Implication of the new Belgian Companies and Associations Code on Tax law
On May 1st 2019, the new Belgian Companies and Associations Code has entered into force. The new text does not only reform Company law in a strict sense, but it also bears fiscal consequences. The legislator intended for the new Code to have a neutral impact on Tax law.
One of the most striking consequences of the new Belgian Companies and Associations Code is that it creates a duality between the applicability of Tax and Company law, to wit the connecting factors used to determine the law of the country under which the company falls.
Rules concerning the constitution, the functioning and the liquidation of a company are enshrined in the Company law (lex societatis) applicable to that company.
The real seat vs the statutory seat
To determine which lex societatis is applicable to a specific company, one of the two following criteria is mostly used: the real seat or the statutory seat.
On the one hand, according to the real seat theory, a company is governed by the law of the country in which it is actually and effectively managed.
On the other hand, following the statutory seat theory, a company is governed by the law of the country in which the statutory seat is located.
With the new Companies and Associations Code, Belgium has abandoned the real seat theory in favor of the statutory seat theory.
When it comes to Tax law, the Belgian legislator has always opted for the real seat theory to determine whether or not a company is a Belgian tax resident (subject to Belgian taxation). This remains unchanged.
Gap between Company & Tax law: Consequences
Therefore, the adoption of the new Code has created a gap between Company law and Tax law. The statutory seat theory is applied to determine the lex scoietatis, while the real seat theory is applied to determine the tax residence of a company.
This gap can lead to difficult situations: for example, if a company has its real seat in Belgium but is incorporated abroad and never changed its seat, it will be subject to Belgian Tax law but its lex societatis will be the one of the country of origin.
In order to ensure the neutral impact on Tax law, the legislator has planned to adopt a rule according to which a company that has its statutory seat in Belgium will be presumed to also have its real seat in Belgium. The presumption can be countered by proving that the fiscal residence of the company is also established in that foreign State, according to the fiscal rules of that State.
If you require assistance or advice in regard to these changes or to your company in general, we at Vanbelle Law offer years of experience in the field, so feel free to contact us.