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Jan 18th
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Old Stock Option Plans Tax-Exempt, Belgian Supreme Court Rules

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Written by Administrator Friday, 24 January 2003
On 16 January, the Belgian Supreme Court overturned a decision by the Court of Appeal of Brussels, which had held that, based on the intent of 1984 legislation, the capital gain derived from an employee stock option plan was a taxable fringe benefit.

The 1984 legislation did not, as such, introduce a tax on the fringe benefit related to a stock option; rather, it stated that capital gains realized by a beneficiary under an ESOP would be tax-exempt under strict conditions. The provisions stated that if the stock options were granted in accordance with those conditions, and if they qualified as a taxable fringe benefit, the beneficiary would not be taxed on the capital gain realized at the time he or she exercised the option.

However, the fact that the tax law added a qualification (that the stock options had to qualify as a taxable fringe benefit) gave tax lawyers an opportunity. They argued that the capital gain, as such, was not a taxable fringe benefit under the tax legislation as it stood then. The taxable event should have been the transaction in which the employer granted the option to the employee, but under the 1984 legislation that transaction was not subject to tax.

After the rally on the stock markets and the resurgence of stock option plans, the government introduced new legislation in 1999, completely changing its approach. Under the new tax regime, the tax would be levied on the value of the stock option when it was granted, and a favorable valuation would be used, particularly if the beneficiary would refrain from exercising the option for at least three years. When it commented on the 1999 legislation, the Conseil d’Etat clarified that the new legislation applied the law correctly and that the old legislation disregarded the common rules of tax law.

However, that did not solve the problem of the old stock option plans. Did employees have to pay tax on the capital gain realized once they exercised the option? Tax authorities assumed that they did, and many employees found themselves in a position where they had to challenge a tax claim. (More …)

Belgiumís Antiavoidance Rule: The First Case Law

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Written by Administrator Friday, 24 January 2003
In 1993, Belgium introduced a general antiavoidance rule to the Income Tax Code (article 344 section 1 ITC 1992) to give the tax authorities more ability to disregard transactions that are created only to avoid taxation.

This rule allows the tax authorities to disregard the legal qualification, or structure, of a transaction if they can prove that the parties have chosen that particular legal structure for the transaction, solely to avoid income tax. If they can establish that, the tax authorities can disregard the legal qualification given by the parties. They can reclassify the transaction to a less tax-efficient qualification and assess the applicable tax. However, taxpayers can require the tax authorities to accept the original qualification if they can prove that it meets lawful financial or economic requirements (répond à des besoins légitimes de caractère financier ou économique ).

The general antiavoidance rule also may be used when the tax authorities can prove that parties have split up one transaction into separate steps to create a certain income tax outcome. The tax authorities can disregard the separate steps and treat them as one operation. That is inspired by the Anglo-Saxon step transaction doctrine.

Many tax lawyers have commented on the general antiavoidance rule, but the courts have rendered decisions interpreting that rule only in the last few months. This article is a short analysis of the recent case law to date. (More …)

Belgian Tax Bill updates the 1999 stock option regime

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Written by Administrator Friday, 20 December 2002
After it approved the bill that will cut the average corporate income tax from 40.17 percent to 33.99 percent, the Belgian Senate on 23 December approved another general bill (so-called “Loi Programme”). This bill which has not less than 1000 provisions has been chased through Parliament. Understandably so in view of the 2003 elections ; a lot of its provisions must attract votes from the electorate. (More …)

Belgian Software Company Loses Court Battle Over Capital Gain Claim

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Written by Administrator Friday, 20 December 2002
In a case that has major implications for the Belgian tax world, the Ghent software company Artwork Systems Group recently lost its first court battle with Belgian tax authorities over a €58.1 million capital gain claim. There is a lot at stake for this company, which is listed on NASDAQ Europe, but even more for the Belgian tax world.

The judgment reads as a cautionary tale against excessive fiscal engineering, but the legal basis of the judgment is just as important. It confirms that if a company receives an asset for free, the “true and fair view” principle requires the company to record a profit, which will be subject to corporate income tax. Tax authorities could apply the same principle to Belgian holding companies. (More …)

Belgian Ministry of Finance organizes information round on advantageous tax regimes

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Written by Administrator Tuesday, 26 November 2002
The Finance Committee of the Belgian Parliament has approved a draft bill that would implement a major corporate income tax reform. While the Parliament is preparing to vote on the draft corporate income tax reform measure, the administration of the Ministry of Finance is looking at its practical implementation.

One of the draft bill’s principal measures would strengthen the so-called minimum taxation condition of the participation exemption for dividends received by a Belgian company.

A Belgian holding company can only claim the participation exemption if its subsidiary is subject to a corporate income tax equivalent to the Belgian corporate income tax and if it is not resident in a country that has an ordinary corporate income tax regime that is substantially more advantageous than the Belgian corporate income tax. (More …)

Stock options and private computers

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Written by Administrator Tuesday, 26 November 2002
On 23 October 2002, the Belgian Government has adopted the text of a ‘Loi Programme’ which it will propose to the Parliament and which contains some tax proposals. (More …)

Covenant to the Belgian German double taxation treaty signed

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Written by Administrator Wednesday, 06 November 2002
Belgium and Germany have signed a covenant to their double tax treaty. One of the major changes is that the cross border worker rule is abandoned. (More …)

Belgium: Year in Review

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Written by Administrator Monday, 29 November 1999

2006 has been an exciting year for international tax lawyers. Since the European Commission attacked the tax regime for coordination centers under the European state aid rules tax, Belgium has been looking for ways to make the country more attractive for foreign investors. The country really has a lot on offer. (More …)

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