Belgium dividend withholding tax to UAE resident individual

[TravelAfficionado]

I'm tax resident in Belgium and have a 100%-owned company in Belgium which will soon have about €250k cash, after payment of 20% corporate tax. If I then withdraw the cash as a dividend, this will incur 30% withholding tax, so €75k.

As an alternative, I could move to Dubai, become tax resident in the UAE and withdraw the dividend as a UAE tax resident. This would be a genuine move, involving establishment of a freezone company and substance in the UAE. According to the Belgium-UAE tax treaty, the dividend from my Belgian company would then only incur 10% withholding tax, so only €25k.

After payment of the dividend, I would close the Belgian company to fully cut my ties with Belgium.

Here are Belgium's withholding tax rates according to PwC:
Belgium - Corporate - Withholding taxes

Here's the text of the Belgium-UAE tax treaty:
http://internationaltaxtreaty.com/download/United Arab Emirates/DTC/UAE-Belgium-DTC-Sep-1996.pdf
The relevant clause is Article 10, clause 2(b)
"the tax so charged shall not exceed... 10 per cent of the gross amount of the dividends in all other cases"

This potential €50k tax saving on day 1 seems like a great welcome gift for my arrival in the UAE.

Does the above plan make sense or have I missed something obvious?

 

[Sols]

Sounds like you've done your research quite well. Just make sure you run it by a Belgian tax adviser first. Don't want to create a mess back in Belgium for if/when you return.

You may need to stay outside of Belgium for a certain period of time and there might also be a timing issue with regards to deferral of dividend payments until resident abroad.

 

[ShillGates]

id keep the money in the company, then invoice from your uae company to belgian company......... obviously banks dont like this when doing this the same ubo so you might need a work around, but that is where my suggestion ends

 

[JustAnotherNomad]

I hope you checked about Belgian exit tax, that could really ruin your plans.

Assuming that exit tax is not an issue, you could either invoice your Belgian company from your UAE company or maybe even pay yourself a salary from the Belgian company as a UAE tax resident. Usually a salary is taxed where the employee is tax resident - but I don't know how Belgium handles that.

Or you could sell your Belgian company to a UAE company. Probably the sales price would have to be realistic, i.e. 250k+. The capital gains from the sale would be taxable in the UAE.
The UAE company should be able to receive the dividends with 0% or 5% WHT - so it can use that money to pay for buying the company. Probably the Belgian company would have to withhold 30% (but not pay it to the tax authorities), and a year later, that money can also be paid out.
But you also have to check whether this could trigger a general anti-avoidance rule (GAAR) in Belgium. They could say you did this all just to avoid the WHT - so maybe your original plan is better after all, and simpler.

You should talk to a Belgian tax lawyer. Since you actually want to live in the UAE, you have nothing to fear and they should be able to provide you with a good solution.

 

[seabreeze]

Definitely make sure you check this with a Belgian tax attorney first. Especially that Belgium recently went utterly haywire in terms of liquidation taxation for individuals, exit taxation for corporates and anti-avoidance.

Your move to UAE isn't particularly notable. Nor is your willingness to distribute dividends.
However, together, they could fall under the radar as a "general anti-avoidance" kind of situation, where legal arrangements made with the primary purpose of gaining a tax advantage are seen as null and void from the point of view of the taxation authority.

To avoid too much interest from Belgian tax, SWIM would first (before booking profits in Belgium) move (properly, severing all ties and doing exit tax declaration) to a EU country where he has no ties and no dividend distribution taxation (Hungary? Cyprus?), Deposit his shares in a HU/CY entity, wait for a few months (preferably next calendar year) THEN move to Dubai, wait for 1 year (12 months participation exemption), shift dividends BE > HU/CY at 0% under PE and then liquidate the Cyprus or Hungary Co or (better still) re-distribute the dividends and keep the company for real activities (the real cause you opened it, not just the tax advantage, remember?).

Then again, the question arises, whether given a move to Cyprus and its non-dom regime, you'd even want to move to Dubai afterwards. Your only saving then would be 2.x% on dividend distributions to yourself...

 

[JustAnotherNomad]

I believe that even when moving between EU countries, exit tax laws have recently become stricter in many countries.
One other option could be to move to Estonia and sell the company to an Estonian holding company. From the Estonian holding company, the dividends could also be paid out free of tax - no matter whether you live in Estonia or in Dubai.
The question would be what the price for the company could be, it probably can't be too low. And the capitals gains from the sale would be taxable where you are tax resident. But if you can sell it for a low amount (again, question for a Belgian tax lawyer), then Estonia could also be an option. And it's less suspicious than Dubai or Cyprus.

 

[jonnyG]

I believe that even when moving between EU countries, exit tax laws have recently become stricter in many countries.
One other option could be to move to Estonia and sell the company to an Estonian holding company. From the Estonian holding company, the dividends could also be paid out free of tax - no matter whether you live in Estonia or in Dubai.
The question would be what the price for the company could be, it probably can't be too low. And the capitals gains from the sale would be taxable where you are tax resident. But if you can sell it for a low amount (again, question for a Belgian tax lawyer), then Estonia could also be an option. And it's less suspicious than Dubai or Cyprus.

There are exit tax laws but in some countries if it is less than 1 million it is not against the law

 

[FreedomSearcher]

I'm tax resident in Belgium and have a 100%-owned company in Belgium which will soon have about €250k cash, after payment of 20% corporate tax. If I then withdraw the cash as a dividend, this will incur 30% withholding tax, so €75k.

As an alternative, I could move to Dubai, become tax resident in the UAE and withdraw the dividend as a UAE tax resident. This would be a genuine move, involving establishment of a freezone company and substance in the UAE. According to the Belgium-UAE tax treaty, the dividend from my Belgian company would then only incur 10% withholding tax, so only €25k.

After payment of the dividend, I would close the Belgian company to fully cut my ties with Belgium.

Here are Belgium's withholding tax rates according to PwC:
Belgium - Corporate - Withholding taxes

Here's the text of the Belgium-UAE tax treaty:
http://internationaltaxtreaty.com/download/United Arab Emirates/DTC/UAE-Belgium-DTC-Sep-1996.pdf
The relevant clause is Article 10, clause 2(b)
"the tax so charged shall not exceed... 10 per cent of the gross amount of the dividends in all other cases"

This potential €50k tax saving on day 1 seems like a great welcome gift for my arrival in the UAE.

Does the above plan make sense or have I missed something obvious?

Globaljetset, can I ask which solution you ended up using and how it turned out? Appreciate it.