Tax Treaty Case Law around the Globe 2025

1. Introduction

The Court of First Instance in Leuven (hereinafter: Court) had to decide whether a Belgian taxpayer could invoke the exemption from withholding tax on interest payments made to its Dutch subsidiary, NLCo2, under Art. 11 of the double tax treaty between Belgium and the Netherlands (hereinafter: the Treaty). The Belgian tax authorities rejected the exemption and argued that the Dutch subsidiary was not the beneficial owner (BO) of the interest payments but acted as a conduit company.

2. Facts of the case

The case before the Court concerned the interpretation of the term “beneficial owner” under Art. 11(3)(a) of the 2001 Belgium-Netherlands Income and Capital Tax Treaty (DTC) and its interplay with the EU Interest and Royalties Directive (Directive 2003/49/EC; IRD). The dispute arose in the context of interest payments made by a Belgian company (hereinafter “BelCo”) to its Dutch subsidiary (NLCo2) relating to five intra-group loans.

BelCo sought an exemption from Belgian withholding tax on these interest payments as stipulated under Art. 11(3)(a) DTC and asserted that the Dutch recipient, NLCo2, was the BO of the interest. NLCo2 formed a Dutch fiscal unity together with NL...