The changes introduced by the Belgian look-through ... · Appermont and B Peeters, ‘Kaaimantaks 2.0, exitheffingen en vrijheid van vestiging, troebel water?’ (2018) 412 Fiscoloog

In depth

The changes introduced by the Belgianlook-through taxation regulations orCayman Tax 20Gerd DGoyvaerts

Abstract

In this article a comment is given on the modifi-

cations to the Belgian lsquoCayman Taxrsquo applicable

since 1 January 2018 and partially applicable

since 17 September 2017 Notably tax regulations

on distributions by trusts have been subject to

considerable changes which are highlighted in

this contribution1

Introduction

In Belgium the so called lsquoCayman Taxrsquo2 was initially

introduced by the law of 10 August 20153 and

tightened by the law of 26 December 20154 Based

on our own definition Cayman Tax in its version

of 2015 (hereinafter referred to as Cayman Tax 10)

can be described as a look-through tax on private

individuals (personal income tax) and legal entities

(legal entities tax) where with income received by a

lsquolegal constructrsquo (a) the lsquofounderrsquo is taxed as if he has

received the income directly or (b) taxed at transfer

to a third party beneficiary and where income that

was not taxable previously now becomes taxable5

Cayman Tax came emerged in 2015 in the fight

against fiscal fraud and in a bid to counter tax evasion

through setting up all kinds of exotic legal constructs6

and it has already been commented on widely in the

Partner Tiberghien Law Firm AntwerpBrussels Email GerdDGoyvaertstiberghiencom wwwtiberghiencom

1 This article is based on a free translation of a part of an earlier article published in Belgian legal literature by the same author GD Goyvaerts lsquoDe kaaimantaks

20 een kritische commentaar bij de aanpassing van de kaaimantaks door de wet vanrsquo 25 December 2017 TFR p 642ndash97 Beware that since English is not an official

language in Belgium the translations of the articles of law have been done with best effort yet in any case reference should be made to the original authentic texts

which are available both in Flemish and in French The footnotes mentioned in the original article have been partly maintained and translated to the extent possible

yet mostly refer to doctrine in Flemish language

2 For earlier publications in English on the Belgian lsquoCayman Taxrsquo and on how Belgium deals with trusts in general reference can be made to S Lust lsquoThe

Belgian lsquolsquoCayman taxrsquorsquo and its Impact on Wealth and Estate Planning in Belgiumrsquo (2018) 24 (3) Trusts amp Trustees 230ndash37 GD Goyvaerts lsquoNew Belgian CFC

Legislation for Private Wealth Structures or Cayman taxrsquo (2016) 23 (1) Journal of International Tax Trust and Corporate Planning 25 GD Goyvaerts lsquoBelgium A

New Obligation to Declare Foreign Private Wealth Structuresrsquo (2014) 21 (1) Journal of International Tax Trust and Corporate Planning 64 GD Goyvaerts

lsquoForeign Trusts in Belgium The Ruling Commission Confirms a Route Towards Positive Treatment of Trustsrsquo (2012) 19 (3) Journal of International Tax Trust and

Corporate Planning 205 GD Goyvaerts lsquoThe Tax Aspects of the Use of Foreign Trusts in Belgium for Private Wealth Purposesrsquo (2011) 18 (4) Journal of

International Tax Trust and Corporate Planning 267 K Moser Trust and Foundations in (Belgian) Private Wealth Structuring Recent Rulings Alabaster 1938ndash

2013 eds C Docclo and J Malherbe (IFA Belgian Branch 2013)

3 arts 38-47 programmawet 10 Augustus 2015 (BS 18 Augustus 2015) KB 23 Augustus 2015 tot uitvoering van artikel 2 1 13 b) tweede lid van het Wetboek

van de Inkomstenbelastingen 1992 (BS 28 Augustus 2015) (opgeheven door KB van 18 December 2015 (BS 29 December 2015)) KB 23 Augustus 2015 tot

uitvoering van artikel 2 1 13 b) derde lid van het Wetboek van de Inkomstenbelastingen 1992

4 Programmawet van 26 December 2015 (BS 30 December 2015 ed 2 p 80634) art 102 tem 109

5 This definite is an own definition mentioned nowhere in the law and used in doctrine GD Goyvaerts lsquoDe kaaimantaks een kritische beschouwingrsquo (2015)

490ndash91 TFR 865ndash923 867

6 ibid 490ndash91 865ndash923

202 Trusts amp Trustees Vol 25 No 2 March 2019 pp 202ndash236

The Author(s) (2018) Published by Oxford University Press All rights reserved doi101093tandttty183Advance Access publication 24 December 2018

Dow

nloaded from httpsacadem

icoupcomtandtarticle-abstract2522025258983 by guest on 12 June 2019

legal literature7 The explanatory memorandum to the

law of 10 August 2015 describes the underlying inten-

tions in a rather euphemistic way8 Cayman Tax was

lsquotightenedrsquo retroactively by the law of 26 December

20159 even before the end of 2015 In essence the law

intended to remedy a limited number of points criti-

cized in legal doctrine as well as a number of adjust-

ments that sought to counter the abuse of the status

of a number of exceptions and where appropriate to

include these within the scope of the system

According to the explanatory memorandum to the

law of 25 December 2017 that first lsquorepairrsquo of the

Cayman Tax intended to counter a number of alleged

abuses10 In particular it concerned the issue of the

so-called compartmentalized sicav dedie where the

shareholding is held in lsquointerconnectednessrsquo

Numerous articles on these issues appeared in legal

literature and disputes11 still exist to this day

All this has led to Cayman Tax 10 which has been

applicable from 1 January 2015 until 31 December

2017 However the amended Cayman Tax 20 already

partly existed since 17 September 2017 (see above) The

general principles and basic concepts of the Cayman

Tax system in place anno 2015ndash2017 considered post

factum even appears quite simple if we compare it with

the very complex regulations of Cayman Tax 20

With Article 51 BITC (Belgian Income Tax Code)

1992 (personal income tax) and with Article 2201

(legal entities tax) Cayman Tax 10 introduced a

system of complete fiscal transparency in the name

of the founder or a lsquothird party beneficiaryrsquo whereby

the latter received an actual payment in the same year

as that in which the legal construct acquired the rele-

vant underlying income We distinguish between

three types of legal constructs

a legal construct type 1 which generally refers to

trusts

a legal construct type 2a that refers to offshore

companies and

7 Reference can be made to Tiberghien (ed) Handboek voor Fiscaal Recht 2017-2018 (Kluwer 2017) randnr 12000 M DaubersquoNouvelles obligations de

declaration fiscale exigence legitime ou auto-incrimination prohibeersquo (2013) 4 RGCF 249ndash78 W Vetters and J Bonne lsquoPrivate vermogensstructuren aangepakt

met doorkijkbelastingrsquo (2013) 42 Fisc Act 1ndash4 A Van Zantbeek lsquoVrij gesteld ndash Constructies aangevenrsquo (2014) 463ndash64 TFR 511-515 GD Goyvaerts lsquoKaaimantaks

treft oprichters en begunstigden van buitenlandse constructiesrsquo (2015) 16 FiscAct 7ndash14 B PeetersrsquoBelgische lsquolsquokaaimantaksrsquorsquo laat nog vele vragen onbeantwoordrsquo

(2015) 379 Fiscoloog (I) 4ndash8 P Smet lsquolsquolsquoDoorkijkbelastingrsquorsquo ook soms lsquolsquobefore cashrsquorsquo en zelfs lsquolsquoregardless of cashrsquorsquorsquo (2015) 1429 Fiscoloog 1ndash8 H Verstraete and L

Migalski lsquoDe lsquolsquoKaaimantaksrsquorsquo analyse en eerste bedenkingenrsquo (2015) 3 VIP 4 GD Goyvaerts lsquoEnkele beschouwingen over de kaaimantaks en de Luxemburgse SPFrsquo

(2015) 4 VIP 47 B Philippart de Foy and A Dayez lsquoTaxe Caıman application aux fonds drsquoinvestissement et aux Sicav-FIS dedieesrsquo (2015) 4 RPP 441ndash33 J Van

Dyck lsquoJuridische constructies eerste lsquolsquouitgebreidersquorsquo vragenlijsten zijn verstuurdrsquo (2015) 1440 Fiscoloog 1ndash7 J Van Dyck lsquorsquorsquoEERrsquorsquo- en lsquolsquoniet-EERrsquorsquo-lijst juridische

constructies gepubliceerdrsquo (2015) 1441 Fiscoloog 1ndash4 GD Goyvaerts lsquoGeen kaaimantaks als er voldoende lsquolsquosubstancersquorsquo isrsquo (2015) 22 FiscAct 1ndash5 M Dhaene

lsquoVoorstel tot vervanging van het net ingevoerde artikel 18 2ter b) WIB 1992 door een duidelijke regel tot vermijding van dubbele belastingrsquo (2015) 485 TFR 607ndash

09 VA De Brauwere and C Wils lsquoTaxe Caıman le crocodile aux dents longuesrsquo (2015) 8 RGF 5ndash24 GD Goyvaerts (n 5) 865ndash23 A Van Zantbeek lsquoOlsen

Duidelijke krijtlijnen voor CFCwetgeving transparante belastingheffingen en kaaimantaksen binnen de Europese Economische Ruimtersquo (2015) 490ndash91 TFR 945ndash

48 M Gossiaux lsquoTaxe Caıman la taxation par transparence des constructions juridiques etrangeresrsquo (2015) 4ndash5 RGCF 303ndash19 N Appermont lsquoDe

kaaimantaksrsquo(2015) 11 AFT 5ndash37 GD Goyvaerts lsquoKaaimantaks gerepareerd en aangescherptrsquo (2015) 42 FiscAct 6 J Van Dyck lsquoKaaimantaks geen verkapte

regularisaties kapitalen meer mogelijkrsquo (2016) 1458 Fiscoloog 1 VA De Brauwere and C Wils lsquoTax Caıman ou la taxation par transparence des structures

patrimoniales lsquolsquoparadisiaquesrsquorsquorsquo (2016) 1 Actfisc 1ndash6 Th Afschrift lsquoLa taxation par transparence des revenus des lsquolsquoconstructions juridiquesrsquorsquo (premiere partie)rsquo

(2016) JDF 5ndash45 Th Afschrift lsquoLa taxation par transparence des revenus des lsquolsquoconstructions juridiquesrsquorsquo (deuxieme partie)rsquo (2016) JDF 65ndash112 GD Goyvaerts

lsquoNew Belgian CFC Legislation for Private Wealth Structures or Cayman Taxrsquo (2016) 23 (1) Journal of International Tax ndash Trust and Corporate Planning 25 GD

Goyvaerts and C Coudron lsquoWanneer zijn Luxemburgse Sicavs in scope en wanneer zijn ze out of scopersquo (2016) 1 VIP 35 DE Philippe lsquoElargissement de la taxe

caıman les Sicav dediees luxembourgeoises dans la ligne de mirersquo (2016) 6 Actfisc 7ndash10 K De Haen lsquoWet reeds aangepast Jaws II of Finding Nemorsquo (2016) 2

InternFiscAct 5ndash8 GD Goyvaerts lsquoDe kaaimantaks en de (niet-)toepassing ervan bij lsquolsquodubbelstructurenrsquorsquorsquo (2016) 504 TFR 572ndash80 P Debaene and S Slaets

lsquoBesprekingrsquo (2016) 504 TFR 601ndash05 F Debelva AM Vandekerkhove and G Verachtert lsquoOntsnappen dubbelstructuren steeds aan kaaimantaksrsquo (2016) 27 FiscAct

1ndash6 F Debelva and AM Vandekerkhove lsquoAntimisbruikbepalingen en dubbelstructuren enkele bedenkingenrsquo (2016) 30 FiscAct 3ndash7 J Van Dyck lsquoAangifte

rechtspersonenbelasting ook uitkijken voor lsquolsquokaaimantaksrsquorsquorsquo (2016) 1479 Fiscoloog 2ndash4 GD Goyvaerts lsquoDe gecertificeerde maatschap onderworpen aan de

Kaaimantaksrsquo (2016) 3 VIP 46ndash50 Ph Hinnekens and L Wellens lsquoRulingcommissie wel kaaimantaks op inkomsten lsquolsquotrustrsquorsquo niet op uitkeringenrsquo (2017) 1512

Fiscoloog 8ndash11 Ph Hinnekens and L Wellens lsquolsquolsquoGecertificeerde maatschaprsquorsquo toepassing kaaimantaks bevestigdrsquo (2017) 1514 Fiscoloog 5ndash8 GD Goyvaerts

lsquoRulings kaaimantaks herijken notie lsquolsquooprichterrsquorsquorsquo (2017) 13 FiscAct 3ndash10 G Verachtert lsquoGeveinsde structuur kan geen belastbaar dividend uitkerenrsquo (2017) 21

FiscAct 4ndash10 DE Philippe rsquoGeen kaaimantaks op Luxemburgse SICAV ndash SIFrsquo (2017) 30 FiscAct 6ndash11 M Delanote and DE Philippe lsquoLes doubles structures et

lrsquoarticle 344 1 CIR quels sont les actes poses par le contribuable susceptibles drsquoabusrsquo (2018) RGCF p 42ndash50 tevens gepubliceerd in TFR 535 121ndash39 N

Appermont and B Peeters lsquoKaaimantaks 20 exitheffingen en vrijheid van vestiging troebel waterrsquo (2018) 412 Fiscoloog (I) 5ndash8

8 ParlSt Kamer 2017ndash18 6 November 2017 Doc 54-2746001 p 29

9 Wet 26 December 2015 houdende maatregelen inzake de versterking van jobcreatie en koopkracht (BS 30 December 2015 ed 2 BS 28 Augustus 2015) KB 18

December 2015 tot uitvoering van artikel 2 1 13 b) tweede lid van het Wetboek van de Inkomstenbelastingen 1992 (BS 29 December 2015) (EER juridische

constructies)Goyvaerts (n 7)6

10 ParlSt Kamer 2017ndash18 (n 8) 28

11 Philippart de Foy and Dayez (n 7) 441ndash33 Goyvaerts and Coudron (n 7) 35 Philippe (n 7) 7ndash10 E Verstraelen De fiscale analyse van gereglementeerde

instellingen voor collectieve belegging naar Belgisch recht in een Europese context Doctoraat Universiteit Antwerpen 2016 randnrs 644ff C Coudron lsquoVoorafgaande

beslissing 2017037 van 14 maart 2017 over de kaaimantaks en de Luxemburgse SICAV-SIF een moeilijke Kwalificatie-oefening rsquo(201702) TBF 40ndash48

Trusts amp Trustees Vol 25 No 2 March 2019 In depth 203

Dow



a legal construct type 2b that refers to foreign

foundations

Both types 2 must be subject to a favourable tax

system as defined by law (the lsquoless than 15 subject-

ivity rulersquo)

Crucial in the Cayman Tax 10 was the introduction

of an Article 18 paragraph 1 3 BITC 1992 under

which benefits by a legal construct type 2b being foun-

dations were declared taxable as a dividend This was

completely new as a foundation obviously does not

disburse dividends but merely grants lsquobenefactionsrsquo

that are in fact characterized as a gift or donation

Dividends from offshore companies that qualify for

Cayman Tax as a legal construct type 2a were of

course already taxable based on Article 18 1 BITC

1992 and to that end the introduction of an Article 18

paragraph 1 3 BITC 1992 was not necessary In the

framework of Cayman Tax 10 a new lsquoexemptionrsquo12

was provided for in Article 21 12 BITC 1992 with the

aim to exempt transparent income already taxed on

the part of the founder at the repayment to the foun-

der by an offshore company or by a foundation This

system was structured quite clear and logical besides

the regrettable fact that disbursements by a foundation

will be taxed as dividends which goes against the

nature of a foundation It would have been so much

more logical if benefits by foundations would continue

to qualify as non-taxable benefits as was the case ini-

tially with disbursements of benefits by a trust and the

legislator would have been limited to imposing a look-

through tax only13

As the combination of a transparent tax process

and a taxation at disbursementdistribution is rather

difficult the law provides a very strictly imposed one-

year principle that we have previously described as the

so-called lsquoX - Xthorn 1 rulersquo14 This rule implies that

income concerning year X of the legal construct is

taxed in the name of the founder(s) unless and to

the extent that that income was paid to a lsquothird party

beneficiaryrsquo in that same year X The taxation ex Article

51 BITC 1992 concerning income tax year X is after all

for done concerning tax year Xthorn 1 A payment from

year Xthorn 1 to a third party beneficiary of the income of

year X based on the latter is therefore fiscally neutral as

the relevant income was already taxed for tax year

Xthorn 1 in the name of the founder This method of

budgeting the tax base in respect of the third party

beneficiary was confirmed in a parliamentary question

and at different decisions by the Ruling commission15

The most recent confirmation of this is contained in

decision no 2017226 of 6 July 201716 However the

latter judgment is interesting in that it was only pub-

lished on 28 March 2018 when the entire legislation to

which it applied was already abolishedmodified The

rule is also explicitly confirmed in the explanatory

memorandum to Cayman Tax 20

lsquoThe look-through approach to third party benefici-

aries could also only be successfully applied if the

income received by the legal construct was paid to a

third party beneficiary in the same taxable period As a

result third party beneficiaries depending on the type

of legal construct were treated differently fiscally de-

pending on whether or not the legal construct paid the

income obtained to this beneficiary in the same tax-

able periodrsquo17

Following a whole series of prior decisions that were

delivered by the Ruling Commission at the end of 2016

progressive insight was gained by the Finance Cabinet

based on which the amendment of the Cayman Tax

12 In essence this is not an lsquoexemptionrsquo yet a list of elements of income which do not qualify as dividends

13 A Biesmans lsquoTrusts quo vadisrsquo in B Peeters (ed) Liber Amicorum Rik Deblauwe Herentals (Knops Publishing 2018) 53

