Belgium applies “formal interpretation” when doing foreign management and control test
On 23 November 2017, the Brussels Court of Appeal has applied a very “formal interpretation” when doing the foreign management and control test.
The facts were as follows:
A Belgium Group has a holding company in Luxembourg (“LuxCo”). LuxCo does not have its own personnel whilst LuxCo’s address was located at the office of a Luxembourg trust office. Most of the LuxCo Directors were Belgium tax resident individuals that were also working for the Belgium tax resident affiliates of the Group. As a result of these facts, the Belgium tax authorities were keen to treat LuxCo as a company subject to Belgium corporate tax as it would actually be managed and controlled “in Belgium”.
However, the Brussels Court of Appeal does not follow the line of reasoning of the Belgium tax authorities. Indeed, after an in-depth factual analysis, it appeared that, although some LuxCo Board decisions were prepared “in Belgium”, it could be evidenced that the various items put on the LuxCo Board of Directors agenda were actually debated “in Luxembourg” and that sometimes the final Board decision “in Luxembourg” deviated from what had been prepared before “in Belgium”. As a result, LuxCo qualifies as a Luxembourg tax resident company for Belgium tax purposes.
