Withholding tax exemption for dividends

Withholding tax exemption for dividends

Conditions

With effect from the income year 2018, investors who meet certain conditions may reclaim the withholding tax they have paid on dividends received. These conditions are explained below.

For whom does the measure apply?

This tax advantage only applies for natural persons (residents or non-residents of Belgium); it does not apply for legal entities. The exemption applies for each taxpayer. Each partner in a married couple may receive this tax advantage (the ‘exemption basket’).

Which dividends are involved?

Dividends received on both Belgian and international shares are eligible. By ‘dividends’, we mean “all benefits awarded by a company on shares or profit-sharing certificates, howsoever they are named, in whatever capacity and in whatever manner they are obtained”. Not all dividends are eligible. The law expressly excludes the following:

  • dividends distributed by or through the agency of legal constructions (entities subject to the ‘Cayman tax’);
  • dividends paid by undertakings for collective investment in transferable securities (‘funds’) or distributed through the agency of mutual funds;
  • dividends originating from special distribution transactions (e.g. merger transactions, distributions from the capital of the company or purchase of treasury shares);
  • reclassified interest (i.e. interest which the company assigns to its shareholder/director and which exceeds certain limits).

The former withholding tax exemption for dividends paid by recognised cooperative companies or companies with a social object has been scrapped and integrated in the new exemption basket. As a result, dividends paid by recognised cooperative companies (such as Cera or BRS) will henceforth also be subject to withholding tax at source.

Moreover, the new rules apply only for dividends awarded or paid in respect of the year 2018.

How much withholding tax can I reclaim?

For the income year 2018 (assessment year 2019) you can reclaim withholding tax up to 192 euros. That is equivalent to dividends totalling 640 euros (assuming they are subject to the withholding tax rate of 30%). For the income year 2019 (assessment year 2020), this amount rises to 240 euros withholding tax, up to a maximum of 800 euros in dividends.

If you have received dividends to which different rates of withholding tax apply, you can decide for which dividends you wish to apply for this exemption.

How do I claim the rebate?

As the exemption does not apply at source, you must in principle always pay withholding tax when you receive the dividends. You can reclaim the withholding tax deducted by entering the dividends on your personal income tax return. The withholding tax deducted will be set off against the income tax you have to pay. If you do not pay personal income tax, the deducted amount will be refunded.

Specifically, you should declare the withholding tax deducted under codes 1437 and 2437 in your personal income tax return for assessment year 2018. However, you are not required to declare the dividend amount actually received in your tax return.

Non-residents can reclaim the withholding tax deducted via the income tax return for non-residents.

If you are a non-resident and do not have to submit an income tax return in Belgium, you must send your rebate claim to the tax authority (the details are not yet known). Your rebate claim must be submitted no later than 31 December of that year.

What evidence must I provide?

It is not yet clear what evidence you must be able to provide to demonstrate that you are entitled to this tax advantage. A Royal Decree will provide more clarity on this. What is certain is that you must not send evidentiary documents together with your tax return, but must keep them in case you receive an inspection.

What about dividends for minors?

Investment income of minors is added to the income of their parents. Minors are therefore not entitled to this tax advantage in their own right. If minors have received dividends, the withholding tax deducted from those dividends must be reclaimed on their parents’ personal income tax return.

What if my dividends are paid directly to me in another country?

If you receive dividends on foreign shares directly in a country other than Belgium, the withholding tax will not be deducted at source. You must therefore enter this investment income on your tax return. This means you will have to pay personal income tax on those dividends at a rate that is equal to the withholding tax rate.

You should also no longer enter those dividends on your annual tax return. N.B.: Only the first tranche of dividends, up to 640 euros, are exempt. If you receive a higher amount in dividends in another country which are not eligible for this new exemption basket, you must of course include them on your tax return.

What about shares in bare ownership - usufruct?

In the event of a legacy or gift subject to usufruct, the bare ownership of the shares in principle belongs to the children and the usufruct to the parent(s). In principle, the usufructuary will receive the dividends and therefore have to pay the withholding tax. In that case, the usufructuary includes the dividends in his or her exemption basket.

What if I receive a dividend payment in the form of shares?

A dividend payment need not necessarily be in the form of cash. We then speak of a dividend ‘in kind’. The same conditions apply for these dividends, which means they are eligible for the exemption basket.

What if dividends are received by an entity with joint ownership of property?

In the case of entities with joint ownership of property (e.g. a civil company or an entity with joint ownership of property established through a gift or legacy), the withholding tax on dividends is in principle paid at source. The members of an entity with joint ownership of property can each reclaim their portion of the deducted withholding tax. See the conditions above for more details on this. The proportionate entitlement of each member is described in the articles of the company, a deed of gift or a statement of inheritance.

What should I enter where on my tax return?

Specifically, you should declare the withholding tax deducted under codes 1437 and 2437 in your personal income tax return for assessment year 2018. However, you are not required to declare the dividend amount actually received in your tax return.

What if you have received a dividend from Cera/BRS?

In that case, you will receive a separate certificate for this.

What if you have received dividends from other financial institutions?

Don’t forget to include them in your calculation. You can add dividends together until your exemption basket of 640 euros per person is full.

Information of dividends from KBC Brussels and for your Bolero account

For the assessment year 2019 (dividends received in respect of 2018), KBC Brussels and Bolero will not send you a personal statement.

You will find information on dividends from KBC Bank on your bank statements in KBC Brussels Touch and in KBC Brussels Mobile.

On your bank statements

You will find information on the dividends in the appendix to the statement of your dividends.

KBC Brussels Touch

Select the account into which the dividend was paid. Tap 'Search and download report’ using the search term 'dividend'. Only look at statements for the period from 01/01/2018 to 31/12/2018. If you select an individual statement, you will find the dividend information in the appendix.

In KBC Brussels Mobile

Select the account into which the dividend was paid. Tap ‘Completed transactions’ using the search term 'dividend'. Only look at statements for the period from 01/01/2018 to 31/12/2018. If you select an individual statement, you will find the dividend information in the appendix.

Dividend information for your Bolero account

You will find the dividend information for your Bolero account on the Bolero platform.

Go to the menu ‘Accounts’ – ‘Transaction history’ and use the search term ‘dividend’. Select the transactions for the period 01/01/2018 to 31/12/2018. If you click on the information button (i-button), you will see the details and the amount of withholding tax.

Please note! This will show you all dividends, but you cannot reclaim the withholding tax for all dividends. You will find more information on this in the FAQs above.

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