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(a) DIVIDENDS

In principle, the Belgian tax on income from personal property is collected from dividends at the source at the full or reduced rate according to their Belgian or foreign origin.

The Conventions with France and Italy provide that income from shares and similar forms of participation shall be taxable in the country where the real head office is situated.1

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As an exception, however, to this rule, the Franco-Belgian Convention prescribes that income from securities (public debentures, shares or other certificates issued by companies, bonds or other loan scrip) is liable to impersonal tax in the State where the beneficiary has his fiscal domicile, to be collected according to the laws of that country. In this case, however, the State will deduct from this tax the tax already paid on the same income in the other country.

In view of the present incidence of taxation in France and Belgium, it was agreed that this provision should be applied as follows:

As regards Belgium, and in so far as the general tax rate on income from foreign securities does not exceed 12 per cent,1 this tax will not be payable on income from French securities accruing to persons having their fiscal domicile in Belgium. Should the general rate exceed 12 per cent, it will be reduced by 12 per cent in respect of these securities. As regards France, the general rate of the tax on income from foreign securities will be reduced by 12 per cent in the case of Belgian securities.

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Further, French share companies having their fiscal domicile in France and a permanent establishment in Belgium may, when making their annual return in Belgium, apply to be treated like Belgian share companies; in this case, the tax on dividends is assessed on a fraction of the Belgian profits equal to the ratio between the distributed profits of the company and its total profits, provided, however, that the sum assessable to the taxes on professional and personal property income does not exceed the total Belgian profits.

A French company which asks for this treatment will have to pay: (i) the tax on income from personal property at the full rate applying to share income on the portion of Belgian profits determined by the above-mentioned ratio; (ii) professional tax at the ordinary rates on the remainder of those profits, whereas, at present, the whole of the taxable profits earned in Belgium are liable to professional tax at 10 per cent.

At the same time, the total income liable to personal property and professional income taxes may not exceed the Belgian profits.

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