14 Goyvaerts (n 5) 865ndash923

15 Vren Antw Kamer 2014ndash15 3 augustus 2015 nr 54036 47 (Vr nr 420 R Deseyn) ruling nr 2016-711

16 Summary Decision nr 2017226 lsquoThe X trust qualifies as a legal construct Type 1 according to article 2 section 1 13 a) BITC 1992 For the income year in

which he receives a distribution by the trust he qualifies as a third party beneficiary on the basis of article 2 section1 141 BITC 1992 and he has the obligation to

mention the exitence of the trust in his annual tax declaration related to the tax year of the dictribution cf article 307 section 1 4 BITC 1992 If the distribution by the

trust relatesto elements of income received in that same year by the trust then the applicant wil be taxable on the basis of article 51 section 2 BITC1992 Distributions of

income by the trust to the applicant [in his capacity as third party beneficiary] are not taxable unless as provided for by article 51 section 2 BITC 1992rsquo

17 ParlSt Kamer 2017-18 (n 8) 30

204 In depth Trusts amp Trustees Vol 25 No 2 March 2019

Dow



seemed necessary That we can at least infer from the

answer to a parliamentary questionrsquo18

My administration and the Policy Committee closely

follow the evolution of Cayman Tax If it appears that

the legislation needs to be amended I will submit a bill

to adjust what may be required as previously happened

through the programme law of 26 December 2015

This finally resulted in the programme law of 25

December 2017 A number of propositions from

ruling practice were included in that law accordingly

A number of possibilities towards alleged abuse was

also excluded The explanatory memorandum

expresses this as follows19

lsquoFirstly it was decided to take on the issue of the so-

called double structures by providing additional rules

in the assessment system which will make it possible

to subject these structures to income tax in a uniform

and effective wayrsquo

lsquoThis draft also allows for the same fiscal treatment of

the disbursements of the legal constructs referred to in

Article 2 section 1 13 a) BITC as the benefits of the

legal constructs referred to in Article 2 section 1 13

b) BITCrsquo

lsquoThe purpose of this draft is to achieve a more uniform

treatment of the third party beneficiariesrsquo lsquoWith this

design the Federal Government would also anticipate

other structures that aim to avoid Cayman Taxrsquo

If we make a first attempt to list all the changes

mentioned in the introductory notes mentioned in

the explanatory memorandum and which relate to

the tightening of Cayman tax and fighting its evasion

we come up with the following list

the introduction of a lsquocontractualrsquo legal construct

type 3 being a third form of legal construct that

mainly (but not exclusively) refers to insurance

constructs

the abolition of the notion lsquothird party bene-

ficiariesrsquo in respect of the application of fiscal trans-

parency on their part however while maintaining

taxation on the part of any third party beneficiary

to any benefit upon distribution

tightening the one-year principle X ndash X thorn l in re-

spect of founders

the introduction of a system of lsquochain constructsrsquo

that should allow continued taxing of so-called

lsquodouble structuresrsquo through the definition of

lsquomother constructrsquo and lsquosubsidiary constructrsquo

the introduction of fictional dividend payments in

case of transfer of or contributions by a legal

construct

tightening up the substance exclusion in the frame-

work of private asset management which allows to

lsquoescapersquo cayman tax

the introduction of the tax qualification of dis-

bursements by trusts as dividends

the introduction of an lsquoanteriority rulersquo based on

which the oldest reserves are fictitiously assumed to

be paid out first

tightening up the lsquocapital rulersquo in determining the

value of the subscribed capital of a legal construct

including the adjustment of the anti-abuse measure

of Article 3441 BITC 1992 through reference to

Article 344 paragraph 1 BITC 1992

If we consider all of this reconsidering the previ-

ously mentioned free definition of what Cayman Tax

is we see a largely amended definition for Cayman

Tax 20 which reads as follows

lsquoCayman Tax 20 is a combined distribution and look-

through taxation for income tax purposes and legal

entities tax in which income which may or may not

have been received or paid fictitiously to one or more

lsquolegal constructsrsquo whether or not fictitious are fiscally

attributable to a lsquofounderrsquo as if he would have received

18 Hand Kamer 2016-17 22 februari 2017 CRIV 54 COM 606 15 (Mond Vr nr 16514 LAAOUEJ)

19 ParlSt Kamer 2017-18 (n 8) 28ndash32


Dow



that income directly or that may be taxable at distri-

bution to a beneficiary or the founder himself

whether or not fictional and in which such income

that was not taxable prior to 1 January 2015 or 1

January 2018 now has become taxablersquo

The reader will immediately notice that this defin-

ition refers to multiple fictions and hypotheses That

is because the complexity of Cayman Tax 20 has

increased markedly in comparison with Cayman

Tax 1020

The legislature has after all in drafting and preparing

the law of 25 December 2017 wanted to prevent all

possible alleged abuses and close loopholes and counter

any kind of creativity when dealing with legal con-

structs As a result however Cayman Tax 20 has

become extremely unclear in its effect21 Moreover

the reading of the various fictions effective and fictional

payment moments allocation rules textual ambiguities

and tax abuse measures such as 3441 BITC 1992 hardly

allows the taxpayer to come to a reasonable estimate of

his tax liability Just the reading of the legal definition of

a legal construct type 1 together with that of a legal

construct type 3 will raise many an eyebrow leaving

one wondering if any contractual relationship would

actually still fall outside the Cayman Tax In earlier con-

tributions we have already pointed out that this may

give rise to undesirable effects and where appropriate

even to lower tax than that which would be due without

such fictions22

Initially with the application of Cayman Tax 10 we

had the impression that the Ruling Commission would

act regulatory That has also effectively happened as

numerous rulings were issued on the application of

Cayman Tax towards the end of 2016 However if we

read the text of the law of 25 December 2017 we see

that our first impressions were confirmed with several

of those rulings The relevant rulings after all assessed

certain issues and legal relationships as taxable that

were not taxable under the Cayman Tax 10 texts at

the time In addition certain legal entities constructs

that have been dealt with have since been contradicted

andor abolished entirely by the law of 25 December

2017 To that extent the relevant rulings can therefore

(at least in part) be considered contra legem23 All this

gives rise to a very indistinct current situation concern-

ing the taxability of structures that may today be

deemed to fall under the scope of the Cayman Tax

20 Hereinafter we will attempt to create some clarity

The expansion of CaymanTax with alegal construct type 3

Cayman Tax 20 provides for the introduction of a

new type of legal construct lsquotype 3rsquo via a new Article

2 section 1 13 c) BITC 1992 what we will refer to

hereinafter as the lsquoContractual type 3rsquo As always with

Cayman Tax with every comment or interpretation it

is important to start with the reading of the literal text

of the law Article 2 section 1 13 c) BITC 1992

reads as follows (free translation)

lsquo(c) an agreement to the extent that that agreement

in exchange for payment of one or more premiums

in the course of the duration of this agreement or at

its termination provides for

the payment of the income that was obtained from

a legal construct referred to in the stipulation under

a) or h) or in

the payment of the economic rights shares or

assets of a legal construct referred to in the

stipulation under a) or b)

20 Despite all of this government speaks about lsquosimplification of tax lawsrsquo which does not immediately seems to apply to Cayman tax

21 GD Goyvaerts lsquolsquolsquoDe kaaimantaks 20 Een korte inleiding over volkomen en onvolkomen fiscale transparantie anno 2018rsquo (2017) 03 TBF 65ndash119 GJ

Verachtert lsquoDe gaten in de kaaimantaks worden gedichtrsquo (2017) 34 FiscAct 1ndash6 S Sablon (ed) FiscKoer 20182 1-2-3 Kluwer pp 11ndash31 L Salien lsquoCollegelid

rulingcommissiersquo seminar on 20 February 2018 at University Hasselt GD Goyvaerts seminar by tijdschrift voor beleggingsfiscaliteit on 23 March 2018 Appermont

and Peeters (n 7) 5ndash8 GJ Verachtert slides seminarie LexAlert mei 2018 verder wordt naar enige aspecten van de kaaimantaks 20 verwezen in drie bijdragen in

het Liber Amicorum Rik Deblauwe uitgegeven bij Knops Publishing (2018) Biesmans (n 13) p 35 GD Goyvaerts lsquoTrust (en stiftung) voor vermogensplanning anno

2018 quo vadisrsquo p 375 A Haelterman lsquoDe feitelijke onbelastbaarheid van de feitelijke vereniging en de lsquolsquokaaimantaksrsquorsquorsquo p 397

22 Goyvaerts (n 5) 865ndash923 and various examples mentioned there such as capital gains of Belgian real estate held by an off-shore ompany subject to Cayman

tax

23 Goyvaerts lsquo(n 7) 3ndash10 Verachtert (n 7) 4ndash10


Dow



in exchange for the contribution of economic

rights of the shares or of the assets of a

legal construct referred to in the stipulation

under a) or b) in the course of the contract

or at the termination of the contracts provided

for in the payment or disbursement of the sub-

scribed rights shares or assets or its counter

valuersquo

The explanatory memorandum clarifies as follows24

lsquoThis draft therefore introduces a new definition of a

legal construct the aim of which is to endorse any

product where either a legal construct of the first or

the second type is involved or the income of a legal

construct or the assets shares or economic rights of a

legal construct isare paid to any beneficiaryrsquo

lsquo( ) not only the traditional investment insurance

products type branch 21 or 23 are endorsed but

also other products that are not investment insurance

products in the strict sense of the word but that

makes it possible to sever the contractual bond be-

tween the founder and the legal construct in a similar

wayrsquo

This new definition thus mainly means that the

packaging of a legal construct of the first or the

second type in an insurance product will no longer

prevent the application of Cayman Tax

lsquo( ) the revenue obtained by the legal construct of

the first or the second type that is part of a legal con-

struct of the third type will be taxed on the part of the

resident or the legal entity that is subject to legal enti-

ties tax that has entered into the contract and in whose

name the premiums of the contract were metrsquo

lsquoAn insurance contract will therefore only be regarded

as a legal construct to the extent that it complies with

the definition proposed in this draftrsquo

lsquoThis draft therefore does not aim to change some-

thing to the fiscal system of investment insurance

products in generalrsquo

There is also a new fifth indent added to Article 2

section 1 14 BITC 1992 with the introduction of a

new fifth kind of founder

either the natural or legal person who is subject to

legal entities tax in accordance with Article 220 that

has entered into the agreement referred to in 13 c)

and in whose name the premium or premiums of this

agreement shall be met

This fifth definition of founder thus clearly links

back to the person who has concluded the relevant

contract By referring to a cumulative condition of a

premium deposit it states


agreement shall be metrsquo it is difficult to see how this

could relate to anything other than an insurance

contract

Nevertheless the explanatory memorandum leaves

the interpretation field completely open by also refer-

ring to other types of contracts However in my opin-

ion the use of the term lsquopremiumrsquo refers rather

exclusively to the insurance sector25

We also need to ask ourselves how to interpret

this provision if the person entering into the agree-

ment isnrsquot a tax resident of Belgium It was already

determined in previous analyses that Cayman Tax

does not apply in respect of non-residents

However it would be perfectly possible that a rele-

vant agreement would be entered into by a non-resi-

dent and that whoever happens to be the

beneficiary is a resident In such a case according

to these new definitions Cayman Tax does not

apply as that contract does not qualify as a legal

construct type 3


25 For a life interest (annuity) contract in practice a capital will have been paid rather then a premium


Dow



We deduce from the entry-into-force provision of

Article 100 of the law of 25 December 2017 that this

provision enters into force on 1 January 2018 In our

opinion this seems to indicate that in the absence of

reference to revenue obtained granted or made pay-

able as of a certain date26 contracts that were con-

cluded prior to 1 January 2018 could never qualify as

a legal construct type 3 Of course it remains to be

seen how the Administration will want to interpret

this and whether they will also want to declare this

new type 3 applicable to contracts that were con-

cluded previously prior to 1 January 2018

The explanatory memorandum does not provide any

other examples of the tax effects of such a type 3 legal

construct The only explanation we can find further

on is in the report which states27

A new definition of a legal construct is implemented As

a result of this new definition the inclusion or packaging

of a legal construct of the first or the second type in an

agreement (eg an insurance contract) will no longer

prevent the application of the look-through tax

It can certainly be inferred from the text of the law

and from the description of the application in the

explanatory memorandum that this new type 3

should always have the following form

Founder

Insurance policy

Contract

Legal construct

Purely theoretical seen the consequences of this

new legal construct lsquotype 3rsquo can be called unclear

The use of the term lsquopackagingrsquo in the memorandum

does not make us much the wiser We gather that

income obtained within the underlying legal con-

structs type 1 or type 2 will be taxed on the part of

the natural or legal entity who has concluded the

contract and in whose name the premiums of the

contract were met and that therefore serves as

lsquofounderrsquo That would imply that the existence of

the legal qualification investment insurance branch

2123 is ignored In that sense it is unclear what

the legislature exactly intends with the provision in

the explanatory memorandum that the draft lsquodoes not

aim to change something to the fiscal system of invest-

ment insurance products in generalrsquo Maybe they mean

that in all other cases the taxation system of the in-

vestment insurance remains but that if the contractor

founder and the subject matter of the contract itself at

the conclusion of the agreement meet one of the two

criteria as stated in the definition of a legal construct

type 3 that fiscal transparency applies in that case cf

Article 51 section 1 on the income of the overlying

policy that is then taxed on the part of the founder

We have already said above that it is unclear what

other contracts could be endorsed by this provision

After all there is no reference to the insurance indus-

try any where in the text of the definition of the legal

construct type 3 We only find those references back

in the explanatory memorandum It is therefore not

certain that the legal construct type 3 would only in-

volve investment insurance products

But what other contracts could be intended The

first possible contract that comes to mind is that of an

annuity contract in exchange for the surrender of

shares (per hypothesis by way of premium payment)

of a legal construct type 2 In such a case the annuity

contract would then apparently no longer work fis-

cally and there would be a lasting fiscal transparency

applicable concerning the revenue that is received by

the incorporated legal construct type 2 In any case

that seems to be consistent with the wording of

Article 2 section 1 13 c) jo Article 2 section 1

26 As this is the case for entry into force by 17 September 2017 which is only foreseen for specific articles such as art 3441 BITC 1992

27 ParlSt Kamer 2017ndash18 13 December 2017 Doc 54-2746016 p 5


Dow



14 fifth indent BITC 1992 However we cannot

escape the impression that such a constellation may

also possibly be governed by the new Article 51 sec-

tion 2 BITC 1992 as in such a case it concerns the

contribution of the shares of a legal construct type 2

In the latter Article however there is no mention

anywhere of lsquoto wherersquo that contribution should be

made It just refers to the contribution of the shares of

a legal construct type 1 or type 2 (see below for a

wider commentary on the very indistinct stipulation

of Article 51 section 2 BITC 1992)

Maybe the legislator wanted to launch a lsquocatch all

provisionrsquo of purely contractual nature with the

introduction of the new legal construct type 3

which in addition to the broad interpretation of the

definition of a legal construct type 1 which the Ruling

Commission already uses in various decisions would

involve just about any transaction in which an off-

shore company a trust or a foundation is involved

from afar or closely involved under the Cayman Tax

Time will tell which interpretation the Ruling

Commission proposes Based on the rulings that

were already delivered end 2016 however we may

assume that the Ruling Commission will handle a

very broad and teleological interpretation which

will not tie up with any part in a strict reading of

the text of the law It is sufficient to refer to the vari-

ous considerations in the rulings which were com-

mented on earlier in the legal doctrine28

In any case this provision apparently only lsquoworksrsquo

if the underlying legal construct type 1 or 2 lsquocontinues

to existrsquo for the duration of the agreement After all

the definition refers to the payment of the income

that was obtained from a legal construct or the dis-

bursement of the economic rights the shares or the

assets of a legal construct Only in the case of Article 2

section 1 13 c) second indent BITC1992 where a

contribution is involved reference is made of the

value of the corresponding incorporated legal

construct

Therefore it seems to us that the definition of the

legal construct type 3 will probably not in all cases

where a combination is made of an insurance policy

and a legal construct type 1 or type 2 lead to the

application of Cayman Tax

For example we can ask ourselves what will happen

if a legal construct which is held by an investment

insurance is liquidated Will the policy-holder who

concluded the agreement then be taxed According

to the definition that will only be the case if the liqui-

dated legal construct was actually incorporated After

all it is only then that there is a counter value (second

indent) However if the life insurance company for

whatever reasons invested the contributed premiums

in cash in a legal construct then according to the def-

inition it seems to me that the classification of a legal

construct type 3 is not satisfied We can of course ask

the question what the advantage of such an investment

strategy would be but thatrsquos another debate

We also do not read anywhere in the definition that

the classical case involving a legal construct type 1 or

type 2 concluding a life insurance agreement is

endorsed by this text In that contract the natural

person who qualifies as founder is nowhere involved

In that sense we can also link up with the assertion in

the explanatory memorandum that the taxation system

of investment insurance is permanently respected Of

course reservations should always be in place for the

application of abuse the new Article 3441 BITC that

refers to Article 344 section 1 BITC 1992 (see below

part I I)

