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Belgium: Treatment of interest payments, exempt dividends under Parent-Subsidiary Directive

Belgium: Treatment of interest payments

The Court of Justice of the European Union (CJEU) on 26 October 2017 issued a judgment concerning the compatibility of Belgian rules under EU Parent-Subsidiary-Directive (90/435/EEC). Specifically, the case concerns the compatibility with the EU Parent-Subsidiary-Directive with Belgian rules under which the deduction of interest payments was disallowed to the extent that in the same tax year, the taxpayer had received exempt dividends from shares held for less than one year, without regard to whether the interest payments were relating to the holding.


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The case is: Argenta Spaarbank NV v Belgische Staat, C-39/16 (26 October 2017)


The Belgian tax authority disallowed a deduction of interest paid by a Belgian-based credit institution on the grounds that in the same tax years, it had also received dividends from holdings that it had not held for a full year at the time of distribution. The credit institution disputed the tax assessment arguing that the rules only were to apply in situations when there is a causal relationship between the interest payments and the partially exempt dividends.

The question referred to the CJEU was whether the Belgian rules are compatible with a provision under the Directive that allows the EU Member State of a parent company to refuse the deductions of costs relating to holdings in a subsidiary established in another EU Member State and a provision under which EU Member States may refuse to grant the benefits of the Directive for reason of preventing tax evasion and abuse.

The CJEU concluded that the disputed Belgian rule did fall within the scope of the Directive, and that the Belgian rules were precluded by the Directive.


Read an October 2017 report [PDF 146 KB] prepared by KPMG’s EU Tax Centre

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