A lot of Belgian residents (HNWI, Belgian group of companies,…) use a Luxembourg holding (the so-called SOPARFI) as part of their tax planning.
Initially, the Belgian tax authorities tried to challenge the “organizational / operational substance” of such foreign holding companies… not always with great success! For instance, in the well-known Belgacom case, the Court of Appeal of Brussels considered that the SOPARFI was a Luxembourg tax resident (and not a Belgian resident subject to corporate income tax in Belgium), on the grounds that the board meetings, where the strategic decisions were taken, were physically held in Luxembourg.
Tax practitioners have seen a huge paradigm shift during the last couple of years. The economic substance is becomingly increasingly important, which can be explained by the adoption of numerous anti-abuse rules in the international tax arena (GAAR of ATAD/PSD,…). In a recent ruling of 1 December 2020, the Court of Appeal of Ghent rejected the withholding tax exemption of the Parent-Subsidiary Directive on dividend distributions made by a Belgian company to a SOPARFI, on the grounds that the latter lacked economic substance (no genuine economic activity in Luxembourg), based on the general EU principle of prohibition of abuse (by referring to the famous Danish cases of the ECJ).
For more developments, see the last article of DEP in Agefi.