The only sensible conclusion of this complex and

almost unreadable stipulation seems to be that a com-

bination of a legal construct type 1 or type 2 with a

lsquocontractrsquo investment insurance cover should not

stand in the way of the application of fiscal transpar-

ency of the revenues generated from the contributed

assets It will therefore be necessary to examine the

contractual relationship in each individual case very

closely in terms of both the parties concerned and in

terms of the contributed property or as regards the

subject matter of the premium payment in order to

determine whether the tax definition of a legal con-

struct type 3 is met

28 GD Goyvaerts (n 7) 3ndash10


Dow



I will try to give some examples to further explain

the concept of legal construct type 3

Example 1 Mr John Smith transfers shares of a BVI Ltd

as a premium deposit to a Lux branch 23 (where the 2

per cent insurance tax is settled) This seems to meet the

definition of Article 2 section 1 13 c) second indent

BITC 1992 and the definition of founder according to

Article 2 section 1 14 fifth indent BITC 1992 After

all Mr Smith as a natural person transfers shares a legal

construct type 2 within the framework of an investment

insurance contract The result will therefore be continu-

ing tax-transparent taxation of the BVIrsquos income with

Mr John Smith who is classified as founder The invest-

ment insurance branch 23 is deemed in fiscalibus not to

exist and the 2 per cent insurance tax paid is thus com-

pletely lost This seems to be a clear example

Example 2 Mr John Smith transfers a sum of money

to a Liechtenstein insurance company that invests the

sum in a Cayman Fund noted on a qualifying stock

exchange It will now of course depend on the struc-

ture of the Cayman Fund

A) In the hypothesis that the Fund is organized in

form of a trust the Fund qualifies as a legal con-

struct type 1 In that case at payment the insurance

company will get an income from a legal construct

type 1 Assuming that it is contractually provided

that those revenues (of the Cayman Fund invest-

ment) will be paid out to Mr John Smith it qualifies

as a whole as a legal construct type 3 (see however

higher up the non-qualifying as type 3 if the invest-

ment in the Cayman Fund could not be attributed

to Mr Smith) However the tax avoidance behav-

iour that this form of investment intends escapes

me Nor do I recognise the abuse which must be

prevented here per se right away The tax exemp-

tion that Mr John Smith intends is after all created

because he pays a premium to an insurance com-

pany The fact that the insurance company invests

that money in a Fund organized in the form of a

trust is in my humble opinion completely irrele-

vant as regards the tax treatment on the part of Mr

John Smith (see supra) In that sense this new def-

inition of a legal construct type 3 seems to be over-

kill The relevant sector will of course have to

decide to what extent they should take this into

account with regard to its Belgian clientele

B) In the hypothesis that the Cayman Fund is orga-

nized in the form of a listed BVI Ltd the constel-

lation does not meet the tax definition of a legal

construct type 3 Because of the exception con-

tained in Article 2 section 1 131 d) BITC

1992 the listed BVI Ltd does not qualify as a

legal construct type 2 so the entire constellation

cannot qualify as a legal construct type 3

C) In the hypothesis that the Cayman Fund is

organized in the form of a compartmentalized

Undertakings for Collective Investments in

Transferable Securities (UCITS) in which the

entire compartment is taken up by the premiums

paid by Mr John Smith it seems entirely possible

to classify as a legal construct type 3 although there

can be some doubt about that The provision that a

compartmentalized UCITS in which hypothetically

only one person has subscribed to the relevant com-

partment or in mutual context I do not think can

just be extended to the insurance company After all

nothing in the Cayman Tax provides that compart-

ments that are fully endorsed by insurance compa-

nies would classify as a legal construct type 2 In this

sense the interim placement of the insurance com-

pany by Mr John Smith is sufficient to prevent the

qualification as a legal construct type 2 (and the

definition of a legal construct type 3 as used

cannot change that) I want to qualify this hypoth-

esis under reservation as not qualifying under the

definition of a legal construct type 3

Example 3 Mr John Smith is a shareholder of a BVI

Ltd qualifying as a legal construct type 2 This BVI

endorses a Luxembourg investment insurance branch

23 with its assets on the life of John on which the 2

per cent insurance tax is paid I do not think this

constellation classifies as a legal construct type 3 for

the simple reason that the contract is not concluded

by a resident or by a legal person subject to legal


Dow



entities tax29 It is the legal construct itself that con-

cludes the contract So no transparent taxation can be

applied to the income of branch 23 on the part of the

founder of the BVI So the favourable tax system of

branch 23 is not neutralized in fiscal bus The existing

fiscal transparency in the relationship between Mr

John Smith and his BVI Ltd remains in existence

but in practice will be suspended until such time as

the investment insurance branch 23 carries out its

non-taxable disbursement to the BVI In that sense

nothing changes compared to the old regulations

Example 4 A trustee endorses a contractual life insur-

ance on the life of Mr John Smith for payment to the

benefit of his mistress For the sake of reasoning simi-

lar to that used in example 3 this is not a legal con-

struct type 3

Lastly examples 3 and 4 should of course be subject

to the possible application of Article 3441 BITC 1992 jo

Article 344 section 1 BITC 1992 based on which it can

be argued that the legal act by a legal construct would be

subject to fiscal abuse based on which a classification as

legal construct type 3 could still be decided on It seems

to me however that this interpretation would affect the

restrictive interpretation to be applied as to what a legal

construct type 3 can be If not every definition could

simply be stretched in the context of the application of

the Cayman Tax in order to arrive at a taxable result

which is by no means provided for by the legislator

A second reservation should be made as already

said higher up for the application of the new

Article 5 section 2 BITC 1992 (see below in the

Section lsquoFictional payment moments in case of con-

tribution or transferrsquo)

Abolition of the tax concept of thirdparty beneficiaries

The notion third party beneficiary which was intro-

duced by the law of 10 August 2015 has been removed

again from the BITC with the removal of article 2

section 1 141 BITC 1992 As justification for this

the explanatory memorandum30 mentions

lsquoConsidering the objective to also tax disbursements of

the legal constructs referred to in article 2 section 1

13 a) BITC 1992 it is no longer necessary to tax the

third party beneficiaries of a legal construct with look-

through tax since the natural or legal person taxable in

legal entities taxes only qualifies as a third party bene-

ficiary at the time that he receives any payment that is

awarded by the legal constructrsquo

Linked to the disappearance of the concept of third

party beneficiaries the existing Article 51 section 2

BITC 1992 in which the regulation of fiscal transpar-

ency on the part of the third party beneficiary was

included for the tax years 2016ndash2018 has been

removed (and replaced by a completely different

text as will be explained below in the Section

lsquoFictional payment moments in case of contribution

or transferrsquo) The concrete impact of this is that per-

sons who do not qualify as founders are excluded

from the fiscal transparency In concrete terms this

implies that a person who receives a payment from a

trust or a foundation and who does not qualify as a

founder will either be taxable on a dividend received

(see below for the amended text of Article 18 first

paragraph 3 BITC 1992) or will not be taxed at all

under the application of Article 21 paragraph 1 12

BITC 1992 The text of the latter Article was also

amended to ensure that the person receiving the pay-

ment need not be the same person as the one who has

paid the underlying tax previously (Article 90 of the

law of 25 December 2017) In that sense any risk of

double taxation in this context is therefore avoided

Mind you the lsquoanteriority rulersquo of Article 21 para-

graph 2 BITC 1992 must also be applied with regard

to benefits in respect of any third parties who are no

longer fiscally classified as third party beneficiaries

On the basis of the anteriority rule the oldest reserves

29 In all other cases being corporate tax or non-resident corporate tax the Cayman Tax does not apply

30 ParlSt Kamer 2017-18 (n 8) 29


Dow



are after all deemed to be paid out first also with

regard to any third party For that reason the

random third party who receives a payment from a

trust or a foundation will also have to pay the tax due

on the lsquolsquodividendrsquorsquo received even if the founder al-

ready paid the tax under tax transparency for the

relevant income tax year In the absence however of

untaxed old reserves the third party receiver will not

have to pay any tax

As such this is a remarkable assessment as this

implies that the taxability of a disbursement to any

third party cannot be seen separate from the history

of the asset structuring in the legal construct This

random third party however is by no means related

to the legal construct and can therefore not be con-

sidered to have any knowledge of nor to have influ-

ence on the composition of the assets of the legal

construct As far as taxation is concerned the ex-

planatory memorandum however doesnrsquot leave any

doubt31

All revenues that were not taxed through the look-

through tax and yet paid by a legal construct in one

way or another to the founders or to other residents

or to legal entities subject to legal entities tax with the

exception of the assets included in the legal construct

as dividend will be noted and taxed accordinglyrsquo

Here too reference should be made to the modi-

fications to the existing Article 18 paragraph 1 3

BITC 1992 (see below the Section lsquoThe changes to

Article 18 paragraph 1 3 BITC 1992 and Article

21 BITC 1992 relating to tax assessment upon distri-

butions - A closer look at distributions by trusts and

the anteriority rulersquo) However questions may al-

ready be raised about the certainty with which refer-

ence is made in the explanatory memorandum to look-

through tax as the only possible tax that could lead to

exemption Of course this passage in the explanatory

memorandum ignores the thesis that an exemption is

a tax This principle has been confirmed by the Ruling

Commission in a number of rulings The explanatory

memorandum to the law of 10 August 2015 leaves not

the least doubt in that regard It therefore seems rea-

sonable to assume that the aforementioned passage in

the explanatory memorandum should not be preju-

diced by that principle The question should also be

raised whether a tax paid by a non-resident can also be

of such a nature to call on Article 21 12 BITC 1992

After all in the context of the application of double

tax treaties this question is far from theoretical

In the context of the removal of the notion of third

party beneficiaries from the code the Article provid-

ing for the notification requirement should of course

also be amended The new text of Article 307 section

11 c) BITC 1992 now reads as follows and refers to

lsquohe who has receivedrsquo

lsquoc) the existence of a legal construct of which the tax-

payer his spouse or children in his custody in accord-

ance with Article 376 of the Civil Code isare either a

founder of the legal construct or has received a divi-

dend or payment of a legal construct in any other way

during the taxable periodrsquorsquo

A similar provision in the legal entities tax was

included in Article 307 section 13 BITC 1992

Although the removal of the term lsquothird party ben-

eficiariesrsquo implies a formal amendment of the text

nothing changes substantially Whether the person

who actually receives the payment legally is described

as a third party beneficiary or as a lsquotaxable personrsquo

essentially doesnrsquot matter The taxation is the same in

both cases Much more relevant of course is the re-

moval of Article 51 section 2 BITC 1992 concerning

the former third party beneficiaries whereby they are

excluded from the application of fiscal transparency

This way of course seriously affects the fiscal trans-

parent character of legal constructs

Depending on the capacity of the person who re-

ceives the benefit founder or not and depending on

the history of the asset structure of the legal construct

a fiscal transparency treatment will be involved (com-

plete fiscal transparency) or taxation at payment with

31 ibid 30


Dow



conversion (incomplete fiscal transparency) or an

lsquoexemptionrsquo (Article 21 paragraph 1 12 BITC

1992) This feature makes Cayman tax highly artificial

and unclear

Fiscal transparencyonly for thefounder but not in case of Article 51section1tenth paragraph BITC1992

As already mentioned above henceforth the applica-

tion of tax transparency is reserved for those who

qualify fiscally as a founder The third party benefici-

aries shall be excluded as from 2018 The adjusted text

of the amended Article 51 section 1 and paragraph 1

BITC 1992 now reads as follows

lsquoThe revenues that were obtained by the legal con-

struct are taxable in respect of the resident who is

the founder of the legal construct as if that resident

has obtained this directlyrsquo

The impact of the removal of the lsquothird party bene-

ficiaryrsquo focuses on tax based on a payment received

rather than to involve the third party in the look-

through tax system (see also Article 18 paragraph 1

3 BITC 1992)

Thus as already above mentioned Cayman Tax has

changed from a perfectly fiscal transparency to an

imperfect fiscal transparency and this based on a

double criterion

a criterion which refers to the capacity of the re-

cipient of the disbursement being a founder or a

receiving third party and

a criterion which refers to the moment and the

taxable period during which the founder received

a benefit

There is an exception to this rule of fiscal transpar-

ency on the part of the founders in case of payment in

year X as defined by Article 51 section 1 paragraph

10 BITC 1992 year X being the year in which income

has been received by the legal construct lsquoThis para-

graph shall not apply to income paid or granted by

the legal constructionrsquo

It is important to note that according to the literal

text the entire paragraph on the transparent tax of

Article 51 section 1 BITC 1992 (concerning the first

to the ninth paragraph) is cancelled by the tenth para-

graph lsquoconcerning the income paid or granted by the

legal constructionrsquo

When the first draft texts of the amended Cayman

Tax started to circulate we spent many hours trying

to figure out what this could possibly mean The only

point of reference that we had was the old text 51

seventh paragraph BITC 1992 which reads as follows

By way of derogation from the first paragraph the foun-

der for the purposes of Article 18 2ter b) is taxable on

the income paid or granted by the legal construction

As Article 18 2ter b) BITC 1992 has been can-

celled retroactively by the law of 26 December 2015

that famous seventh paragraph of Article 51 section

1 BITC 1992 never came into effect We now read the

following in the explanatory memorandum to the law

of 25 December 201732

lsquoThe seventh paragraph which becomes paragraph 10 of

Article 511 section 1 BITC 1992 is replaced in order to

clarify that the look-through principle does not apply in

case the legal construct will pay out income to one or

more founders This provision thus intends to avoid that

Article 51 section 1 BITC 1992 would be relied upon to

counter a qualification of this payment as dividendrsquo

This was also not clear for the Council of State and

at the request of the Council of State the Government

representative gave additional clarification33

lsquoThe aim is to apply the look-through tax on rev-

enues that were obtained by the legal construct

32 ibid 36

33 ibid 182


Dow



Look-through tax need not be applied to the income

that is paid or granted by the legal construct to the

founder or another beneficiary since this concerns

income actually obtained by the taxpayer

Abbreviated format

income that was obtained by the legal construct

look-through approach (Article 51 BITC 1992)

income that is paid by the legal construct quali-

fication as dividends (art 18) and no look-

through approach (Article 51 section 1 last

paragraph BITC 1992)


on which the look-through approach was

applied and which is then paid to a resident

exempt (art 21 BITC 1992)rsquo

lsquoWe see the acquisition of income by a legal con-

struct and the payment of income tax by a legal

construct as two separate fiscal events So the look-

through principle applies to all income obtained by

the legal construct With this provision we only

want to ensure that the transparent fiscal treatment

of the obtained income of the legal construct

cannot be used as an argument to counter

the qualification of the undistributed income [as

dividend] The legal construct is thus transparent

as regards the obtained income and not trans-

parent as regards the income paid This is

nothing new The fiscal system of the founder re-

garding the obtained and distributed income

from a legal construct referred to in Article 2 sec-

tion 1 13 b) BITC 1992 has remained unchanged

in this area since the introduction of the Cayman

Taxrsquo

These phrases in the explanatory memorandum and

the report are extremely noteworthy and this is for

two reasons Firstly it is now clearly stated that the

Cayman Tax is not a system of complete fiscal

transparency but rather a system of imperfect fiscal

transparency The so-called non-conversion of the

income received was apparently never the

Governmentrsquos intention It is now stated literally

that a legal construct on the part of the founder is

transparent with regard to the income obtained but

not transparent as regards the income paid For the

sake of clarity it is now also written in the law that if

disbursement takes place of the income received by

the legal construct (in the same year as that in which

these revenues were received) that the fiscal qualifica-

tion as dividend shall in such case prevail I believe

this is a form of imperfect fiscal transparency as pos-

ited by colleague Axel Haelterman in his PhD34 in

1992

This imperfect fiscal transparency however

appliesmdashalthough this is not stated in the law in so

many words but it is necessary clear from reading the

various Articles of the law in this field togethermdashonly

if the payment is made in the same year as the year in

which the underlying legal construct received the

income In practice this means the legal confirmation

of the one-year rule X ndash X thorn 1 but only on the part of

the founder This can best be illustrated with an

example

Suppose Mr Smith has established a trust illore

tempore For the simplicity of the example we

assume that there are no old reserves in this trust

and there are only contributed assets and already

taxed Cayman Tax reserves35 The trust receives a

tax-free capital gain in the year 2018 cf Article 90

1 BITC 1992 For the application of Article 90 1

BITC 1992 in relation to a tax free capital gain rea-

lized by trusts reference may be made to the explana-

tory memorandum to the law of 10 August 2015 as

well as to various rulings36

In application of fiscal transparency no tax will arise

for Mr Smith as he enjoys a tax exemption for capital

gains on shares realized in the framework of a normal

management of a private assets that in a tax-

34 A Haelterman Fiscale transparantie theorie en praktijk in Belgie Kalmthout Biblo 1992 p 51

35 lsquoCayman tax reservesrsquo are retained earnings composed of revenue that have been subject to a transparent tax either on the basis of art 51 section 1 BITC

1992 or art 2201 section 1 BITC 1992 since January 2015 or any other comparable tax levied earlier such as a taxation in respect of art 344 2 BITC

