Tax Treaty Case Law around the Globe 2022

S. 331Chapter 28: Belgium: Subject-to-Tax Clause

Anne Van de Vijver/Eva Baekelant

28.1. Introduction

This chapter concerns the interpretation of subject-to-tax clauses in tax treaties. International literature observes that there exists a wide variety of subject-to-tax clauses. In Belgium, three types of treaties can be distinguished. The first type follows the exemption method of article 23 of the OECD Model, which provides that an exemption must be granted if the income “may be taxed” in the other state in accordance with the provisions of the treaty. This means that the income must be exempted, regardless of whether the source state effectively taxes the income. Second, in deviation from the OECD Model, since the turn of the century a lot of treaties provide in their article 23 that income must be “taxed” in the other state in order for the exemption to apply. Finally, the third type of tax treaty explicitly stipulates that the exemption must only be granted if the income has been “effectively taxed” in the source state.

In Belgium, the second type of subject-to-tax clause (“taxed”) is generally interpreted in accordance with the so-called “Sidro” or “exemption vaut impôt” doctrine. Und...