What’s new?
Since this year, Belgian taxpayers who are the founder of a trust or similar legal structure, need to include Form 276 CJC with their personal income tax filing. This form will allow the Belgian tax authorities to gain more detailed insight into foreign assets held by Belgian tax residents in private wealth structures abroad.
In previous years, taxpayers already had to indicate “Yes” to Code 1077 on their tax return, if they were involved with a foreign legal structure, like a trust, foundation, or other similar entity. Previously, the identification requirements were rather limited but have now also expanded to income and asset reporting.
Belgian Cayman Tax
The Belgian Cayman Tax was introduced back in 2015 and aims to tax the assets sheltered in legal structures in countries with more favourable tax regimes. It allows the Belgian tax authorities to look through targeted offshore structures to directly tax their founders and beneficiaries on income received by such constructions.
You may not always expect it, but the Cayman tax has a much broader scope than one would think. The law currently targets 3 different categories of legal constructions: (i) trusts, (ii) legal entities abroad that are subject to an effective tax rate lower than 15%, and (iii) contractual arrangements like e.g. life insurance contracts.
The ‘look-through’ treatment can be avoided by demonstrating that the entity meets a substance test, i.e. that it is not a ‘wholly artificial arrangement’ and that it has a ‘genuine economic activity’. In other words, that it is not established purely for tax purposes. However, different than legal structures, trusts are always subject to a look-through taxation.
Reporting Obligation
From income year 2023 (tax year 2024) onwards, founders of these legal structures, as well as anyone who has received dividends or somehow benefits from it, must include Form 276 CJC for each legal structure separately. As mentioned, the amount of information to report as of this year has increased significantly.
Who Must Report?
The reporting obligation applies to any type of legal structure of which the taxpayer, their spouse, or any minor children, is considered the ‘founder’ or from which they have received a dividend or other benefit during the relevant taxable period. Even if the look-through taxation would not apply, the existence of the legal structure must still be reported in your tax return. This includes legal structures eligible for the substance exclusion, referring to those entities that are insufficiently taxed but do carry out a genuine economic activity.
Identification Information
In previous years, taxpayers were already required to disclose the following identification information in their tax return: full name, legal form, address, and, if applicable, the identification number of the legal structure; as well as the name and address of the manager of the legal structure in some cases.
Reportable Assets
A new requirement is that Form 276 CJC now asks to include the ‘total amount of assets of the legal structure at the end of the taxable period’. This means that the year-end value of the assets of the legal structure, as shown in the latest financial statements (or similar document), must be reported. Since this has not been made clear by the tax authorities, this can be interpreted to be at ‘market value’ or ‘booking value’.
Additionally, the ‘portion of the assets contributed by the founder’ must also be disclosed, referring to the nominal amount initially contributed by the founder, and increased by any later contributions.
Earnings Reportable in the Tax Filing
The relevant income to report in the personal tax return includes 3 subcategories:
- income obtained by the legal structure that has already been reported in the Belgian tax return because it is transparently taxable at the founder’s personal level. These would typically be reported as dividend income under Codes 1444/2444.
- distributions made or declared payable by the legal structure that are not regular (liquidation) dividends, including amounts deemed to have been distributed when, for instance, a legal structure transfers its economic rights, shares, or assets under certain conditions. Typically not considered would be a repayment of the founder’s capital and distributions from structures whose income is excluded from the ‘look-through’ taxation, e.g. due to the substance exclusion.
- undistributed profits of the legal structure that are attributed or declared payable to the founder, and which must be reported in the founder’s personal income tax return. The latter category only applies to income made payable as from 1 January 2024 (tax year 2025), so not for this year’s tax return.
Earnings Excluded from the Tax Filing
Lastly, the new Form includes 2 income subcategories that are not specifically included in the personal tax return:
- The first category consists of tax-exempted dividends, referring to distributions from income of the legal structure that has already been transparently taxed. In this respect, the Cayman Tax has been tightened recently, and it is no longer sufficient for income to e.g. qualify as a tax-free capital gain in the context of a normal management of your privately held assets. Even in this scenario, a taxation may apply under the Cayman tax rules.
- The second category concerns dividends not declared in the personal income tax return, because they fall under the final withholding tax system, meaning withholding tax was previously deducted and for this reason should no longer be included in the tax filing. For example, a dividend distributed by a Belgian company to a foreign wealth structure whereby withholding tax has been deducted at source.
Conclusion
In summary, we can conclude that the extended reporting requirement for trusts and legal structures under the new regulations, strengthens the tax authorities’ control over the Belgian Cayman Tax through the introduction of a new mandatory annex to the tax return. This form requires detailed information about the legal structure, its assets, and earnings, meaning that despite the apparent simplification, the reporting obligation has been significantly extended.
Filling out the Form could also lead to various practical discussions. Therefore, it is advisable to seek assistance from a specialized advisor if the above would somehow be relevant to you.