On 9 October 2023, the federal government reached an agreement on the budget for 2024. It aims to strengthen various control and anti-abuse measures in the fight against tax evasion and avoidance. The intention is to reinforce and tighten the Cayman Tax to further restrict the flight towards tax havens.
The Cayman Tax was introduced with the aim of preventing Belgian residents from obtaining a tax advantage by holding assets in low-taxed entities. Since 2013, the Cayman Tax has evolved from a mere reporting obligation to (imperfect) fiscal transparency (the so-called look-through taxation) and a tax on distributions. The targeted entities (legal arrangements) have also significantly increased.
Founders are, in principle, taxable on the income of the legal arrangement under “the look-through taxation”, as if the founder had received the income directly. Distributions made by legal arrangements can be taxed as dividends in the hands of the recipient. When a legal arrangement holds, in turn, another legal arrangement, the look-through taxation applies to the entire chain.
Although the Cayman Tax has been adjusted repeatedly over the past ten years, the Minister of Finance still considers it to be insufficiently effective.
The Court of Audit proposes a series of measures to increase the Belgian taxable base:
It is particularly unfortunate that the Court of Audit’s suggestions do not address the uncertainty surrounding the (non-)application of the Cayman Tax to situations clearly outside the intended scope of the tax (for example, the fiscally transparent Dutch trust office foundation - stichting administratiekantoor/STAK,). The Minister of Finance has announced a circular letter to address certain uncertainties (such as clarifying the “substance exclusion”).
To assess the actual fiscal impact, we await the draft text of the law.
The government’s aim is undoubtedly to submit a draft law to the federal parliament’s vote by the end of the year. We will keep you informed and remain available if you have any questions regarding the impact on your personal situation.
Caroline is a member of the Greenille Private Clients team. Caroline focuses on private wealth structuring, in particular when international aspects come into play. Over the past decade, she gained a broad perspective in the tax area working for family businesses and high-net-worth individuals. Adhering to a holistic approach, she ensures the client receives the advice and assistance he or she seeks.