In two drafts of Royal Decrees the scope of the so called ‘Cayman Tax’-legislation is widened.
Brief summary of The Cayman Tax
In brief, the Cayman Tax is a set of rules in the Belgian income tax code designed to facilitate transparency, for income tax purposes, of certain foreign legal structures, such as trusts and low-taxed foundations and companies. Individual tax residents in Belgium who are founders of foreign legal structures are taxed on the income of those structures, as if the structures did not exist.
The Cayman Tax is also about the taxation of the distributions made by the foreign legal structures.
The founder has the obligation to report interests in foreign legal structures in his annual income tax return.
Targeted foreign legal structures
Non-E.E.A.
All trusts qualify as targeted foreign legal structures. In principle the same goes for all low-taxed foundations and companies that are established outside the E.E.A.
Foundations and companies that are established outside the E.E.A. are presumed to be non-taxed or low-taxed. The presumption is rebuttable.
E.E.A.
Within the E.E.A. only a list of specific entities qualify as targeted foreign legal structures. The blacklist of targeted entities starts with undertakings for collective investments (UCIs) that are held by one person, or by several individuals who are related to each other. The holding criteria are assessed for each component part of the structure. After the UCIs come non-Belgian companies with Belgian source income that are tax transparent in the jurisdiction where they are established. The current list ends with four specific E.E.A.-entities: the Liechtenstein Foundation, the Liechtenstein Anstalt, the Luxembourg Foundation and the Luxembourg Société de Patrimoine Familial (known as ‘SPF’). The blacklist is not part of the income tax code, but is contained in a Royal Decree, so making it more easily adjustable. No evidence to the contrary is admissible.
Widening scope of targeted foreign legal structures
E.E.A.
The draft of a first new Royal Decree targets the following entities:
- the public or institutional entities for collective investments, and the public or institutional or private alternative entities for collective investments, that are held by one person or by several individuals who are related to each other;
- the companies that are not transparent for Belgian income tax purposes, but that are transparent according to the tax legislation of the jurisdiction within the E.E.A. where they are established; and
- the companies established in the E.E.A. of which the income is not effectively subject to income tax.
Non-E.E.A.
The draft of a second Royal Decree implements the changes for entities established outside the E.E.A