36 Reference is made to ParlSt Kamer 2014-15 1 juni 2015 Doc 54-1125001 pp 46ndash48


Dow



transparent way However the trustee decides to pay

Mr Smith this tax-free capital gain or a part of it by

way of a lsquodistributionrsquo In terms of taxation Article 5

1 section 1 paragraph 10 BITC 1992 states that this

payment is considered a dividend and will therefore be

subject to a taxation of 30 per cent The fiscal trans-

parency which as a rule is lsquocompletersquo becomes a form

of imperfect fiscal transparency with a conversion to a

dividend as the consequence However in the event

that the trustee will pay the same amount in the year

2019 or later the relevant disbursement will no longer

qualify as a dividend under application of Article 21

paragraph 1 12 BITC 1992 as the exemption enjoyed

under Article 90 BITC 1992 affects the underlying

taxability Where appropriate Mr Smith as a founder

will have an interest in ensuring that the trustee adjusts

his payment policy according to this rule37

This rule was apparently implemented in response to

a prior decision no 2016623 pursuant to which a

group of shareholders of a Bermuda Ltd in the liquid-

ation of the latter could draw the full capital gains

realized by this company on an underlying company

tax free The new provision of Article 51 section 1

paragraph 10 BITC 1992 makes this impossible at least

if the relevant payment happens in the same year as

that in which the underlying capital gains were realized

In her contribution in the Liber Amicorum Rik

Deblauwe Anouck Biesmans cites an interesting ex-

ample in this respect Her example concerns a resi-

dent of the UK Jack who has established a trust in

which real estate located in the UK are kept The trust

receives commercial rental income that is paid to

Jackrsquos son lsquoright awayrsquo (so we assume still in the

same fiscal year) Biesmans wonders whether this

real estate income paid on English real estate will

now be taxable as a dividend As Biesmans rightly

points out this was after all not the case under the

old Article 51 section 2 BITC 1992 because of the

effect of the relevant double-taxation treaty in favour

of the third party beneficiaries So the question is

indeed whether the relevant payment can still be

exempt from effective taxation38 under the changed

rules That seems rather questionable Rephrased

the question is however whether Article 6 jo

Article 23 Organization for Economic Cooperation

and Development Model can set aside the double

taxation caused by Article 51 section 1 10th BITC

1992 In my opinion that is indeed the case for the

simple reason that a national law does not unilat-

erally change a treaty exemption After all let us not

lose sight of the fact that the disbursement by a trust

under Article 18 paragraph 1 3 BITC 1992 is

merely a lsquofictionalrsquo and not a lsquorealrsquo dividend The

last word is far from being said on this

EDouble structures anno 2015^17remain untaxed

There was much ado on the taxation of the so-called

double structures and the problem was covered quite

extensively already both in the press in

Parliamentary sessions and in legal doctrine The

Ruling Commission also took up its position in vari-

ous prior decisions on dossiers which dealt with

double structures39 Grosso modo two different inter-

pretations can be differentiated

According to a first legalistic restrictive interpret-

ation of the Cayman Tax 10 regulation summarized

it could be held that in double structures the earnings

of the underlying legal construct which in practice is

a company were taxable only in a very limited

number of cases In that interpretation it is however

also so that the income of the underlying company

may in some cases be involved in fiscal-transparent

taxation A complete exclusion of double structures

under application of the Cayman Tax is not even

allowed by this legalistic interpretation40 In that

sense and to that extent the amendment in the

37 This interpretation has been confirmed as correct by a member of the ruling commission at a seminar given organized by the University of Hasselt on 20

February 2018 slide page 7

38 Biesmans (n 13) 53

39 Goyvaerts (n 7) 572ndash80 Debelva Vandekerkhove and Verachtert (n 7) 1ndash6 Debelva and Vandekerkhove (n 7) 3ndash7 Goyvaerts (n 7) 3ndash10

40 TFR GD Goyvaerts lsquoDe kaaimantaks en de (niet )toepassing ervan bij lsquolsquodubbelstructurenrsquorsquorsquo (2016) 504 TFR 572ndash80


Dow



Cayman Tax 20 of the rules on double structures

with a definition of lsquochain constructsrsquo therefore

proved to be completely unnecessary

According to a second much broader interpret-

ation that was inspired by the teleological interpret-

ation one needs to look at the purpose and intent of

the legislature It is this interpretation that the Ruling

Commission had handled in several prior decisions

In addition the Ruling Commission concluded that

double structures should be regarded as a legal con-

struct type 1

Ruling No 2016563 marg no 32 lsquoX Trust is

involved in a legal relationship with respect to Y

Ltd as referred to in Article 2 section 1 13 a)

BITC 1992 The structure combines the constitutive

elements of Article 2 section 1 13 a) BITC 1992rsquo

However the Ruling Commission specifies that the

underlying qualifications of the income of the legal

construct type 2 are preserved which in itself implies

a contradictio in terminis with the regulation of the

legal construct type 1

Ruling No 2016563 marg no 32 lsquoHowever the

attention is drawn to the fact that Y Ltd is still a legal

construct type 2 with all associated tax consequences

of a legal construct type 2rsquo

Reference may also be made to the prior decisions

No 2016564 no 2016 576 no 2016 602 no

2016610 and no 2016711

To further support this conclusion the Ruling

Commission combines several elements of the legis-

lation in its reasoning It uses for instance a broader

interpretation of the concept of founder that seems to

rather be based on the text of the explanatory memo-

randum than on the text of the law itself41 In add-

ition on files where two legal constructs type 2 were

involved the Ruling Commission also found inspir-

ation in the application of Article 3441 BITC 1992

and afforded it a very wide scope

I believe that the position of the Ruling

Commission may therefore be strongly criticized

The Ruling Commission for instance applies the old

Article 3441 first paragraph BITC 1992 to transac-

tions that have taken place and double structures that

emerged long before the Cayman Tax has entered

into force thus assuming the theory that the old

Article 3441 BITC 1992 would in any case apply to

income from 1 January 2015

That argument is in my opinion extremely debat-

able In addition constitutional questions may in any

case arise about that article as the text of the old

Article 3441 BITC 1992 does not provide for an

intent requirement in respect of the taxpayer nor

does it provide for a possible rebuttal The fact that

the law of 25 December 2017 at Article 97 cancels the

old wording of Article 3441 BITC 1992 as a whole

supports this criticism

We have suggested previously that the rulings of the

Ruling Commission concerning the aspect of double

structures were contra legem42 The law of 25

December 2017 which now provides for a legal de-

scription of double structures in a completely differ-

ent way than in the interpretation by the Ruling

Commission seems to confirm this position In add-

ition the text of Article 3441 BITC 1992 was funda-

mentally changed and an intent requirement was

added (see below the Section lsquoThe new text of the

special anti-abuse stipulation of Article 3441 BITC

1992rsquo ) This is stated in so many words in the

report of the parliamentary discussion where it is

said that lsquoa legal construct is worked out in order to

ensure the application of the look-through tax in an

accumulation of legal constructsrsquo43 For the income

received during the period from 1 January 2015 to

16 September 2017 we may well assume that lsquodouble

41 This point of view is shared by Debelva and Vandekerkhove (n 7) 3ndash7 for a critical comment to various rulings in relation to Cayman tax reference to

Goyvaerts (n 7) 3ndash10

42 Goyvaerts ibid 3ndash10



Dow



structuresrsquo are only taxable according to the restrictive

legalistic interpretation in which where appropriate

Article 344 section 1 BITC 1992 (and thus no longer

Article 3441 BITC 1992) could possibly be called

on44 It may also appear appropriate to submit an

objection for tax year 2017 insofar as one may have

been enticed by the aforementioned ruling practice to

declare undistributed income from a double structure

For the 2016 tax year it is possible to examine whether

a request for exemption seems appropriate officially

Double structures defined anno 2018and the taxation redesigned

The law of 25 December 2017 in its Article 86 pro-

vides for a legal description of double structures

through the introduction of a series of new provisions

in Article 2 section 1 BITC 1992

Article 2 section 1 132 BITC 1992

lsquoSubsidiary construct A subsidiary construct is a legal

construct whose shares or economic rights are wholly

or partly held by another legal constructrsquo


lsquoMother construction A mother construct is a legal

construct that holds the shares or economic rights of

another legal construct entirely or in part lsquolsquo article 2

section 1 134 BITC 1992 lsquolsquoChain construct A chain

construct is a set of legal constructs that is formed by a

legal construct and its entire subsidiary constructs If

the chain construct includes a subsidiary construct

that is also a mother construct the subsidiary con-

structs of this mother construct shall also be part of

the same chain of legal constructs

The application of the second paragraph is repeated as

long as all the subsidiary constructs of the mother

constructs that are part of the chain construct are

included in this chain constructrsquo

Article 51 section 1 second paragraph BITC 1992

lsquoIf the legal construct is a mother construct

for the purposes of this paragraph the revenue

that were obtained by a subsidiary construct of

this mother construct forms part of the income

that were obtained by this mother construct in

proportion to the percentage held of the above-

mentioned shares or the economic rights of the

mother structure in this subsidiary construct as

if this mother construct acquired these revenues

directly

if the revenues that were paid by the subsidiary

construct to the mother construct are not

taxable on the founder to the extent and on

condition that the taxpayer has proven

that the revenues consists of income that was

taxed through a tax system on a natural

person or legal entity referred to in article 220

in Belgiumrsquo

Article 51 section 1 third paragraph BITC 1992

lsquoFor the purposes of the second indent of the second

paragraph the oldest income is considered to be first

obtainedrsquo

Article 51 section 1 paragraph four BITC 1992

lsquoIf more than two legal constructs are part of a chain

construct the second and the third paragraph applies

to every mother construct that forms part of this chain

constructrsquo

Article 51 section 1 fifth paragraph BITC 1992)

lsquoThe application of the provisions in paragraph 2

cannot allow income that was obtained by a legal con-

struct to be taxed multiple times on the founder of the

legal constructrsquo

44 Delanote and Philippe (n 7) 42ndash50 tevens gepubliceerd in TFR 2018 nr 535 pp 121ndash39


Dow



According to the explanatory memorandum in this

context lsquoan entirely new provision is introduced

which aims to also include the so-called double struc-

tures under the scope of this tax systemrsquo The memo-

randum continues with the thesis that lsquothis new

provision therefore seeks to make it possible to ad-

dress compounded legal constructs in a consolidated

wayrsquo which of course stresses again that this wasnrsquot

the case under the rules of Cayman Tax 1045 The

memorandum also offers a very comprehensive ex-

ample in which the principles of chain constructs

are explained quite clearly Of course this example

is structured fairly simple and doesnrsquot take the inher-

ent complexity that the application of these rules in

an existing structure would bring into account46

The following are two simple examples to explain

the concept of taxation of the chain constructs

In practice it will be especially important that this

new tax scheme of look-through taxation in the context

of chain constructs implies a serious infringement on

the reality principle as far as the accounting charge of

paid dividends is concerned with the relevant foreign

entities and these both with the subsidiary and the

mother construct After all one cannot expect of the

Board of Directors of a foreign company that they will

take the particularities of Belgian tax provisions into

account to the extent that this differs considerably

from the accounting allocation rules What is particu-

larly disturbing in this is the application of the anter-

iority rule according to which all dividend payment

should be taxed with priority on the oldest reserves as

defined in the new Article 51 section 1 paragraph 3

BITC 1992 (see below the Sections lsquoThe changes to

Article 18 paragraph 1 3 BITC 1992 and Article 21

BITC 1992 relating to tax assessment upon distributions

- A closer look at distributions by trusts and the anter-

iority rulersquo and lsquoThe new text of the special anti-abuse

stipulation of Article 3441 BITC 1992rsquo)

In addition it will now be necessary besides an

accounting balance sheet of each company and a

fiscal balance for purposes of local applicable tax

law to also keep a consolidated Cayman Tax balance

sheet of the entire group at hand to determine exactly

which dividend payments were already charged on

existing reserves and which income should be taxed

transparently In any case it is not the intention of

these new regulations to achieve a double taxation

which is also specified in so many words in the new

Article 51 section 1 paragraph 6 BITC 1992

It is important to note that in the definition of a

chain construct each individual entity that is

involved considered by itself should qualify as a

legal construct type 1 or type 2 Although in theory

the definition of a chain construct does not exclude

that a legal construct of type 3 is also involved this

however seems rather improbable in practice A cor-

poration or foundation that is subject to a normal tax

system and that therefore considered in itself does

not qualify as a legal construct type 1 or type 2 can

therefore not be part of a chain construct In practice


46 ibid 34ndash36


Dow



this means that the entity and all entities that are

situated beneath will fall outside the consolidated

taxation Two comments should be made in this re-

spect First the individual qualification criterion of

the single entity as a legal construct was preceded

by a whole discussion which incidentally is still

raging on whether the tax legislator hasnrsquot been a

bit too mild in this respect (we are not of that opin-

ion) Secondly it is doubtful whether in fact a nor-

mally taxed company effectively interrupts the chain

construct Concerning this debate reference may be

made to the parliamentary report47 In that it is

however mainly the answers given by the Minister

on the subject that are of interest The Minister for

instance specifies in the report48

lsquoThe scheme which is intended to address double

structures The present bill refers to chain constructs

endorses any case in which a legal construct is placed

above or below another legal construct The scheme is

also worked out so that this has an effect regardless of

the length of the chain The option is not to extend the

look-through taxation to situations in which a tax-

payer is indirectly the founder of a legal construct

and this is to avoid that a share in a normal company

for example an ordinary commercial company could

mean someone could become the founder of any pos-

sible legal construct which may eventually be held in-

directly by this company The income from a normal

company in which the taxpayer has a share is also

taxed at distribution to the taxpayer and the company

in question will also be subject to the normal tax

system on its income

Because of inserted companies and more specifically

concerning for example a Luxembourg SOPARFI

the specific anti-abuse provision in the context of

the look-through tax was rewritten so that the sliding

in of such entity can in any case be countered if it

seeks to escape the provisions of the look-through tax

under similar conditions as these apply in the context

of the general anti-abuse income tax provision

There is indeed already a wide arsenal of measures in

the current legislation to target double structures In

the framework of examining the strengthening of the

look-through tax of which this bill is of course the

result it was nevertheless decided after detailed ana-

lysis that it is indeed recommendable to include a

specific provision in the law for the future in any

case to target an accumulation of legal constructs in

an unambiguous way Other cases generally fall under

the law with the existing provisions For example the

notion of founder is formulated so very wide to in-

clude a wide range of fields in particular cases where

the structure is founded by an intermediaryrsquo

We can certainly deduce from the Ministerrsquos ex-

planatory note that it was never intended to directly

or indirectly involve a normal taxed company in a

chain construction The Minister is also very clear in

his rejection of the notion of indirect ownership as a

criterion to apply Cayman tax In the framework of

respect for the applicable double tax treaties and the

fiscal sovereignty of third countries that is of course

essential On the other hand the Minister does leave

an opening for the general anti-abuse provision of

Article 344 section 1 BITC 1992 that will also apply

to legal actions by legal constructs through the new

Article 3441 BITC 1992 The new Article 51 section

2 BITC 1992 concerning contribution andor transfer

of economic rights shares or assets can in this case

be invoked49 by the tax authorities

More generally the Minister is obviously perfectly

correct in saying that this increasing complexity will

initially encourage taxpayers who have such struc-

tures to liquidate them50

lsquoThis further extension of the scope and the closing of

various loopholes will in first instance ensure that the

47 ParlSt Kamer 2017ndash18 (n 27) 21ff

48 ibid 27ndash28

49 In this respect the parliamentary report gives an extensive example of a likely application of the new art 3441 BITC ParlSt Kamer 2017ndash18 (n 8) 42



Dow



use of constructions will also be discouraged That elem-

ent is often underestimated in the discussion and evalu-

ation of the look-through tax By adjusting the look-

through tax the taxation in Belgium will be the same

with or without a construct This of course urges tax-

payers to dissolve their tax structures one of the original

objectives and to invest directly from Belgium under

normal tax rules and taxation in Belgiumrsquo

Whether taxpayers will effectively do so will of

course depend on many factors In the framework of

a chain construct which is de facto controlled by a

person or by a family I can imagine that the request

for a liquidation will surely be made However faced

with the cost of a liquidation or settlement in which a

tax of 30 per cent would be payable on the accumulated

reserves that have emerged in the past long before the

entry into force of Cayman Tax the conclusion may

well be that a settlement just now will not be the trans-

action one should be doing After all it is the express

intention of the Minister to tax hoarded reserves from

the distant past upon payment (anywhere in the

chain) which has been clearly expressed in the report

lsquoThe proceeds of the look-through tax not only lie in

the application of the tax on these constructions

which are spread over different income categories

but also and perhaps especially in the abandonment

of these constructs and the normal holding of the

concerned investments in Belgium with the relevant

taxes As a result the yield of the look-through tax and

its amendments are not always easy to deduce in re-

lation to the total proceeds of the tax revenues

Finally the benefits of type I constructs like trusts

will now also be taxable The historically collected

revenues in these constructs will from now on be

taxed in case of disbursements This will have a sig-

nificant budgetary impact taking into account the

substantial capital assets which were built up in the

course of the years in such constructionsrsquo51

It remains to be seen whether things will evolve in

that manner First of all serious questions may be

raised as to whether historically accumulated profit

reserves in an untaxed fiscal entity such as a trust

are taxable at all upon payment One can after all

raise the perfect reasoning that this income has al-

ready undergone its final tax treatment In that

sense these historical reserves in a trust and also in

a foundation would qualify as taxed reserves for ap-

plication of Article 21 paragraph 1 12 BITC 1992

The final word has certainly not yet been said (see

below the Section lsquoFictional payment moments in

case of contribution or transferrsquo)

