If you are a resident for tax purposes in Belgium, that means that you are taxable here on your worldwide income, including any dividend income that you receive from a foreign source. Yes, even if your foreign dividends have already been taxed abroad, they are to be reported and they will be taxed all over again in Belgium.
Even if a double taxation agreement (DTA) is in place between Belgium and the country the dividend originates from, the dividend will still be subject to both a withholding tax (WHT) at source abroad and an additional income taxation in Belgium. Although this has been challenged several times before the European Court of Justice, cross-border dividend income is indeed still subject to a de facto ‘double’ taxation.
The tax treaty itself provides a legal basis for this double taxation, but it also sets a maximum WHT that can be applied in the source country, the so-called ‘preferential rate’. If you do not inform your foreign bank or tax office abroad that you are a Belgian tax resident, the dividend income is normally subject to the standard ‘domestic rate’ in the source country. By demonstrating that you are a Belgian tax resident (e.g. by submitting a tax residency certificate), you can invoke the DTA benefit and claim the lower ‘preferential rate’. In most cases, this is a maximum rate of 15% of the gross dividend, but it can differ a bit from treaty to treaty.
If tax is withheld at source on the gross dividend, the net amount (after the foreign WHT of – for example – 15% is withheld) must then be reported in Belgium in your resident tax return. This net dividend will additionally be subject to a flat tax rate of 30% in Belgium.
For example, if an individual receives a gross dividend of €100, a (preferential) WHT will be due abroad, let’s say it’s 15% (100 – 15 = €85). For any amount withheld above this 15%, the beneficiary will need to ask for a tax refund in the source country (the aforementioned difference between the ‘domestic rate’ and the ‘preferential rate’). The net dividend of €85.00 will then be reported and subject to a 30% tax in Belgium (85 – 30% = €59.50). In other words, of every foreign gross dividend of €100, you will ultimately keep only €59.50 in net income.
In Belgium, a tax exemption applies to the first €800.00 (income year 2023) of dividend income earned per taxpayer. This exemption allows taxpayers to reclaim the 30% WHT previously withheld on no more than €800.00 of Belgian dividend income. For foreign dividends, in most cases, no Belgian WHT was deducted at source. In that case, there is no Belgian WHT to reclaim, but instead the total dividend income to report in the Belgian tax return can be reduced by an amount of €800.00 per taxpayer in order to still benefit from the exemption.
TAXPATRIA® can advise you on the Belgian tax consequences of your foreign income and assist you with your personal tax filing.