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November 29, 2021

Belgium and France sign new double tax treaty

Executive summary

The Belgian and French Finance Ministers signed a new double tax treaty and protocol on 9 November 2021. These documents were published on 16 November1 and will replace the currently in-force treaty, which was concluded in 1964 and modified by several additional protocols over the years. The renewal has been on the agenda for several years, as the 1964 treaty was no longer in line with international Organisation for Economic Co-operation and Development (OECD) principles.

The new treaty is likely to enter into force on 1 January 2023 after its ratification. Key changes to the treaty relate to rules with respect to hybrid entities, the determination of permanent establishment, new withholding tax exemptions and the introduction of anti-abuse measures.

This Alert summarizes the key provisions of the new double tax treaty.

Detailed discussion

Implementation of the MLI

In 2016, the OECD released the Multilateral Instrument (MLI) to implement its tax treaty-related Base Erosion and Profit Shifting (BEPS) measures into existing bilateral tax treaties in a swift, coordinated and consistent manner. The 1964 Belgian-French double tax treaty is a covered tax agreement, meaning that the MLI must be applied alongside the 1964 Belgian-French double tax treaty – replacing or completing various treaty provisions.

The text of the new Belgian-French double tax treaty is directly inspired by the MLI and aligned with the currently existing international OECD principles. As a result, multiple adjustments to the concept of permanent establishment were made, withholding tax exemptions (or reduced rates) are now subject to a beneficial ownership requirement and a principal purpose test (PPT) is now included in the treaty itself. Based on this PPT, access to treaty benefits can be disallowed if claiming these benefits was one of the principal purposes of an arrangement or transaction, exclusively or mainly lacking solid business motives.

Tax residency and hybrid entities

The 1964 treaty applies to legal entities, being resident in that Contracting State in which its place of effective management is located. Contrary to many other double tax treaties, it is as such not required for these legal entities to be subject to taxation in that Contracting State in order to access the 1964 Belgian-French treaty. The new double tax treaty now refers to the OECD definition of tax residents, which includes a subject-to-tax requirement.

The new treaty also addresses the French hybrid entities (such as the sociétés civiles immobilières or “SCI,” which have not opted for the application of the French corporate income taxation) in order to provide them some treaty protection. These companies will be treated as tax resident for the purpose of the new Belgian-French treaty, provided that: (i) their place of effective management is located in France; (ii) they are subject to tax in France; and (iii) their partners or members are personally liable under French tax legislation for the tax on their distributive profit share of these companies.

The new double tax treaty contains various provisions to deal with transparent entities. It includes the general rule according to which income received by an entity is deemed to be income derived from a resident of a Contracting State, to the extent that this Contracting State equally treats this income for tax purposes as income derived from a tax resident of that state. However, a specific exception is provided for income generated by aforementioned French hybrid entities (which is basically a carve-out of the aforementioned transparency rule for those French entities). Hence, the partners of such French entities cannot claim treaty benefits in similar circumstances. This is a rather important deviation from the OECD Model Convention.

Permanent establishment

The definition of permanent establishment (PE) as outlined in the new double tax treaty is in line with articles 12, 13 and 15 of the MLI. As a result, the text of the new Belgian-French treaty now includes an anti-fragmentation rule to be met to be able to claim the non-PE status for local presence with a mere preparatory or auxiliary character (art. 13 MLI). Moreover, the definition of an independent agent is restricted (excluding persons acting exclusively, or almost exclusively, for one or more enterprises to which this agent is closely related) (art. 15 MLI), whereas the definition of a dependent agent is broadened (art. 12 MLI). In addition to situations where a person is acting on behalf of an enterprise and habitually concludes contracts, a dependent agent PE is also deemed to exist where this person habitually exercises the principal role leading to the conclusion of contracts that are subsequently routinely concluded by the enterprise without material modifications.

A non-MLI adjustment to the PE concept relates to the duration test for building sites or construction/ assembly projects. Whereas the 1964 treaty provided for a six-month period, the new treaty sets out a nine-month period to achieve PE status. Note that the OECD Model Convention provides for a 12-month duration test.

Withholding taxes

Withholding taxes on dividend distributions as applied by the source state cannot be higher than 15% according to the 1964 Belgian-French treaty. This maximum rate is reduced to 12.8% under the new treaty. However, a withholding tax exemption is possible for dividends to parent companies situated in the other Contracting State, having a direct minimum shareholding of at least 10% and respecting a 365-day holding period. When calculating the holding period, any changes directly resulting from a reorganization of the corporate shareholder (such as a merger or demerger) may be disregarded.

The new treaty provides for a withholding tax exemption for interest and royalties paid or attributed in a Belgian-French context.

These withholding tax exemptions can only be claimed if the recipient of the dividend, interest and/or royalty income is the beneficial owner. This requirement equally applies to the reduced dividend withholding tax rate.

Capital gains

Capital gains realized upon the sale of shares, or any other rights of a company whose assets consists (directly or indirectly) of more than 50% of its value in real estate located in one of the Contracting States are taxable in that state according to the new Belgian-French treaty. The French tax authorities already tried to achieve this outcome although the possibility to do so under the 1964 treaty was rather controversial. However, the French State Council (Conseil d’Etat) recently ruled in favor of the French tax authorities. The new Belgian-French treaty now confirms this position.


Belgian residents receiving foreign income (not being dividends, interest and royalties) can be exempt from taxation in Belgium only if such income is taxed in France. This is further defined by the protocol as income that is subject to the tax regime normally applicable in France. However, with respect to Belgian individuals, the new treaty makes the exemption subject to “effective taxation” in France (the source country). According to the protocol, this should be the case when the income item is taxed in France without benefitting from any exemption. These are useful clarifications considering the interpretation discussions in the past.

With respect to French-sourced dividends, interest and royalties, reference is made to the respective provisions in Belgian tax legislation in order to credit foreign taxes against the Belgian tax liability.

Entry into force

The signed text should still be ratified by the parliaments of both States. As soon as the ratification procedures are completed in Belgium and France, the double tax treaty can enter into force. The new double tax treaty will be applicable for income years, starting on 1 January of the year, following the year in which the treaty will enter into force.

Provided that the ratification is completed by Belgium and France before 31 December 2022, the new Belgian-French double tax treaty will be applicable as from 1 January 2023.


For additional information with respect to this Alert, please contact the following:

EY Brussels

EY Hasselt

EY Antwerp

Ernst & Young LLP (United States), Belgian Tax Desk, New York



  1. Full text available in Dutch or in French.