In his enthusiasm the Minister also loses sight of the

fact that many of these structures are controlled by

non-residents and that from a perspective of family

estate planning that has nothing to do with the

Belgian tax jurisdiction Such families are of course

not really impressed by the very complex and exhaust-

ing-looking taxation of a tiny unattractive country like

Belgium These families are very mobile and in so far as

they come into contact with Belgian tax law not at all

bound to our territory It therefore seems rather im-

probable that these families will terminate those struc-

tures but will rather avoid payments being made that

would be subject to Belgian taxation Where appropri-

ate this could lead to the payment policy of certain

legal constructs being reviewed In addition this can

result in a number of beneficiaries of legal constructs

emigrating from Belgium In that sense Cayman Tax

20 will in fact contribute to less taxes being received by

the Treasury rather than more

On the other hand it should once again be pointed

out that in a number of cases double structures could

already be taxed52 under the regulations of Cayman

Tax 10 There are even some cases that cannot be

included under the new understanding of a chain

construct Some authors also have reservations in

this regard on the application of Article 344 section

1 BITC 199253 This also indicates that the

51 ibid 26


53 Delanote and Philippe (n 7)121ndash39


Dow



introduction of the notion chain construct is counter

productive in some cases

Concerning the application in practice on the

temporal effect of the amended provisions it

should be noted that the relevant provisions on the

taxability of revenues that are received by chain con-

structs have entered into force on 1 January 2018

and thus for income from 1 January 2018 (Article

100 of the law of 25 December 2017) So the relevant

provisions do not fall under the early implementa-

tion for income from 17 September 2017 So the new

scheme on chain constructs cannot yet be applied for

tax year 2018

All the more reason for the relevant taxpayers to be

very critical about the declaration in the personal

income tax assessment for the year 2018 in which

the earnings of the underlying companies unless in

the above-mentioned very exceptional cases cannot

be involved in the transparent taxation and therefore

need not be declared

Fictional paymentmoments in case ofcontribution or transfer

The amended Cayman Tax 20 provides for two fic-

tional payment moments in the framework of legal

constructs type 1 andor type 2 To this end the text

of Article 51 section 2 BITC 1992 is replaced en-

tirely and which now reads as follows


lsquoIn case of a transfer of economic rights the shares or

the assets of a legal construct referred to in article 2

section 1 13 a) or b) or in case the assets of a legal

construct referred to in article 2 section 1 13 a) or

b) are transferred to another state than intended in

paragraph two at the time the contribution or transfer

is complete the undistributed income of this legal

construct shall be deemed to have been granted or

made payable to the resident who was the founder

of this legal constructrsquo


lsquoThis paragraph shall not apply to transfers to a State

with which Belgium has concluded an agreement on

prevention of double taxation or has concluded an

agreement on the exchange of information with

regard to tax matters or who participates with

Belgium in another bilateral or multilateral concluded

legal instrument provided that this agreement this

accord or this legal instrument allows the exchange

of information on tax matters between the States con-

cluding the agreementrsquo

When reading this complex text it is very import-

ant to clearly distinguish between two different situ-

ations transfer and contribution The purpose and

scope of this provision is to equalize both cases with

the settlement of the relevant legal construct which

then has the effect that all (old) reserves in it and

latent capital gains are supposed to be granted or

made payable to the founder of the legal construct

Where appropriate they will then within the limits

defined by Article 21 BITC 1992 be subject to a

charge of 30 per cent

In the first situation of lsquotransferrsquo it concerns the

transfer of the assets (read lsquoallrsquo assets) of a legal con-

struct type 1 or type 2 to a State with which no

effective tax information is exchanged with

Belgium Transfer of assets also explicitly implies a

transfer of the registered address If the transfer

takes place to a State with which Belgium has a

double-taxation treaty or other convention for

the effective exchange of information the fiction

does not apply For example the transfer of the

assets of a legal construct to an European

Economic Area (EEA) Member State can never fall

under this fiction Knowing that Belgium has since

concluded a convention on the exchange of infor-

mation with most jurisdictions in which the usual

legal constructs are established it seems this provi-

sion will more or less remain without effect54

54 See also Appermont and Peeters (n 7) 5ndash8


Dow



In the second situation of lsquocontributionrsquo it con-

cerns the transfer of economic rights the shares or

once again lsquoallrsquo assets of a legal construct type 1 or

type 2 There is also a transfer but then in the form of

a lsquocontributionrsquo (in French lsquoapportrsquo) This implies

that shares should be issued in exchange for the con-

tribution A lsquocontributionrsquo in a trust or a foundation

therefore arguably cannot fall under this provision as

no shares are issued in such a case However a lsquocon-

tributionrsquo in a company in exchange for shares

would qualify under this fiction At least that is if

we interpret the provision literally According to the

explanatory memorandum however both these pro-

visions are intended to have a very broad scope

lsquoIn order to perpetuate the repatriation of historical

built-up reserves and therefore to increase the effi-

ciency and the effectiveness of the tax system this

draft proposes to compare two specific situations to

a settlement In case the legal construct including all

the assets moves to another State or in the case the

assets of a legal construct are transferred to another

State with which no effective exchange of tax infor-

mation takes place these assets are irrefutably sus-

pected to be paid This measure aims to prevent

avoidance of the look-through tax because of the

fact that a legal construct would be moved to a State

that doesnrsquot exchange useful tax information so the

Administration can no longer obtain any information

that should allow implementation of look-through

tax The liquidation of a legal construct is also irrefut-

ably suspected in case the economic rights the shares

or the assets of a legal construct referred to in the

stipulation under a) or b) are inserted into a new

structure The idea here is to discourage the accumu-

lation and packaging of legal constructs in complex

structures which seeks to prevent the administration

to achieve actual taxation It goes without saying that

the exemption provided for in article 21 paragraph 1

12 BITC 1992 also applies here in case the undistrib-

uted but taxed income is then actually paidrsquo

This text in the explanatory memorandum has a very

different tenor than the text of the law itself For

example it specifies that the objective of this provi-

sion lies in perpetuating the repatriation of historical


ciency and the effectiveness of the tax system This

once again shows the intention to building a form

of implicit retroactivity with Cayman Tax 20 with

the intention to tax historic reserves If the founders

do not pay up voluntarily the Government imple-

ments a fiction in which the intention is apparently

to tax a restructuring The question of course is

which fiction falls under that restructuring and

which do not The text of the law after all expressly

limits the fiction to two specific situations

The text of the memorandum then goes on to say

that in case the legal construct including all the

assets moves to another State or in the case the




pected to be paid This passage is remarkable for

several reasons

First of all it is specifically stated that the fiction of

settlement is irrefutable This is however nowhere

in the law One would think that at the registration

in the law of an irrefutable presumption or an ir-

refutable fiction that this lsquoirrefutable characterrsquo will

be specified explicitly in the text of the law

Then it is clearly specified that the lsquomovingrsquo should

be done including lsquoallrsquo assets A transfer of regis-

tered address is never mentioned although this is

intended

It is also clear that both the move to and the trans-

ferring to another State should in both cases con-

cern a State with which no information shall

effectively be exchanged

Furthermore the text specifies that the liquidation

of a legal construct is also irrefutably suspected in

case the economic rights the shares or (all) the

assets of a legal construct type 1 or type 2 are in-

serted into a new structure

A number of matters can again be derived from this

passage


Dow



As it turns out the word lsquocontributionrsquo can appar-

ently also cover the lsquocontributionrsquo in a trust or foun-

dation Reference is made to lsquoa new structurersquo But

what structure is intended After all it doesnrsquot say

that this has to be a legal construct Specifically this

would mean that the contribution by a legal construct

type 1 or type 2 in a normal taxed company would

irrefutably imply the liquidation of the transferring

legal construct That would mean that any investment

where lsquoallrsquo assets of the legal construct would be in-

serted into a subsidiary in a normal taxed jurisdiction

would irrevocably lead to the fictional liquidation of

the transferring entity The fiction however only

applies if lsquoallrsquo assets of the legal construct are inserted

This means that if only a part of the assets are in-

serted the fictional liquidation does not apply Note

that Appermont and Peeters suggest that Article 51

section 2 BITC 1992 might also apply in the case of a

transfer of assets that does not relate to lsquoallrsquo assets55

These authors also refer to the earlier provision of

Article 18 2ter b) BITC 1992 that referred to the

total or partial transfer of the assets of a legal con-

struct The authors also pose that for the time being

despite the introduction of a new provision this pos-

ition was not abandoned The provision of Article 18

2ter b) BITC 1992 was however revoked retro-

actively by the law of 26 December 2015 and thus

has never existed We then ask ourselves the question

how can it be referred to In addition that provision

referred explicitly to the lsquopartial transferrsquo a provision

which is missing in Article 51 section 2 BITC 1992

For the rest both authors also rightly suggest that

such a broad interpretation would give rise to serious

application problems in the framework of a propor-

tional allocation of reserves on the disbursed assets I

therefore believe that this position cannot be

endorsed In addition such an application would be

contrary to the abuse that this provision aims to

oppose In my opinion Article 51 section 2 BITC

1992 is a specific anti-abuse provision and to that

effect shall therefore be restrictively interpreted

Furthermore such an extensive application would

be in conflict with the intent of the text as it appears

from the explanatory memorandum in which a lsquofic-

tional liquidationrsquo is intended The text of the law

itself however does not refer to a lsquofictional liquid-

ationrsquo and purely and simply provides for a fictional

benefit

Assuming however that Article 51 section 2 BITC

1992 would apply to any transfer or contribution of

assets to another entity (that need not be a legal con-

struct) without lsquoallrsquo assets being involved then this

would imply that any investment transaction that is

done by a legal construct under Article 51 section 2

BITC 1992 should be regarded as a fictitious pay-

ment That can obviously not have been the intention

of the legislator In that sense we uphold our view

that in order for Article 51 section 2 BITC 1992 to

apply the transaction should concern lsquoallrsquo assets or

lsquoallrsquo shares or lsquoallrsquo economic rights

The fiction however also applies if all units or

economic rights of the existing legal construct are

contributed However such input is then done by

the founder himself This is of course a totally dif-

ferent situation than that in which the legal construct

performs the contributing transactions The fiction

applies in both cases as per the explanatory

memorandum

Apparently the legislature suspects intent to abuse

It is after all written in the text of the explanatory

memorandum that the idea here is to discourage the

accumulation and packaging of legal constructs in

complex structures which would then aim to prevent

the Administration to come to an actual tax assess-

ment That is a very peculiar pronunciation The

notion of the chain construct has just been intro-

duced in the framework of Cayman Tax 20 Such

chain construct is still subject to the Cayman Tax

so the fiscal transparency is therefore guaranteed

Why provide for a special anti-abuse provision by

way of fictitious settlement if the Cayman Tax is

not put aside by that operation How can one then

claim that such transaction would be intended to pre-

vent the Administration from performing an actual

55 ibid 5ndash8


Dow



taxation I believe there is clearly something missing

in the explanation of the relevant provision

In the context of an EU or EEA-connection there is

a clear infringement of freedom of movement I can

just imagine that if such a contributing transaction to

for example a Liechtenstein company or by extension

to a Liechtenstein foundation would be considered

by the Belgian tax authorities as being a fictional li-

quidation this could mean an infringement within

the framework of the EEA In this context reference

can be made to the case-law already quoted earlier in

the context of Cayman Tax on the Olsen- judgment

of 9 July 201456 This theorem is also convincing

taken up by Appermont and Peeters in their previ-

ously quoted contribution57 Both authors also rightly

refer to the Panayi judgment of 14 September 2017

which applies the rules in respect of the free move-

ment of capital following the Olsen- judgment in

case of a UK trust58 Now regarding Cayman Tax a

UK trust will rather rarely be used as a vehicle to

wealth management but it is obviously not excluded

completely59

In addition we cannot escape the impression here

that the legislator ignores the fact that a new legal

construct type 3 was already provided for in Article

2 section 1 13 c) BITC 1992 that may already be

providing in a similar situation It is therefore to be

seen in which cases the tax authorities will classify the

tax of a legal construct type 3 (where there is no fic-

tional liquidation) or will decide that there is a con-

tribution in another lsquostructurersquo (in which case there

would be a fictional liquidation)

It goes without saying that the exemption provided

for in Article 21 paragraph 1 12 BITC 1992 also

applies here in case the undistributed but taxed

income is then actually paid

Finally the text of the law in the situation of a

transfer of the economic rights shares or assets of a

legal construct in a new structure contains no refer-

ence to the non-exchange of information by the State

in which this new structure is established This can

only mean that the legislature has provided that in the

event of a contribution in an entity located in a coun-

try where this entity is subject to normal tax a fic-

tional liquidation of the transferring legal construct

would also take place in this case60 Serious questions

may also be raised within the EU and EEA context

concerning freedom of movement

The entry into force of this provision of fictional

liquidation is applicable to income from 17

September 2017 onwards However the question is

what exactly is meant by this Does it mean that in

case of a fictional liquidation only the income in the

fictional liquidation that has arisen from 17

September 2017 will be involved Or does it mean

that all transactions which are supposed to resemble

a fictional liquidation will be involved in the levy if

these transactions are completed from 17 September

2017 onwards and in which the allocation is located

on a date starting from 17 September 2017 Maybe

the latter is intended in which all existing historical

reserves would be considered to have been disbursed

with the relevant tax liability pursuant to Article 51

section 2 BITC 1992 jo Article 18 paragraph 1 3

BITC 1992

Amendment of the lsquosubstancersquoexclusion of Article 51 section 3 b)BITC1992

The text of the substance exclusion as it appears in the

Cayman Tax 10 is replaced by a new provision which

56 GD Goyvaerts (n 5) 865ndash923 EVA-Hof 9 juli 2014 E-313 en E-2013 Olsen ea Noorwegen wwweftacourtint The Olsen-case relates to a Norwegian

CFC-legislation on the basis of which foreign trusts are taxed transparently The Olsen-case has been extensively cited in the advice by the Council of State (AdvRvS

nr 570643 from 7 april 2015 ParlSt Kamer 2014-15 Doc 54-0679003) and goes with a comment by Van Zantbeek (n 7) 945

57 Appermont and Peeters (n 7) 5ndash8

58 HvJ 14 September 2017 nr C-64615 Trustees of the Panayi Accumulation and Maintenance Settlements Commissioners for Her Majestyrsquos Revenue and

Customs

59 Due to Brexit it cannot be excluded that UK-trusts may eventually fall completely out of the EEA and EU and from that moment on the Panayi-case may no

longer provide in any comfort

60 This interpretation has been confirmed by N Appermont and B Peeters in their quoted contribution cited above


Dow



at the same time has become stricter and smoother

The new provision reads as follows

Article 51 section 1 and 2 shall not apply for the

TY for which the founder

lsquoDeclares in the annual income tax declaration and on

simple request demonstrates that the legal construct is

situated in a State referred to in paragraph 2 second

paragraph [DTA or TIEA country] and that

the income from this legal construct is mainly

obtained through the exercise of one or more

actual economic activities in which these activ-

ities may not involve the management of the pri-

vate assets of the founder or of one of the

founders of this legal construct and that

this legal construct has a set of premises staff and

equipment at its disposal in proportion to the

aforementioned actual economic activities

referred to in the first indentrsquo

If we compare the provision with the version as it

occurred in Cayman Tax 10 we notice various

relaxations

the provision now also clearly applies to trusts

where that could be doubted in respect of

Cayman Tax 10

the provision is now smoother by providing that

the income of the legal construct will no longer be

obtained exclusively but only lsquomainlyrsquo through the

exercise of the actual economic activity

according to the text that actual economic activity

can now also take place in a different place than

that at which the legal construct is established

through the removal of the word lsquotherersquo

These liberalizations were included in the text to

meet the relevant European case-law based on criti-

cism already raised in legal literature61 The main

change however is the tightening of the provision

by limiting it to income from economic activities

which may not refer to the management of the lsquopri-

vately held assets of the founderrsquo or of one of the

founders of this legal construct Here reference may

be made to ruling No 2016540 which came to the

same conclusion although without explicit provision

in the law For the relevant argumentation based on

which this provision might be in conflict with the

established European and EEA case-law reference

may be made to the text of the relevant ruling

In doing so we must however ask ourselves what

is intended with the notion lsquothe private assets of the

founder or of one of the founders of this legal con-

structrsquo In the context of the application of Cayman

Tax all the assets are after all owned by the legal

construct itself and are not the property of the foun-

der To what extent can there then be any private

assets of the founder This seems to be a contradictio

in terminis Letrsquos make this clear with an example

Letrsquos assume Mr John Smith had a Liechtenstein

foundation set up through his Swiss banker in 1987

and the foundation bought a chalet on a beautiful

sunny slope in Verbier The chalet is rented out by

a local rental office to tourists and occasional users

and now and then Mr John Smith also uses the

chalet One can seriously question whether the

rental income would be taxable under Cayman Tax

Irsquom inclined to think not as it concerns an actual

economic activity of rental This activity in itself

should suffice to invoke the substance exclusion On

the other hand the application of Cayman Tax in this

example need not be detrimental at all as the relevant

foreign rental income tax will also remain exempt

through fiscal transparent tax based on Article 51

section 1 BITC 1992 and based on Article 6 of the

Belgian Swiss Treaty with progression In addition

with later disbursement the appropriate rents then

qualify as tax-exempt income under application of

Article 21 paragraph 1 12 BITC This too clearly

shows that the various provisions of the Cayman Tax

are intrinsically contradictory If the intention was to

61 Goyvaerts (n 5) 890ff with reference to Cadbury Schweppes case and the Olsen-decision case Reference also can be made to the Panayi case Appermont and

Peeters (n 7) 5ndash8


Dow



create a greater taxable basis based on a tightening of

the relevant provisions this may sometimes back-

fire One could of course take on the position in

this example that the substance exclusion can be

invoked based on which the relevant underlying

rental income is not taxable in the framework of

the Cayman Tax In time however that leads to a

disadvantage for the taxpayer who is then faced with

taxable dividends at payment or with a liquidation

bonus based on Article 18 paragraph 1 3 BITC

1992 In the present case it is in the interest of the

taxpayer not to call on the substance exclusion

should this apply We have already argued previ-

ously that the tax authorities cannot invoke the sub-

stance exclusion since this never applies

automatically but it must be invoked by the tax-

payer by way of an active choice in the personal

income tax declaration62

It is also noteworthy that the rebuttal that is defined

in this substance exclusion can only be issued by the

founder and no longer by the third party beneficiaries

deleted from the law This would mean that if a trust

makes a payment to a third receiver this third recipi-

ent cannot rely on the substance exclusion This seems

to me to be inconsistent with the principle of equality

The provision entered into force on 1 January 2018

So there is no extension to income received since 17

September 2017

The changes toArticle18 paragraph13 BITC1992 and Article 21BITC1992relating to tax assessment upondistributionsccedila closer look atdistributions by trusts and theanteriority rule

