Tax Treaty Case Law around the Globe 2024

29.1. Introduction

A subject-to-tax clause in article 23 of tax treaties conditions the taxpayer’s access to double tax relief (through either the credit or exemption methods) in their state of residence to their foreign-source income having been subject to taxation in the other state. To most observers, it might seem intuitive that alleviating overlapping cross-border taxation presupposes that the taxpayer paid tax with respect to an item of income somewhere at least once. In Belgium, however, the meaning of subject-to-tax for purposes of applying article 23 has been, for decades, a source of jurisprudential and scholarly debate. Various factors complicate this debate: different wordings of article 23 in Belgium-signed tax treaties, with some adopting the expression “taxed” while others refer to “may be taxed”, “effectively taxed”, or even “chargeable to tax”; diverging positions expressed over the years by the Belgian tax administration on the meaning of these terms; and, especially, the enduring, even if contested, influence of a decades-old internal law doctrine referred to as “exemption vaut impôt” or “the Sidro doctrine” (in the latter case, in reference to the name of the com...