The European Commission has formally requested Belgium to change its tax provisions relating to dividends earned from Belgian investment funds that invest all of their assets in real estate ("real estate" SICAF).
Belgium limits the exemption from withholding tax to dividends paid by Belgian "real estate" SICAF that invest at least 60% of their assets in residential real estate situated on Belgian territory, which results in discriminatory treatment.
Dividends paid by Belgian "real estate" SICAF investing at least 60% of their assets in real estate situated in Belgium are exempt from withholding tax as far as resident shareholders are concerned, whereas dividends paid by their foreign counterparts are not.
The Commission considers this treatment to be discriminatory and to amount to a barrier to the free movement of capital and the freedom to provide services, since such a rule creates an incentive for Belgian residents to invest only in Belgian real estate investment funds. Moreover, the rule that Belgian investment funds investing in real estate have to invest at least 60% of their assets in real estate situated in Belgium in order to benefit from the exemption also constitutes a restriction on the free movement of capital and the freedom to provide services, as it discourages Belgian investment funds from investing in real estate situated abroad.
The request takes the form of a reasoned opinion (second step of the infringement procedure provided for in Article 258 of the Treaty on the Functioning of the EU). If there is no satisfactory response to the reasoned opinion within two months, the Commission may decide to refer the matter to the Court of Justice of the (source: http://ec.europa.eu/community_law/index_fr.htm)