The most important adjustment of the Cayman Tax

20 is that which is provided in the new text of Article

18 first paragraph 3 BITC 1992 read together with

the modified version of the exemption provision of

Article 21 paragraph 1 12 BITC 1992 jo Article 21

paragraph 2 BITC 1992 The amended text of Article

18 first paragraph 3 now reads as follows

Article 18 paragraph 1 3 BITC 1992

lsquoBenefits other than those referred to in 1 2 2bis

and 2ter granted or made payable by a legal con-

struct including the revenues that are supposed to

be granted or made payable in accordance with

Article 51 section 2 to the extent that the taxpayer

has not established that this attribution or payment

reduces the capital of the legal construct to less than

the capital contributed by the founderrsquo


lsquoIncome that is granted or made payable by a legal

construct to the extent that it is established that

these revenues are composed of income obtained

through the legal construct that has already been sub-

ject to a tax system under a natural person or legal

entity in Belgium referred to in Article 220rsquo


lsquoFor the purposes of the first indent 12 the oldest

income is considered to be the first to be disbursedrsquo

From analysing the two texts and the comment as

written in the explanatory memorandum63 it turns

out that the intention is to now also define benefits

of trusts and other similar legal relationships as

defined in Article 2 section 1 13 a) BITC 1992 or

the legal constructs type 1 as a dividend According

to the government a loophole in the law would now

be closed as trusts could make tax free disbursements

because these benefits unlike benefits from compa-

nies and foundations were not considered to be divi-

dends With this change one of course strays even

further from the path of perfect fiscal transparency

which was initially the cornerstone of Cayman Tax

62 Goyvaerts (n 7) 6



Dow



10 One might even ask why any transparent taxation

should be made if any payment from a legal construct

is taxed as a dividend anyway As we have argued

before the initial construction error of Cayman Tax

10 just entailed benefits of foundations that were

taxed as dividends where such benefits were not trad-

itionally regarded as income This track is now finally

abandoned by making payments from trusts fiscally

equivalent to benefits from foundations and to tax

these as dividends64 Cayman Tax is thus turned into

an unnecessary complexity

Apparently the Government found this change so

important that they have devoted a special publication

in the Belgian Official Gazette of 3 October 2017 to

make it clear that as from 17 September 2017 pay-

ments from trusts would be taxed as dividends65

This is all the more remarkable as the aforementioned

publication in the Belgian Official Gazette does not

mention the other provisions that retroactively entered

into force on 17 September 2017 It is once again re-

markable that on 17 November 2017 ruling No

2017340 was handed down that confirmed the non-

taxability of distributions by trusts66 That ruling liter-

ally refers to lsquothe current state of the legislationrsquo which

is once again very curious as the relevant board mem-

bers of the Ruling Commission were well aware of the

fact that the aforementioned publication had taken

place in the Belgian Official Gazette based on which

disbursements by trusts were in fact made taxable al-

ready It would be quite interesting to know how the

relevant applicant in this specific decision will respond

at the time of the submission of the tax return for tax

year 2018 We can only hope purely from intellectual

interest of course that if the tax authorities will pro-

ceed with taxationmdashwhich for the record I assumemdash

that this matter will end up in the courts so that every-

one can take note of this in due course

The Government specifies in the explanatory memo-

randum that Article 18 paragraph 1 3 BITC 1992 was

amended to better reflect that any payment of a legal

construct not being a refund of the subscribed capital

shall be deemed to be a dividend67 Right away it is

stated in an implicit reference to the new Article 21

second paragraph BITC 1992 that

the disbursement of the subscribed capital is only

assumed to have taken place after all reserved profits

and revenues were paid and that where appropriate it

is up to the taxpayer to prove the extent of the ori-

ginally subscribed capital

This finding must of course be seen and read

together with

the lsquoanteriority rulersquo based on which the oldest re-

serves are deemed to have been paid out first

the fact that payments by legal constructs type 1 are

also equated with a dividend from 17 September

2017

the fact that the Cayman Tax was never intended to

provide a property fiction between founder and

legal construct

the exception rule on fiscal transparency under

founders as provided for in Article 51 section 1

paragraph 10 BITC 1992

where appropriate the application of Article 51

section 2 BITC 1992 if and to the extent that

such a transfer is related to lsquoallrsquo assets and ignites

a lsquodeemed liquidationrsquo

This obviously once again severely affects the thesis

of perfect fiscal transparency The lsquoas if provisionrsquo

which is nevertheless the cornerstone of Article 51

section 1 BITC 1992 is thus completely crushed So

64 For a critical comment and clear example reference can be made to Biesmans (n 13) 49ff

65 Notice of 28 September 2017 relating to the modification of Cayman tax lsquode wijziging van het aanslagstelsel dat van toepassing is op de juridische

constructiesrsquo Belgian Official Gazette 3 October 2017

66 Ruling nr 2017340 dd 21 November 2017 Summary translation lsquoDisbursements in the current state of the law attributed or paid by the trust to the

applicant are not taxable en no WHT is to withheld nor on the basis of cayman tax (reference to article art 51 section 1 7 BITC 1992 and article 18 first section

2ter and 3 WIB 1992) nor on the basis of any other stipulation in the BITC 1992 (reference to article 17 BITC 1992 and article 19 BITC 1992) irrespective of the

type of disbursement (capital or income in relation to the termination of the trust or not) with the exception of distributions of income received by the trust in the

same year as in which the distributions were made and which are taxable on the basis of art 51 section 2 BITC 1992)rsquo



Dow



the fiscal transparency works de facto especially in

favour of the tax authorities and is not consistently

repeated in the relationship between tax authorities

and taxpayers

Concerning the adjustment of Article 21 paragraph

1 12 BITC 1992 and the introduction of a new

second paragraph under Article 21 the explanatory

memorandum specifies that

lsquoThe changes that are implemented by this draft aim

to also allow the exemption in case the payment of the

legal construct referred to in Article 2 section 1 13

a) BITC 1992 should be exempt from income tax in

case this disbursed income has already been taxed in

Belgiumrsquo

This sentence really doesnrsquot read well and therefore

it might be good to also refer to the French-speaking

text

lsquoLes modifications qui sont apportees par le present

projet ont pour but de rendre possible lrsquoexoneration

egalement dans le cas ou le benefice distribue drsquoune

construction juridique visee a lrsquoArticle 2 section 1ter

13 a) BITC 1992 est exonere de lrsquoimpot sur les reve-

nus lorsque ces revenus distribues ont subi leur regime

fiscal en Belgiquersquo68

Despite the very unclear text it obviously refers to

the taxability of payments from trusts that in future

are classified as dividends The addition of the second

paragraph under Article 21 then clarifies according to

the explanatory memorandum that69

for the purposes of Article 21 paragraph 1 12 BITC

1992 the oldest obtained revenues are supposed to be

paid out first As a result this exemption may only be

used after disbursement of the historical reserves

The burden of proof lies entirely with the person

receiving the benefit That can be the founder but

that can also be a third party beneficiary although

the concept of lsquothird party beneficiaryrsquo no longer ap-

pears in the text of the law That burden of proof also

concerns the fact that the amounts paid by the legal

construct must consist of income obtained by the

legal construct lsquothat have already been taxed in

Belgium on the part of a natural person or a legal

entity referred to in Article 220rsquo

As a result this new text immediately implies that

tax previously paid by person X can now also lead to

an exemption on distribution to person Y In the ver-

sion of the text as this applied under Cayman Tax 10

there could be doubt based on the literal text of the

law This issue is now fixed70 with an amendment of

the law

That it however only refers to having been taxed

lsquoin Belgiumrsquo remains strange This can after all be

problematic in case a third party beneficiary resident

in Belgium would receive a payment from a trust that

would otherwise historically have nothing to do with

Belgium nor did it ever have According to the literal

text of the law such third party beneficiary will still be

taxable even though tax was already paid abroad on

the underlying income in the framework of the legis-

lation there Where appropriate this seems to violate

the double tax treaties that were concluded with the

relevant country in which the trust or the trustee or

the settlorbeneficiary is established and which is re-

sponsible for the income tax In case a Belgian na-

tional resident receives a payment in such a way from

trusts established in Canada the USA the UK New

Zealand Australia and other countries who cannot

be classified as tax havens this point will certainly

have to be reviewed This contains a clear hidden

risk of double taxation In such a case it cannot be

explained how the lsquoanteriority rulersquo should be applied

if this can only concern taxable income lsquoin Belgiumrsquo

According to the new Article 21 second paragraph

BITC 1992 for the purposes of Article 21 paragraph

1 12 BITC 1992 the oldest obtained income is after

all supposed to have been paid first Perhaps the

68 ibid 39

69 ibid 39

70 Goyvaerts (n 5) 909 where we suggest the need for a non-linked personal tax credit under the previous version of art 21 12 BITC 1992


Dow



effective functioning of this lsquoanteriority rulersquo can best

be explained by an example Letrsquos assume Mr John

Smith is the founder of a Liechtenstein foundation

being a legal construct type 271

On 31 December 2018 the Board makes a payment

of EUR 50000 to a third party beneficiary of the

foundation This third party will have a duty to de-

clare the payment received in tax year 2019 and in

principle will be taxable on a dividend income

amounting to EUR 50000 for 2018 at a rate of 30

per cent as a result of the application of Article 18

paragraph 1 3 BITC 1992 Fiscally this EUR 50000

should be charged on the oldest reserves of the foun-

dation amounting to EUR 500000 This is thus

reduced in fiscalibus to EUR 450000 The amount

of income of EUR 5000 on 31 December 2018 will

be transparently taxable for the 2019 tax year on the

founder Mr John Smith The total tax rate on tax year

2019 is therefore 30 per cent on EUR 55000 or EUR

16500

On 2 January 2019 the Board reduces its capital in

favour of Mr John Smith amounting to EUR 500000

This amount of EUR 500000 is charged fiscally based

on the anteriority rule72 amounting to EUR 450000

on the reserves on 31 December 2014 on which tax

applies as a dividend at a rate of 30 per cent cf Article

18 paragraph 1 3 BITC 1992 jo Article 21 para-

graph 2 BITC 1992 On the remaining amount of

EUR 50000 the capital reduction should be taxed

on the existing Cayman Tax reserve of EUR

130000 therefore the EUR 50000 can enjoy the ex-

emption cf Article 21 first paragraph 12 BITC 1992

The Cayman Tax reserve 2017 is then reduced to EUR

80000 For tax year 2020 the founder will have an

obligation to declare based on the fact that he received

benefits from a legal construction type 2 and he will

also have a tax liability amounting to EUR 450000 at

a rate of 30 per cent

Liechtenstein foundationon 31December 2018

Fiscal Accounting

Assets contributed EUR1000000 EUR1000000Reserves on31December 2014

EUR 500000 NA

CaymanTax reserve75 EUR130000 NAInterest on income on31December 2018

EUR 5000 NA

Reserves NA EUR 635000Total EUR1635000 EUR1635000

Liechtenstein foundationon 01January 2019

Fiscal Accounting


EUR 450000 NA

CaymanTax reserve 2017 EUR130000 NAInterest on income on31December 2018

0 EUR NA

CaymanTax reserve 2018 EUR 5000 EUR 585000ReservesTotal EUR1585000 EUR1585000

71 lsquoCayman tax reservesrsquo are retained earnings composed of revenue that have been subject to a transparent tax either on the basis of art 51 s 1 BITC 1992 or

art 2201 s 1 BITC 1992 since January 2015 or any other comparable tax levied earlier such as a taxation in respect of art 344 2 BITC This effectively relates to the

lsquogrossrsquo amount since transparent taxation does not foresee in a correlation between the disbursement and the effective underlying tax which is payed out of a

lsquodifferent pursersquo

72 Do note that the legislator introduces a priority rule for companies subject to Cayman tax yet for other foreign (and Belgian) companies a pro rata rule has

been introduced


Dow



The end of the story is that the accounting bal-

ance and the fiscal balance taking into account

the rules of the Cayman Tax 20 differ significantly

from each other As the example shows these rules

imply a major infringement on the principle of the

accounting reality concerning relevant entities that

qualify as legal constructs In practice this impact

will be quite large and will be experienced as exces-

sively complex by the relevant trustees and the Boards

of Directors

The order of allocation as can be seen from the text

of the law is however quite simple and can be

summed up as follows provided they are read in con-

junction with various articles

1) Oldest reserves according to Article 21 para-

graph 2 BITC 1992

2) Cayman Tax reserves according to Article 21

paragraph 1 12 BITC 1992

3) Assets contributed

As Anouck Biesmans rightly points out in her con-

tribution in the Liber Amicorum Rik Deblauwe a First

In First Out method applies as far as the reserves

apply mutually but there is a List In First Out

method with regard to the reserves versus the con-

tributed capital73

Yet a number of marginal notes must be formu-

lated with this apparent simplicity The tax rules can

after all be disabled by

revenue from the current year paid out to the

founders based on the exception system of Article

51 section 1 paragraph 10 BITC 1992 based on

which this will be taxed right away as dividends

(see above part I D and below part II A)

albeit that this rule may result in a very different

effect74

revenue paid by underlying companies in the

framework of a chain construction are always

included in the calculation (see above part II A)

Finally the question may also be asked on the tax-

ability at payment of older reserves that have arisen

prior to the introduction of Cayman Tax by no later

than 31 December 2014 In the example above we

have not taken that objection into account as it was

our intention to reflect the position of the tax autho-

rities in the example as that it is clear from the ex-

planatory memorandum However there is also

another opinion possible One can argue that reserves

that have arisen prior to the introduction of the

Cayman Tax were already taxed or they were not

taxable at all This problem is addressed in another

publication75

The new text of the special anti-abusestipulation of Article 3441BITC1992

The hotly contested Article 3441 BITC 1992 was can-

celled and replaced by a text that essentially implies a

mere reference to Article 344 section 1 BITC 1992

with regard to legal acts by legal constructs

Article 3441 BITC 1992

lsquoIf based on presumptions or other evidence referred

to in Article 340 and based on objective circum-

stances it is shown that a legal construct has

Liechtenstein foundationon 03 January 2019

Fiscal Accounting

Assets contributed EUR1000000 EUR 500000Reserves on31December 2014

EUR 0000 NA

CaymanTax reserve 2017 EUR 80000 NAInterest on income on31December 2018

0 EUR NA

CaymanTax reserve 2018 EUR 5000 NAReserves EUR 585000Total EUR1085000 EUR1085000

73 Biesmans (n 13) 50ndash51

74 This lsquoeffectrsquo is commented upon in part II of the original article published in Belgian legal literature GD Goyvaerts (n 1) 642ndash97

75 This question is dealt with in part II of the original article published in Belgian legal literature Goyvaerts ibid 642ndash97


Dow



performed one of the transactions as referred to in

Article 344 section 1 second paragraph of the trans-

actions the legal act or all legal acts that established

the same transaction cannot be held against the

administration

Where necessary the counter evidence referred to in

Article 344 section 1 paragraph 3 can be provided by

the founder of this legal construct or by the taxpayer

who received a dividend from this legal construct

during the taxable year

If the founder or the taxpayer cannot present the

counter evidence the tax base and the tax calculation

will be restored in accordance with article 344 section

1 fourth paragraphrsquo

According to the explanatory memorandum it is

not necessary to have a special general anti-abuse pro-

vision in the Cayman Tax context

lsquoSo article 3441 BITC 1992 proposed in this draft

avoids the avoidance of the application of the general

anti-abuse provision by also submitting the actions of

a legal construct to the anti-abuse provision testrsquo76

In that context Article 47 paragraphs 2 and 3 of

the programme law of 10 August 2015 is also can-

celled The fact that this provision is cancelled with-

out ado is rather strange since the explanatory

memorandum to the law of 10 August 2015 focussed

comprehensively on the need to provide such a spe-

cific anti-abuse provision for Cayman Tax77

What is special about the new provision of Article

3441 BITC 1992 is that this extends to legal transac-

tions by a legal construct itself We now know that the

Cayman Tax system should not be interpreted that a

legal transaction by a legal construct may be

compared to legal transactions by the relevant tax-

payer itself This taxable person the founder accord-

ing to Article 2 section 1 14 BITC 1992 is by

definition a resident for the Cayman Tax to be ap-

plicable at all A legal construct however is by def-

inition a non-resident who himself is not subject to

tax be it individual or corporate tax As such the

legal construct itself is therefore not subject to

Cayman Tax One may have to consider further

whether and to what extent a non-resident can per-

form a transaction at all to be endorsed by Article 344

section 1 BITC 1992 We can therefore ask whether a

trustee or a Board of Directors of a foundation or the

Board of Directors of an offshore company can per-

form a transaction that can qualify as tax abuse in

respect of a tax payable by a founder or a third re-

ceiver (to no longer use the term third party benefi-

ciaries) The elaboration of Article 344 section 1 BITC

1992 in this context is also particularly remarkable78

The second paragraph of the new Article 3441

BITC 1992 after all proposes that where appropriate

a rebuttal can be supplied by the founder or by the

third receiver (described as the taxpayer who has

received a dividend from this legal construct during

the taxable period) How can that founder or third

receiver read the mind of the trustee or the Board of a

discretionary79 trust or foundation to take note of the

intentions that these individuals had at the time of the

legal transaction This seems to me to be a particu-

larly peculiar requirement We can perhaps best illus-

trate this with an example Imagine you receive a

payment in 2022 of a trust set up in 1956 by your

long since deceased great-uncle who lived in England

The trustee presented you with the payment in the

context of a broad determination of benefaction

which can be interpreted as your great-unclersquos wish

that distant and close family members (whether or

not already born) could count on help from the



78 Useful reference can be made to Delanote and Philippe (n 7) 42ndash50 also published in TFR 2018 nr 535 pp 121ndash39 also A Haelterman and E Maes lsquoDe

kaaimantaks wie ontspringt de dans nogrsquo in F BUYSSENS and AL Verbeke (eds) Notariele actualiteit 2014-2015 (Intersentia 2015) randnr 36

79 The Belgian tax administration has difficulty in acceptation that trusts can be discretionary For a closer look at the criteria traditionally used by the Belgian

tax administration reference will be made to Goyvaerts Gerd D lsquoThe Tax Aspects of the Use of Foreign Trusts in Belgium for Private Wealth Purposesrsquo (2011) 18

(4) Journal of International Tax Trust and Corporate Planning 267 also see Biesmans (n 13) 44


