discover Taxand’s analysis of macro trends, local tax issues and 2011 challenges to be mindful of, take a look at "The 2011 Guide to Tax" for private equity and real estate, published by PERE & Taxand:
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