U.S. income tax treaty with Belgium

Treaty documents and protocols

The 2006 convention and its protocol replaced the 1970 convention, which the IRS still lists. The IRS also lists a technical explanation for each convention. IRS Table 3 shows the 2006 convention effective January 1, 2008 and lists no later protocol.^[1][6][4][8]

Convention structure

The 2006 convention has 29 articles. Articles 1 to 9 cover General Scope, Taxes Covered, General Definitions, Resident, Permanent Establishment, Income from Real Property, Business Profits, Shipping and Air Transport, and Associated Enterprises.^[6]

Articles 10 to 20 cover Dividends, Interest, Royalties, Gains, Income from Employment, Directors' Fees, Entertainers and Sportsmen, Pensions and Social Security, Government Service, Students and Teachers, and Other Income. Article 21 is Limitation on Benefits, Article 22 Relief from Double Taxation, Article 23 Non-Discrimination, Article 24 Mutual Agreement Procedure, Article 25 Exchange of Information and Administrative Assistance, Article 26 Assistance in Collection, Article 27 Members of Diplomatic Missions and Consular Posts, Article 28 Entry into Force, and Article 29 Termination.^[6]

A protocol signed with the convention adds the rules for binding arbitration of cases the competent authorities cannot settle, and it clarifies the attribution of profits to a permanent establishment.^[4]

Dividends, interest and royalties

Article 10 lets the country of the payer tax dividends at up to 5 percent of the gross amount when the beneficial owner is a company holding directly at least 10 percent of the voting stock, and at up to 15 percent in other cases.^[6] Dividends from a U.S. company are not taxed in the United States at all when the beneficial owner is a Belgian company that has held at least 80 percent of the voting power for 12 months and meets one of the limitation on benefits tests, or a Belgian pension fund that does not earn the dividends through a business.^[6] Dividends paid by a U.S. regulated investment company or real estate investment trust get special limits.^[6]

Under Article 11, interest is taxable only in the country of the beneficial owner. Three exceptions apply. Contingent interest from the United States that does not qualify as portfolio interest can be taxed by the United States at up to 15 percent for a Belgian owner. Belgian interest determined by reference to the debtor's receipts, profits or cash flow can be taxed in Belgium at up to 15 percent. Excess inclusion income of a real estate mortgage investment conduit is taxed under domestic law.^[6]

Article 12 gives the residence country the sole right to tax royalties. Royalties cover payments for copyrights of literary, artistic or scientific works including films and software, patents, trademarks, designs, plans, secret formulas and processes, and information about industrial, commercial or scientific experience.^[6] When a special relationship between the payer and the beneficial owner pushes a payment above an arm's length amount, only the arm's length amount gets treaty treatment.^[6]

Residence and dual residence

Article 4 defines a resident of Belgium by Belgian tax residence and a resident of the United States by U.S. tax residence. A U.S. citizen or green card holder is treated as a U.S. resident for treaty purposes only if he or she has a substantial presence, permanent home or habitual abode in the United States and is not a resident of a third country for purposes of that country's treaty with Belgium.^[6]

An individual who is resident in both countries is assigned to the country where he or she has a permanent home. If there is a home in both, the closer personal and economic relations decide. If that is unclear, habitual abode decides, then nationality. If the person is a national of both countries or neither, the competent authorities settle the question by mutual agreement.^[6]

Saving clause and U.S. citizens

Article 1(4) provides that the convention does not affect a country's taxation of its own residents and citizens, subject to the exceptions in paragraph 5. Those exceptions preserve, among others, the relief from double taxation in Article 22, non-discrimination, the mutual agreement procedure and associated enterprise adjustments. A former citizen or former long-term resident can be taxed under that country's law for 10 years after losing that status.^[6] For a U.S. citizen living in Belgium, this means the United States keeps taxing worldwide income and the treaty mainly works through the foreign tax credit and the allocation rules, not through an exemption.^[6]

Related reading

The U.S. income tax treaty with France also contains residence rules and a saving clause. See also U.S. income tax treaty with Luxembourg. The U.S. income tax treaty with Switzerland includes provisions on information exchange. The U.S. income tax treaty with Portugal also covers income and residence and includes a saving clause.

Questions and answers

Related resources

Related glossary terms

• Treaty rate table: A treaty rate table summarizes income categories and tax rates or exemptions under U.S. income tax treaties. The IRS explains the tables' scope and limits.
• Limitation on benefits: A limitation on benefits article sets conditions for entities in a treaty country to qualify for certain treaty benefits under the applicable U.S. tax treaty.
• FBAR: FinCEN describes the FBAR filing rule for U.S. persons with foreign accounts. It covers the $10,000 aggregate threshold, account interests and exceptions.

Related articles and guides

• U.S. income tax treaty with Pakistan: The IRS lists Pakistan's income tax treaty document. The convention sets rules on income and residence, plus information exchange, with its articles set out.
• U.S. income tax treaty with France: The U.S. income tax convention with France is amended by two protocols, and the 2009 Protocol changed the dividend and royalty rules for qualifying holders.

Tools and official documents

• Form 1116: foreign tax credit: Form 1116 claims the foreign tax credit for U.S. citizens: income categories, supporting information, related forms and filing timing under the instructions.

Related pages

• Tax treaties: All treaty partners listed by the IRS.
• Treaty documents lookup: Find IRS-listed treaty documents by country.