Dow



trust for the payment of study costs For this purpose

different sub-trusts were set up in 2013 with the pur-

pose to isolate capital intended for study costs One of

those sub trusts is intended for your study costs and a

sum of EUR 250000 is deposited in it in 2018 where

the balance could possibly be used for the study costs

of other family members or be returned to the settle-

ment established in 1956 In the context of the appli-

cation of Article 344 section 1 BITC 1992 your local

controller however believes that the trustee had the

intention to award the full amount to you Due to

that reclassification in dividend according to Article

18 paragraph 1 3 BITC 1992mdashand who knows

even according to Article 51 section 2 BITC 1992

if this provision can also be considered to apply if a

transfer of funds do not concern all assets80mdashyour

local controller proceeds with a 30 per cent taxation

Of course such a levy is not justifiable under a literal

interpretation of the texts of the Cayman Tax 20

However as lsquothird party beneficiaryrsquo of the sub-

trust for the record you are not the founder you

are faced with an impossible burden of proof How

can you prove that the trustee who had acted within

the framework of trust law would have had any in-

tention in 2013 to commit tax abuse with regard to

the rules of the income taxes code as this applies to

one of the many family beneficiaries rules of law that

at the time the trustees committed this legal transac-

tion did not even exist This seems to me very close

to an impossible proof

On the other hand the removal of the old Article

3441 BITC 1992 can be called an improvement and a

concession to the criticism expressed in the legal doc-

trine in this area on the unconstitutional nature of

this stipulation81

An interesting side effect of the lifting of the old

Article 3441 BITC 1992 is that there are several rul-

ings that refer to this article to be able to tax double

structures82 It can therefore also be claimed without

much doubt that the relevant rulings in so far as they

are not contra legem (see above) have lost their val-

idity Whether this is going to effectively have an

impact is uncertain however because Article 3441

BITC 1992 was not cancelled with retroactive effect

So for previous tax years 2016ndash18 (for benefits until

16 September 2017) nothing need necessarily have to

change In addition the new Article 3441 BITC 1992

applies for income from 17 September 2017 which of

course doesnrsquot make the determination of the tax

base any easier This may possibly require a legal con-

struct to be looked at in two different ways within the

same fiscal year as per 31 December 2017 to deter-

minate the tax base on the part of the founder or a

third beneficiary Then we can question the date of

entry into force of that provision We know from

reading the prior decision no 2016-610 that the

Ruling Commission is of the opinion that the old

provision of Article 3441 BITC 1992 applied to trans-

actions made prior to the entry into force of the

Cayman Tax This position is also endorsed by a

single source in the legal doctrine83 However this

cannot be said of Article 344 section 1 BITC 1992

that only applies to operations from 1 January 2012

In concrete terms this means that even in the vision

as used by the Ruling Commission transactions car-

ried out by legal constructs by 31 December 2011 can

never be included in the new text of the special anti-

abuse provision of Article 3441 BITC 1992 Although

the effect of this finding may be marginally possible it

seems useful to invoke this where appropriate with

regard to the tax authorities knowing the very exten-

sive and sometimes teleological interpretation that

the tax administration uses in applying Cayman

Tax One will have to wait and see how the Ruling

Commission will apply this provision From experi-

ence with the previous rulings we know that the

Ruling Commission is also not shying away from

the teleological interpretation and it has previously

been inspired by operations in the distant past for

the interpretation of the current legal position of

80 See the Section lsquoDouble structures defined anno 2018 and the taxation redesignedrsquo above

81 Debelva and Vandekerkhove (n 7) 3ndash7 and Goyvaerts (n 5) 910ndash14

82 Example ruling nr 2016-610

83 DEBELVA and Vandekerkhove (n 7) 3ndash7


Dow



taxable persons when applying the Cayman Tax The

legal and tax counsel that will determine the legal

status of his client in this will also have to be very

wary

The entry into force on17 September2017 and its limits

In accordance with Article 100 of the law of 25

December 2017 the following provisions shall apply

to the revenue acquired granted or made payable by a

legal construct since 17 September 2017 rather then

as from 1 January 2018

removal of the definition of lsquothird party

beneficiariesrsquo

removal of the references to lsquothird party bene-

ficiariesrsquo in Article 51 BITC 1992 that regulates

the transparent taxation of the legal construct

amendment regarding the payment of income ob-

tained during the current calendar year in respect

of the founder

addition of the provisions on input by and transfer

of a legal construct to a State with which Belgium

has not concluded any corresponding information

exchange

changes to the Articles 51 and 2201 BITC 1992

with regard to the priority rule of charging of bene-

fits on old reserves

changes to the text of Article 18 paragraph 1 3

BITC 1992 and Article 21 paragraph 1 12 BITC

1992 including the taxability as dividend of benefits

by trusts

the modification or removal of the special anti-

abuse provision of Article 3441 BITC 1992

All other changing provisions shall apply from 1

January 2018 and so will therefore only have an

impact (in principle) for tax year 2019 This includes

all changing provisions relating to chain constructs

The message from the Minister of Finance of 28

September 2017 that was published in the Belgian

Official Gazette of 3 October 2017 however only

applies to benefits by trusts84 and is apparently in-

tended to implement the retroactive application of

the extension of the qualification as dividend on

benefits of a legal construct referred to in Article 2

section 1 13 a) BITC 1992 type 1 for lsquobenefits

granted or made payable as of 17 September 2017rsquo

Moreover with this message the originally intended

retroactive application of this planned expansion to

include benefits that have occurred from 1 January

2017 already has been finally put aside which can

be applauded85

This message for the retroactive entry into force

only refers to the extension of the concept of dividend

to benefits by a legal construct lsquotype 1rsquo but not to the

other changes that are summarised higher up and

mentioned in Article 100 of the law of 25 December

2017 Since these other changes also take effect for

income starting from 17 September 2017 the so-

called lsquoannouncement effectrsquo that is accomplished by

the special announcement in the Belgian Official

Gazette cannot really apply for these other provisions

In general the question therefore arises as to what

extent the retroactive entry into force will be recon-

cilable with the principle of legal certainty In add-

ition reference is also no longer made to an even

earlier announcement by the government in the

adoption of the summer agreement on 24 July 2017

in which reference was also made to these changes

(which also did happen in the coalition agreement

of 9 October 2014) In this sense one can ask why

the benefits paid out by trusts as from 24 July 2017

were not also subject to the new rules by the afore-

mentioned lsquoannouncementrsquo the government had

84 Message of 28 September 2017 concerning the modification of Cayman tax (lsquohet aanslagstelsel dat van toepassing is op de juridische constructiesrsquorsquo in the

Belgian Official Gazette of 3 October 2017 in which reference is made to the Newsletter of 17 September 2017 issued by Tiberghien Law Firm 5httpswww

tiberghiencomnl1059kaaimantaks-onder-revisie4

85 In precise comments without sufficient nuance on the subject of the so called lsquoearly information leak which led to a partially anticipated entry into force of

the relevant provision on distributions by trusts from 1 January 2018 to 17 September 2017 are therefore wrong See Verachtert (n 21) 1ndash6


Dow



already announced it by then In its opinion the

Council of State in any case already expressed itself

very critical of this approach

In any case at the time of submission of the dec-

laration for tax year 2018 these provisions will have

to be taken into account for all benefits paid out from

17 September 2017 where a de-duplication of the

attachments for the calculation of income subject to

the Cayman Tax to be added to the annual tax return

seems advisable It remains to be seen how the local

tax audit will deal with these problems Due to the

short term for the tax declaration to be filed no help

was to be expected in these dealings of the Ruling

Commission and no rulings effectively have been

issued on Cayman Tax 20 to date

Conclusions on spasmodic legislation in dubio pro fisco

Due to the adjustments made by the law of 25

December 2017 the Cayman Tax 20 has become a

lot more complex That complexity naturally affects

legal certainty to the extent that there was at least

some legal certainty in the context of the Cayman

Tax 10 already which now seems to have partially

vaporized The various prior decisions that were de-

livered end 2016 are a clear illustration The Ruling

Commission had been very creative in this regard and

pushed the limits of the principle of legality by hand-

ling the teleological interpretation The literal text of

the law was blatantly deviated from With Cayman

Tax 20 the margins of interpretation that the literal

text of the law seems to allow appears to have been

stretched even further After all we cannot escape the

impression that various new provisions could be in-

terpreted very broadly I am thinking in particular of

the new lsquocontractual legal construct type 3rsquo whose

impact is highly unclear Also the relevant provisions

on the fictional liquidations through contribution or

transfer under the new Article 51 section 2 BITC

1992 can be interpreted very widely in my opinion

whether or not in reading with Article 344 section 1

BITC 1992 which is now explicitly declared

applicable on legal transactions by legal constructs

through the new Article 3441 BITC 1992

On the basis of the use of the texts of the Cayman

Tax 10 in the various ruling requests and prior deci-

sions in the year 2015 and 2016 it appears the history

of the emergence of a legal construct and its assets is

highly relevant to come to a correct assessment of the

taxation Many of those factual considerations are

however in a distant past for which the normal in-

spection terms of the tax authorities are no longer

capable of After all one has to recompose a family

history of old structures in a very comprehensive way

to be able to identify who qualifies as the founder-heir

of a legal construct and how the assets were compiled

and evolved Using the current composition of a legal

construct and its various subsidiary structures one

cannot just check what the history was The new pro-

visions of the Cayman Tax 20 make this all even

more complex by recording special tax rules with re-

spect to the payment of old reserves Not only are you

required to fully recompose the history of the emer-

gence of a structure you must also reflect the full

history of all these different structures in figures

And the burden of proof as already explained above

is entirely shifted to that of the taxpayer

The tax administration may after all according to

the text of the new Article 18 paragraph 1 3 BITC

1992 assume that any payment is a dividend unless

and to the extent that the taxpayer-founder or lsquothird

party recipientrsquomdashhas proven that the payment

reduced the capital of the legal construct to below

the capital contributed by the founder In addition

the amended Article 21 paragraph 1 12 BITC 1992

specifies that it should be proven that disbursed

income are composed of income obtained by the

legal construct that have already been taxedmdashin

Belgium That burden of proof of course again

rests on the taxpayer In other words the legislature

creates a comfort zone for itself where the tax autho-

rities can tax any payment at 30 per cent until proven

otherwise To me within the framework of objective

capabilities this seems to be more than a bridge too

far De facto the Cayman Tax 20 boils down to the


Dow



adagium lsquoin dubio pro fiscorsquo or lsquoeverything is taxable

unless you can prove otherwisersquo This is of course ab-

solutely contrary to the constitutional principles of

legality and I cannot escape the impression that the

legislator has measured a power here that she has not

Many taxpayers will therefore ask the question

whether liquidation of a legal construct could be a

solution I donrsquot think so In the event of liquidation

within the framework of the regulation of the Cayman

Tax 20 there can be little doubtmdashat least according

to the interpretation that emerges from the explana-

tory memorandummdashthat all (old) reserves will imme-

diately be subject to a tax charge of 30 per cent This

finding alone can prevent many a trustee or Board of

Directors from submitting a request for liquidation

Why would a foreign trustee or Board of Directors of

a foundation respond to a request that would linea

recta lead to ceding 30 per cent of an important part

of the target assets which can also be used for other

future beneficiaries to the Belgian tax administration

Certainly within the framework of maintaining the

wealth structure of internationally oriented families

this seems to me a route to avoid at all cost

Of course there should be provisions to combat tax

fraud and these provisions should be applied with the

necessary rigour But why proceed in principle based

on the underlying notion in the development of a tax

scheme involving trusts and around foundations that

tax fraud must quasi always be involved as is the case

with the Cayman tax That is of course a completely

wrong point of departure that can never lead to a

proper legislation That in the elaboration of

Cayman Tax 20 a principle was adopted lsquoto guaran-

tee the revenue for the Treasuryrsquo and as a result ruling

the benefits from trusts taxable and implementing

the anteriority rule in which benefits are charged in

fiscalibus on so-called older reserves makes a mockery

of the accounting principle of reality After all one

pushes the underlying accounting reality of the trust

and its financial accounts which is embedded in a

system governed by foreign law fully and casually

aside This is done purely for the benefit of the

Belgian federal treasury One can seriously question

whether such a fiscal treatment with emphatic denial

of foreign law is not contrary to the code of private

international law and contrary to the principle of

legality

The necessary symbiosis of the Cayman Tax on

trusts and foundations with the needs of inheritance

and estate planning which should lead to a correct

and well thought out taxation of income and capital

seem to have been sacrificed in the Belgian tax law in

an atmosphere of general mistrust of trusts and for-

eign foundations This could already be seen in 2015

in the explanatory memorandum to the emergence of

the Cayman Tax where it was said that discretionary

trusts are usually only discretionary86 on paper and

that lsquono one after all entrusts his assets to an un-

known administrator in a tax havenrsquo These are of

course statements that demonstrate a total inexperi-

ence with the phenomenon of trusts and foundations

and which we would rather have expect to read in a

popular weekly magazine that pretentiously embraces

the status of quality journalism than in the explana-

tory memorandum to a tax law of a country that due

to its central location may look forward to global

trading interests and financial flows also with coun-

tries that are located in the jurisdiction of Common

Law

One might then ask whether Belgium as a small

country in its zeal to discourage the conservation of

targeted assets hasnrsquot overplayed its hand The

pitcher goes so often to the well that it is broken at

last This may just be the last straw in legislative

change that will prompt administrators of targeted

assets to brand Belgium as a jurisdiction to avoid at

all cost If this should happen and there are already

indications that such decisions have been made or

are at least already being prepared this will of

course not be beneficial to the Belgian Treasury

86 ParlSt Kamer 2014-15 1 June 2015 Doc 54-1125001 p 26ff


Dow



Time will tell if and if so to what extent Cayman tax

20 will have a negative effect on the willingness of

several wealthy taxpayers to accept this endless com-

plex legislation should it continue

Gerd D Goyvaerts Partner Tiberghien Law Firm AntwerpBrussels E-mail GerdDGoyvaertstiberghiencom

wwwtiberghiencom


Dow



legal literature7 The explanatory memorandum to the

law of 10 August 2015 describes the underlying inten-

tions in a rather euphemistic way8 Cayman Tax was

lsquotightenedrsquo retroactively by the law of 26 December

20159 even before the end of 2015 In essence the law

intended to remedy a limited number of points criti-

cized in legal doctrine as well as a number of adjust-

ments that sought to counter the abuse of the status

of a number of exceptions and where appropriate to

include these within the scope of the system

According to the explanatory memorandum to the

law of 25 December 2017 that first lsquorepairrsquo of the

Cayman Tax intended to counter a number of alleged

abuses10 In particular it concerned the issue of the

so-called compartmentalized sicav dedie where the

shareholding is held in lsquointerconnectednessrsquo

Numerous articles on these issues appeared in legal

literature and disputes11 still exist to this day

All this has led to Cayman Tax 10 which has been

applicable from 1 January 2015 until 31 December

2017 However the amended Cayman Tax 20 already

partly existed since 17 September 2017 (see above) The

general principles and basic concepts of the Cayman

Tax system in place anno 2015ndash2017 considered post

factum even appears quite simple if we compare it with

the very complex regulations of Cayman Tax 20

With Article 51 BITC (Belgian Income Tax Code)

1992 (personal income tax) and with Article 2201

(legal entities tax) Cayman Tax 10 introduced a

system of complete fiscal transparency in the name

of the founder or a lsquothird party beneficiaryrsquo whereby

the latter received an actual payment in the same year

as that in which the legal construct acquired the rele-

vant underlying income We distinguish between

three types of legal constructs

a legal construct type 1 which generally refers to

trusts

a legal construct type 2a that refers to offshore

companies and

7 Reference can be made to Tiberghien (ed) Handboek voor Fiscaal Recht 2017-2018 (Kluwer 2017) randnr 12000 M DaubersquoNouvelles obligations de

declaration fiscale exigence legitime ou auto-incrimination prohibeersquo (2013) 4 RGCF 249ndash78 W Vetters and J Bonne lsquoPrivate vermogensstructuren aangepakt

met doorkijkbelastingrsquo (2013) 42 Fisc Act 1ndash4 A Van Zantbeek lsquoVrij gesteld ndash Constructies aangevenrsquo (2014) 463ndash64 TFR 511-515 GD Goyvaerts lsquoKaaimantaks

treft oprichters en begunstigden van buitenlandse constructiesrsquo (2015) 16 FiscAct 7ndash14 B PeetersrsquoBelgische lsquolsquokaaimantaksrsquorsquo laat nog vele vragen onbeantwoordrsquo

(2015) 379 Fiscoloog (I) 4ndash8 P Smet lsquolsquolsquoDoorkijkbelastingrsquorsquo ook soms lsquolsquobefore cashrsquorsquo en zelfs lsquolsquoregardless of cashrsquorsquorsquo (2015) 1429 Fiscoloog 1ndash8 H Verstraete and L

Migalski lsquoDe lsquolsquoKaaimantaksrsquorsquo analyse en eerste bedenkingenrsquo (2015) 3 VIP 4 GD Goyvaerts lsquoEnkele beschouwingen over de kaaimantaks en de Luxemburgse SPFrsquo

(2015) 4 VIP 47 B Philippart de Foy and A Dayez lsquoTaxe Caıman application aux fonds drsquoinvestissement et aux Sicav-FIS dedieesrsquo (2015) 4 RPP 441ndash33 J Van

Dyck lsquoJuridische constructies eerste lsquolsquouitgebreidersquorsquo vragenlijsten zijn verstuurdrsquo (2015) 1440 Fiscoloog 1ndash7 J Van Dyck lsquorsquorsquoEERrsquorsquo- en lsquolsquoniet-EERrsquorsquo-lijst juridische

constructies gepubliceerdrsquo (2015) 1441 Fiscoloog 1ndash4 GD Goyvaerts lsquoGeen kaaimantaks als er voldoende lsquolsquosubstancersquorsquo isrsquo (2015) 22 FiscAct 1ndash5 M Dhaene

lsquoVoorstel tot vervanging van het net ingevoerde artikel 18 2ter b) WIB 1992 door een duidelijke regel tot vermijding van dubbele belastingrsquo (2015) 485 TFR 607ndash

