26.8- United States Tax Treaty with Belgium

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Following is a summary of the Convention Between the United States of America and the Kingdom of Belgium for the Avoidance of Double Taxation and the Prevention of Fiscal Evasion with respect to Taxes on Income (signed November 27 2006, enters into force December 28 2007) and its key provisions.
Note: This is a summary only — you should consult the full treaty text and/or a tax professional for specific applications.

Key Facts

• The new treaty and protocol between the U.S. and Belgium were signed on November 27 2006 and entered into force on December 28 2007 (applying for tax years beginning on or after January 1 2008).
  
  

• It replaced the prior U.S.–Belgium income tax treaty of July 9 1970 (amended 1987) and modernizes many provisions, including anti-treaty-shopping, information exchange, arbitration, and dividend/interest rules.
  
  

• The treaty’s main goal is to avoid double taxation, prevent fiscal evasion, and facilitate cross-border trade and investment between the U.S. and Belgium.
  
  

Major Provisions

Here are some of the key provisions of the treaty:

Taxing Rights & Permanent Establishment (PE) Rules

• Business profits of an enterprise of one country are taxable in the other only if the enterprise carries on business in the other country through a permanent establishment (PE) situated therein. (Articles 7)
  
  

• Dividends, interest, royalties, etc., are also addressed with specific rules for source vs. residence country taxing rights.
  
  

Dividends

Up to 15% generally; reduced to 5% when the beneficial owner is a company (resident of the other State) owning at least 10% of the capital of the company paying the dividends.

Dividend payments to pension funds may be exempt under certain conditions.

Interest

In many cases 0% withholding from the source country on interest payments under the new Treaty & Protocol.

Applies for certain types of interest when conditions are met.

Royalties

Generally 0% withholding in the source country under the modern treaty.

Subject to the beneficial-owner rules and treaty conditions.

Relief from Double Taxation

• The treaty ensures that a resident of one country taxed on income from the other country may generally obtain a foreign tax credit or exemption in the residence country for taxes paid in the source country.
  
  

• For example, the U.S. allows a credit for Belgian income taxes paid (subject to U.S. foreign tax credit rules).
  
  

Exchange of Information & Anti-Abuse Measures

• The treaty strengthens the powers of tax authorities to exchange information between the U.S. and Belgium, including financial institution information, to combat tax evasion.
  
  

• It includes a strong Limitation on Benefits (LOB) clause to prevent “treaty shopping” by residents of third countries.
  
  

• The treaty includes a mandatory arbitration provision for unresolved disputes between competent authorities — a relatively rare feature when it was added.
  
  

Saving Clause & Former Residents

• The treaty contains a saving clause allowing the U.S. to tax its citizens or residents as if the treaty were not in effect in certain circumstances.
  
  

• It also handles former citizens and long-term residents of the U.S. for up to ten years after status change.
  
  

Practical Implications

• If you are a U.S. resident earning Belgian-source income (or a Belgian resident earning U.S.-source income), the treaty can reduce withholding taxes and help avoid being taxed twice on the same income.
  
  

• For example: If a Belgian company pays dividends to a U.S. company owning at least 10% of its capital, the Belgian withholding tax may be reduced or eliminated under the treaty.
  
  

• Interest and royalty payments between U.S. and Belgian residents may benefit from 0% withholding under the treaty when all conditions are met.
  
  

• Businesses operating across U.S.–Belgium borders benefit from clarity around permanent establishment status, transfer pricing, and mutual agreement procedures.
  
  

• Proper documentation is essential: Residents must often provide tax residency certificates, beneficial-owner declarations, and complete forms (e.g., W-8BEN/E) to claim treaty benefits.
  
  

• Even if withholding tax is reduced under the treaty, the recipient must still report worldwide income (for U.S. citizens/residents) and may claim foreign tax credits.
  
  

Important Notes & Limitations

• Meeting the residency requirement of the treaty is critical — simply being a citizen of one country may not suffice to claim all treaty benefits.
  
  

• If any of the treaty conditions are not satisfied (for example, beneficial-owner test, holding requirement, etc.), the reduced rates may not apply, and domestic tax laws of the source country may impose higher rates.
  
  

• The treaty does not override all domestic tax laws — each country’s own tax code still applies in many respects.
  
  

• The Saving Clause means U.S. citizens/residents may still be taxed by the U.S. even if the treaty provides reduced treatment for non-citizens/residents.
  
  

• Specific types of income (such as pensions, social security, teachers/trainees, etc.) may have particular rules or exceptions under the treaty — always check the relevant articles.