PROTOCOL TO THE 1970 TREATY (1987)
Date of Conclusion: 31 December 1987.
Entry into Force: 3 August 1989.
Effective Date: 1 January 1988 (see Article 4).
MODIFYING AND SUPPLEMENTING THE CONVENTION BETWEEN
THE UNITED STATES OF AMERICA AND
THE KINGDOM OF BELGIUM
FOR THE AVOIDANCE OF DOUBLE TAXATION AND
THE PREVENTION OF FISCAL EVASION
WITH RESPECT TO TAXES
SIGNED AT BRUSSELS ON JULY 9, 1970
The text of Article 10 (Dividends) of the Convention is suspended and replaced by the following:
- Dividends paid by a company which is a resident of a Contracting State to a resident of the other Contracting State may be taxed in that other State.
- However, such dividends may also be taxed in the Contracting State of which the company paying the dividends is a resident, and according to the laws of that State, but if the beneficial owner of the dividends is a resident of the other Contracting State, the tax so charged shall not exceed:
- 5 percent of the gross amount of the dividends if the beneficial owner is a company which owns directly at least 10 percent of the voting stock of the company paying the dividends;
- 15 percent of the gross amount of the dividends in all other cases.
This paragraph shall not affect the taxation of the company in respect of the profits out of which the dividends are paid.
- The term “dividends” as used in this Article means income from shares, “jouissance” shares or “jouissance” rights, mining shares, founders’ shares or other rights, not being debt-claims, participating in profits, as well as income from other corporate rights which is subjected to the same taxation treatment as income from shares by the laws of the State of which the company making the distribution is a resident. This term also includes income — even if paid in the form of interest — which is taxable as income from capital invested by the members of a company, other than a company with share capital, which is a resident of Belgium.
- The provisions (1) and (2) shall not apply if the beneficial owner of the dividends, being a resident of a Contracting State, carries on business in the other Contracting State of which the company paying the dividends is a resident, through a permanent establishment situated therein, or performs in that other State independent personal services from a fixed base situated therein, and the holding in respect of which the dividends are paid forms part of the assets of such permanent establishment or fixed base. In such case, the provisions of Article 7 (Business Profits) or Article 14 (Independent Personal Services), as the case may be, shall apply.
- Where a company which is a resident of a Contracting State pays dividends, the other Contracting State may not impose any tax on the dividends paid by that company to a resident of the first-mentioned State, except insofar as the holding in respect of which the dividends are paid forms part of the assets of a permanent establishment or a fixed base situated in that other State.
- For the purpose of paragraph (4) and notwithstanding any other provision of the Convention, dividends paid by a company which is a resident of Belgium in respect of a holding which forms part of the assets of a permanent establishment situated in Belgium, may be taxed separately in accordance with Belgian law.
In paragraph (5) of Article 11 (Interest) of the Convention, the words “paragraph (3) of Article 10 (Dividends)” shall be substituted for the words “paragraph (2) of Article 10 (Dividends)”.
The following Article is inserted in the Convention between Article 12 (Royalties) and Article 13 (Capital Gains):
(Limitation on Benefits)
- A person (other than an individual) which is a resident of a Contracting State and derives dividends, interest or royalties from the other Contracting State shall not be entitled under Articles 10 (Dividends), 11 (Interest) or 12 (Royalties) to relief from taxation in that other Contracting State unless:
- both of the following conditions are satisfied:
- more than 50 percent of the beneficial interest in such person (or in the case of a company, more than 50 percent of the number of shares of each class of the company’s shares) is owned, directly or indirectly, by one or more individual residents of one of the Contracting States, one of the Contracting States or its political subdivisions or local authorities, or citizens of the United States; and
- more than 50 percent of the gross income of such person is not used, directly or indirectly, to meet liabilities for interest or royalties to persons who are not residents of one of the Contracting States, one of the Contracting States or its political subdivisions or local authorities, or citizens of the United States; or
- the dividends, interest or royalties derived from the other Contracting State are derived in connection with, or are incidental to, the active conduct by such person of a trade or business in the first-mentioned State (other than a business the principal activities of which are making or managing investments in the other Contracting State); or
- the person deriving the dividends, interest or royalties is a resident of a Contracting State either in whose principal class of shares there is substantial and regular trading on a recognized securities exchange, or more than 50 percent of whose shares of each class is owned by a resident of that Contracting State in whose principal class of shares there is such substantial and regular trading on a recognized securities exchange.
- both of the following conditions are satisfied:
- For purposes of subparagraph (1)(a)(ii), the term “gross income” means:
- in the case of the United States, gross income as defined under the Internal Revenue Code of 1986, as may be amended from time to time, without regard to the geographic source of the income.
- in the case of Belgium, gross receipts, or where an enterprise is engaged in a business which includes the manufacture or production of goods, gross receipts reduced by the direct costs of labor and materials attributable to such manufacture or production and paid or payable out of such receipts.
- For purposes of subparagraph (1)(c), the term “recognized securities exchange” means:
- the NASDAQ System owned by the National Association of Securities Dealers, Inc. and any stock exchange registered with the Securities and Exchange Commission as a national securities exchange for purposes of the Securities Exchange Act of 1934;
- the Belgian stock exchanges; and
- any other securities exchange agreed upon by the competent authorities of the Contracting States.
- This supplementary Protocol, which shall form an integral part of the Convention signed at Brussels on July 9, 1970, shall be ratified and the instruments of ratification shall be exchanged at Brussels as soon as possible.
- This supplementary Protocol shall enter into force on the fifteenth day after the date of the exchange of the instruments of ratifications and its provisions shall have effect with respect to dividends, interest and royalties credited or paid on or after January 1, 1988.
This supplementary Protocol shall remain in force as long as the Convention’s in effect and in the event of termination of such Convention shall terminate simultaneously with such Convention. However, either Contracting State may terminate separately this supplementary Protocol, through diplomatic channels, by giving to the other Contracting State at least six months’ written notice of termination at any time after five years from the day on which it enters into force. In such event, the supplementary Protocol shall cease to have effect with respect to dividends, interest and royalties credited or paid on or after the first day of January 1 next following the expiration of the six-month period and the provisions of the Convention, as effective on December 31, 1987, shall have effect with respect to such amounts.
IN WITNESS WHEREOF the undersigned, being duly authorized thereto by their respective Governments, have signed this supplementary Protocol.
DONE at Washington in duplicate, in the English, French and Dutch languages, the three texts being equally authentic, this 31st date of December, 1987.