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According to trade press, the Belgian Minister of Finance, Jan Jambon, has recently confirmed that the tax administration, after having been repeatedly overruled by case law, would no longer oppose the application of the lump-sum foreign tax (LSFT hereafter) on French dividends received by Belgian private investors. At the time of writing, no official source has confirmed this. However, this stance is consistent with Circular Letter 2021/C/49 of May 28, 2021, which contains FAQs regarding the LSFT and dividends from France.
What is the LSFT? A quick refresher
A gross dividend paid from France is first subject to a 12,8% withholding tax. The remaining amount is then taxed again in Belgium at a rate of 30% (withholding tax on movable income), resulting in a significant tax burden. The Belgian Court of Cassation has repeatedly confirmed that, based on the Belgium-France tax treaty, Belgium is required to limit its taxation to 15%. In essence, this means that Belgian resident taxpayers can invoke the Franco-Belgian tax treaty to claim the LSFT of 15%, thereby effectively reducing the Belgian tax to 15% (30% - 15%).
Example
Consider a gross dividend of €100:
Without LSFT-offset | With LSFT-offset (15%) | |
|---|---|---|
| Gross dividend | €100,00 | €100,00 |
| French withholding tax (12,8%) | - €12,80 | - €12,80 |
| Net dividend from France | €87,20 | €87,20 |
| Belgian withholding tax (30%) | - €26,16 | - €26,16 |
| LSFT-offset (15% of € 87,2) | + € 13,08 | |
| Net amount received | €61,04 | €74,12 |
| Total tax burden | 38,96% | 25,88% |
Conclusion: As a result of the application of the LSFT, a Belgian resident private investor receives an additional net gain of €13,08 on a gross dividend of €100.
How to claim the LSFT?
If you receive dividends from French sources, we would be pleased to help you in optimizing your tax situation and including the necessary data in your tax return. Furthermore, if the legal deadlines allow, we can assist you in filing a claim to request a refund of the LSFT if it has not been applied by the tax authorities.
Attention: LSFT-offset is ending
The current double taxation treaty with France, which enables the LSFT-offset, will be replaced by a new treaty (signed on 9 November 2021).
The new treaty does not include provisions for the LSFT-offset. Although the new treaty was initially set to enter into force on 1 January 2023, it will not come into effect before 1 January 2026, as ratification by both countries has not yet been completed.
Should you require additional information or assistance, RSM Belgium Tax team remains at your disposal ([email protected]).