09 VA De Brauwere and C Wils lsquoTaxe Caıman le crocodile aux dents longuesrsquo (2015) 8 RGF 5ndash24 GD Goyvaerts (n 5) 865ndash23 A Van Zantbeek lsquoOlsen

Duidelijke krijtlijnen voor CFCwetgeving transparante belastingheffingen en kaaimantaksen binnen de Europese Economische Ruimtersquo (2015) 490ndash91 TFR 945ndash

48 M Gossiaux lsquoTaxe Caıman la taxation par transparence des constructions juridiques etrangeresrsquo (2015) 4ndash5 RGCF 303ndash19 N Appermont lsquoDe

kaaimantaksrsquo(2015) 11 AFT 5ndash37 GD Goyvaerts lsquoKaaimantaks gerepareerd en aangescherptrsquo (2015) 42 FiscAct 6 J Van Dyck lsquoKaaimantaks geen verkapte

regularisaties kapitalen meer mogelijkrsquo (2016) 1458 Fiscoloog 1 VA De Brauwere and C Wils lsquoTax Caıman ou la taxation par transparence des structures

patrimoniales lsquolsquoparadisiaquesrsquorsquorsquo (2016) 1 Actfisc 1ndash6 Th Afschrift lsquoLa taxation par transparence des revenus des lsquolsquoconstructions juridiquesrsquorsquo (premiere partie)rsquo

(2016) JDF 5ndash45 Th Afschrift lsquoLa taxation par transparence des revenus des lsquolsquoconstructions juridiquesrsquorsquo (deuxieme partie)rsquo (2016) JDF 65ndash112 GD Goyvaerts

lsquoNew Belgian CFC Legislation for Private Wealth Structures or Cayman Taxrsquo (2016) 23 (1) Journal of International Tax ndash Trust and Corporate Planning 25 GD

Goyvaerts and C Coudron lsquoWanneer zijn Luxemburgse Sicavs in scope en wanneer zijn ze out of scopersquo (2016) 1 VIP 35 DE Philippe lsquoElargissement de la taxe

caıman les Sicav dediees luxembourgeoises dans la ligne de mirersquo (2016) 6 Actfisc 7ndash10 K De Haen lsquoWet reeds aangepast Jaws II of Finding Nemorsquo (2016) 2

InternFiscAct 5ndash8 GD Goyvaerts lsquoDe kaaimantaks en de (niet-)toepassing ervan bij lsquolsquodubbelstructurenrsquorsquorsquo (2016) 504 TFR 572ndash80 P Debaene and S Slaets

lsquoBesprekingrsquo (2016) 504 TFR 601ndash05 F Debelva AM Vandekerkhove and G Verachtert lsquoOntsnappen dubbelstructuren steeds aan kaaimantaksrsquo (2016) 27 FiscAct

1ndash6 F Debelva and AM Vandekerkhove lsquoAntimisbruikbepalingen en dubbelstructuren enkele bedenkingenrsquo (2016) 30 FiscAct 3ndash7 J Van Dyck lsquoAangifte

rechtspersonenbelasting ook uitkijken voor lsquolsquokaaimantaksrsquorsquorsquo (2016) 1479 Fiscoloog 2ndash4 GD Goyvaerts lsquoDe gecertificeerde maatschap onderworpen aan de

Kaaimantaksrsquo (2016) 3 VIP 46ndash50 Ph Hinnekens and L Wellens lsquoRulingcommissie wel kaaimantaks op inkomsten lsquolsquotrustrsquorsquo niet op uitkeringenrsquo (2017) 1512

Fiscoloog 8ndash11 Ph Hinnekens and L Wellens lsquolsquolsquoGecertificeerde maatschaprsquorsquo toepassing kaaimantaks bevestigdrsquo (2017) 1514 Fiscoloog 5ndash8 GD Goyvaerts

lsquoRulings kaaimantaks herijken notie lsquolsquooprichterrsquorsquorsquo (2017) 13 FiscAct 3ndash10 G Verachtert lsquoGeveinsde structuur kan geen belastbaar dividend uitkerenrsquo (2017) 21

FiscAct 4ndash10 DE Philippe rsquoGeen kaaimantaks op Luxemburgse SICAV ndash SIFrsquo (2017) 30 FiscAct 6ndash11 M Delanote and DE Philippe lsquoLes doubles structures et

lrsquoarticle 344 1 CIR quels sont les actes poses par le contribuable susceptibles drsquoabusrsquo (2018) RGCF p 42ndash50 tevens gepubliceerd in TFR 535 121ndash39 N

Appermont and B Peeters lsquoKaaimantaks 20 exitheffingen en vrijheid van vestiging troebel waterrsquo (2018) 412 Fiscoloog (I) 5ndash8

8 ParlSt Kamer 2017ndash18 6 November 2017 Doc 54-2746001 p 29

9 Wet 26 December 2015 houdende maatregelen inzake de versterking van jobcreatie en koopkracht (BS 30 December 2015 ed 2 BS 28 Augustus 2015) KB 18

December 2015 tot uitvoering van artikel 2 1 13 b) tweede lid van het Wetboek van de Inkomstenbelastingen 1992 (BS 29 December 2015) (EER juridische

constructies)Goyvaerts (n 7)6


11 Philippart de Foy and Dayez (n 7) 441ndash33 Goyvaerts and Coudron (n 7) 35 Philippe (n 7) 7ndash10 E Verstraelen De fiscale analyse van gereglementeerde

instellingen voor collectieve belegging naar Belgisch recht in een Europese context Doctoraat Universiteit Antwerpen 2016 randnrs 644ff C Coudron lsquoVoorafgaande

beslissing 2017037 van 14 maart 2017 over de kaaimantaks en de Luxemburgse SICAV-SIF een moeilijke Kwalificatie-oefening rsquo(201702) TBF 40ndash48


Dow




foundations



ivity rulersquo)


























through tax only13


































able periodrsquo17














17 ParlSt Kamer 2017-18 (n 8) 30


Dow

























b) BITCrsquo













constructs







spect of founders







construct








be paid out first



















Dow












Tax 1020



















such fictions22



































a) or h) or in












tax



Dow










valuersquo














wayrsquo
































contract

















construct type 3




Dow




























Founder

Insurance policy

Contract

Legal construct















































Dow










































construct































part I I)
















Dow
























































































Dow


















struct type 3





























































30 ParlSt Kamer 2017-18 (n 8) 29


Dow











have to pay any tax











doubt31





























































31 ibid 30


Dow






and unclear
















3 BITC 1992)




double criterion






a benefit








































32 ibid 36

33 ibid 182


Dow







Abbreviated format




























Taxrsquo



















1992










example





















Dow




















































































Dow













struct type 1
















No 2016564 no 2016 576 no 2016 602 no

2016610 and no 2016711




















































Dow















































directly








in Belgiumrsquo




obtainedrsquo





constructrsquo








Dow
































































46 ibid 34ndash36


Dow















































































48 ibid 27ndash28




Dow

















































































51 ibid 26




Dow















tax year 2018


































































Dow

































































several reasons










intended











passage


Dow


















































benefit




















memorandum

















55 ibid 5ndash8


Dow
























completely59











































BITC 1992









Customs





Dow























relaxations



Cayman Tax 10

























































Dow






























September 2017












































Dow





















































together with





2017



legal construct






















Dow






and taxpayers










Belgiumrsquo



text

































the law



























68 ibid 39

69 ibid 39



Dow






















16500




















Fiscal Accounting


EUR 500000 NA


EUR 5000 NA



Fiscal Accounting


EUR 450000 NA


0 EUR NA







been introduced


Dow












of Directors






graph 2 BITC 1992









tributed capital73










effect74
















publication75











Fiscal Accounting


EUR 0000 NA


0 EUR NA






Dow







administration











































































Dow





































this stipulation81



















































Dow






wary








beneficiariesrsquo






of the founder




exchange







by trusts




















be applauded85





























Dow























































































Dow

















































legality






















Law














Dow








wwwtiberghiencom


Dow




foundations



ivity rulersquo)


























through tax only13


































able periodrsquo17














17 ParlSt Kamer 2017-18 (n 8) 30


Dow

























b) BITCrsquo













constructs







spect of founders







construct








be paid out first



















Dow












Tax 1020



















such fictions22



































a) or h) or in












tax



Dow










valuersquo














wayrsquo
































contract

















construct type 3




Dow




























Founder

Insurance policy

Contract

Legal construct















































Dow










































construct































part I I)
















Dow
























































































Dow


















struct type 3





























































30 ParlSt Kamer 2017-18 (n 8) 29


Dow











have to pay any tax











doubt31





























































31 ibid 30


Dow






and unclear
















3 BITC 1992)




double criterion






a benefit








































32 ibid 36

33 ibid 182


Dow







Abbreviated format




























Taxrsquo



















1992










example





















Dow




















































































Dow













struct type 1
















No 2016564 no 2016 576 no 2016 602 no

2016610 and no 2016711




















































Dow















































directly








in Belgiumrsquo




obtainedrsquo





constructrsquo








Dow
































































46 ibid 34ndash36


Dow















































































48 ibid 27ndash28




Dow

















































































51 ibid 26




Dow















tax year 2018


































































Dow

































































several reasons










intended











passage


Dow


















































benefit




















memorandum

















55 ibid 5ndash8


Dow
























completely59











































BITC 1992









Customs





Dow























relaxations



Cayman Tax 10

























































Dow






























September 2017












































Dow





















































together with





2017



legal construct






















Dow






and taxpayers










Belgiumrsquo



text

































the law



























68 ibid 39

69 ibid 39



Dow






















16500




















Fiscal Accounting


EUR 500000 NA


EUR 5000 NA



Fiscal Accounting


EUR 450000 NA


0 EUR NA







been introduced


Dow












of Directors






graph 2 BITC 1992









tributed capital73










effect74
















publication75











Fiscal Accounting


EUR 0000 NA


0 EUR NA






Dow







administration











































































Dow





































this stipulation81



















































Dow






wary








beneficiariesrsquo






of the founder




exchange







by trusts




















be applauded85





























Dow























































































Dow

















































legality






















Law














Dow








wwwtiberghiencom


Dow

























b) BITCrsquo













constructs







spect of founders







construct








be paid out first



















Dow












Tax 1020



















such fictions22



































a) or h) or in












tax



Dow










valuersquo














wayrsquo
































contract

















construct type 3




Dow




























Founder

Insurance policy

Contract

Legal construct















































Dow










































construct































part I I)
















Dow
























































































Dow


















struct type 3





























































30 ParlSt Kamer 2017-18 (n 8) 29


Dow











have to pay any tax











doubt31





























































31 ibid 30


Dow






and unclear
















3 BITC 1992)




double criterion






a benefit








































32 ibid 36

33 ibid 182


Dow







Abbreviated format




























Taxrsquo



















1992










example





















Dow




















































































Dow













struct type 1
















No 2016564 no 2016 576 no 2016 602 no

2016610 and no 2016711




















































Dow















































directly








in Belgiumrsquo




obtainedrsquo





constructrsquo








Dow
































































46 ibid 34ndash36


Dow















































































48 ibid 27ndash28




Dow

















































































51 ibid 26




Dow















tax year 2018


































































Dow

































































several reasons










intended











passage


Dow


















































benefit




















memorandum

















55 ibid 5ndash8


Dow
























completely59











































BITC 1992









Customs





Dow























relaxations



Cayman Tax 10

























































Dow






























September 2017












































Dow





















































together with





2017



legal construct






















Dow






and taxpayers










Belgiumrsquo



text

































the law



























68 ibid 39

69 ibid 39



Dow






















16500




















Fiscal Accounting


EUR 500000 NA


EUR 5000 NA



Fiscal Accounting


EUR 450000 NA


0 EUR NA







been introduced


Dow












of Directors






graph 2 BITC 1992









tributed capital73










effect74
















publication75











Fiscal Accounting


EUR 0000 NA


0 EUR NA






Dow







administration











































































Dow





































this stipulation81



















































Dow






wary








beneficiariesrsquo






of the founder




exchange







by trusts




















be applauded85





























Dow























































































Dow

















































legality






















Law














Dow








wwwtiberghiencom


Dow












Tax 1020



















such fictions22



































a) or h) or in












tax



Dow










valuersquo














wayrsquo
































contract

















construct type 3




Dow




























Founder

Insurance policy

Contract

Legal construct















































Dow










































construct































part I I)
















Dow
























































































Dow


















struct type 3





























































30 ParlSt Kamer 2017-18 (n 8) 29


Dow











have to pay any tax











doubt31





























































31 ibid 30


Dow






and unclear
















3 BITC 1992)




double criterion






a benefit








































32 ibid 36

33 ibid 182


Dow







Abbreviated format




























Taxrsquo



















1992










example





















Dow




















































































Dow













struct type 1
















No 2016564 no 2016 576 no 2016 602 no

2016610 and no 2016711




















































Dow















































directly








in Belgiumrsquo




obtainedrsquo





constructrsquo








Dow
































































46 ibid 34ndash36


Dow















































































48 ibid 27ndash28




Dow

















































































51 ibid 26




Dow















tax year 2018


































































Dow

































































several reasons










intended











passage


Dow


















































benefit




















memorandum

















55 ibid 5ndash8


Dow
























completely59











































BITC 1992









Customs





Dow























relaxations



Cayman Tax 10

























































Dow






























September 2017












































Dow





















































together with





2017



legal construct






















Dow






and taxpayers










Belgiumrsquo



text

































the law



























68 ibid 39

69 ibid 39



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51 ibid 26




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68 ibid 39

69 ibid 39



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EUR 450000 NA


0 EUR NA







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this stipulation81



















































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51 ibid 26




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tax year 2018


































































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55 ibid 5ndash8


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completely59











































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68 ibid 39

69 ibid 39



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16500




















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EUR 5000 NA



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EUR 450000 NA


0 EUR NA







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publication75











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EUR 0000 NA


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this stipulation81



















































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completely59











































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68 ibid 39

69 ibid 39



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EUR 500000 NA


EUR 5000 NA



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EUR 450000 NA


0 EUR NA







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Dow












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graph 2 BITC 1992









tributed capital73










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publication75











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EUR 0000 NA


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administration











































































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this stipulation81



















































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beneficiariesrsquo






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68 ibid 39

69 ibid 39



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EUR 500000 NA


EUR 5000 NA



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EUR 450000 NA


0 EUR NA







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Dow












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EUR 0000 NA


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this stipulation81



















































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beneficiariesrsquo






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68 ibid 39

69 ibid 39



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16500




















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EUR 500000 NA


EUR 5000 NA



Fiscal Accounting


EUR 450000 NA


0 EUR NA







been introduced


Dow












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graph 2 BITC 1992









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publication75











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EUR 0000 NA


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administration











































































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this stipulation81



















































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beneficiariesrsquo






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text

































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68 ibid 39

69 ibid 39



Dow






















16500




















Fiscal Accounting


EUR 500000 NA


EUR 5000 NA



Fiscal Accounting


EUR 450000 NA


0 EUR NA







been introduced


Dow












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graph 2 BITC 1992









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publication75











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EUR 0000 NA


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administration











































































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this stipulation81



















































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68 ibid 39

69 ibid 39



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16500




















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EUR 500000 NA


EUR 5000 NA



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EUR 450000 NA


0 EUR NA







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Dow












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graph 2 BITC 1992









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EUR 0000 NA


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this stipulation81



















































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68 ibid 39

69 ibid 39



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16500




















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EUR 500000 NA


EUR 5000 NA



Fiscal Accounting


EUR 450000 NA


0 EUR NA







been introduced


Dow












of Directors






graph 2 BITC 1992









tributed capital73










effect74
















publication75











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EUR 0000 NA


0 EUR NA






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administration











































































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this stipulation81



















































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beneficiariesrsquo






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Belgiumrsquo



text

































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68 ibid 39

69 ibid 39



Dow






















16500




















Fiscal Accounting


EUR 500000 NA


EUR 5000 NA



Fiscal Accounting


EUR 450000 NA


0 EUR NA







been introduced


Dow












of Directors






graph 2 BITC 1992









tributed capital73










effect74
















publication75











Fiscal Accounting


EUR 0000 NA


0 EUR NA






Dow







administration











































































Dow





































this stipulation81



















































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beneficiariesrsquo






of the founder




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Dow























































































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legality






















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text

































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68 ibid 39

69 ibid 39



Dow






















16500




















Fiscal Accounting


EUR 500000 NA


EUR 5000 NA



Fiscal Accounting


EUR 450000 NA


0 EUR NA







been introduced


Dow












of Directors






graph 2 BITC 1992









tributed capital73










effect74
















publication75











Fiscal Accounting


EUR 0000 NA


0 EUR NA






Dow







administration











































































Dow





































this stipulation81



















































Dow






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beneficiariesrsquo






of the founder




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Dow























































































Dow

















































legality






















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Dow








wwwtiberghiencom


Dow






















16500




















Fiscal Accounting


EUR 500000 NA


EUR 5000 NA



Fiscal Accounting


EUR 450000 NA


0 EUR NA







been introduced


Dow












of Directors






graph 2 BITC 1992









tributed capital73










effect74
















publication75











Fiscal Accounting


EUR 0000 NA


0 EUR NA






Dow







administration











































































Dow





































this stipulation81



















































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wary








beneficiariesrsquo






of the founder




exchange







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Dow























































































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legality






















Law














Dow








wwwtiberghiencom


Dow












of Directors






graph 2 BITC 1992









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publication75











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EUR 0000 NA


0 EUR NA






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this stipulation81



















































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beneficiariesrsquo






of the founder




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this stipulation81



















































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this stipulation81



















































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Documents

The changes introduced by the Belgian look-through ... · Appermont and B Peeters, ‘Kaaimantaks 2.0, exitheffingen en vrijheid van vestiging, troebel water?’ (2018) 412 Fiscoloog