For more than 20 years, the same question has been recurring, fuelling debate and sparking controversy: can Belgium levy the subscription tax on foreign Ucits, and in particular on Luxembourg-based open-ended investment companies (SICAVs)?
As of today, around 899 cases are ongoing, both at the administrative and judicial levels, involving a total amount of more than €1.5bn, of which just over €962m relates to principal amounts. According to Belgium’s federal Ministry of Finance, the Federal Public Service Finance (FPS Finance), the majority of these disputes are currently pending or have been placed back on the court roll.
The subscription tax, the scope of which was extended to foreign collective investment undertakings (CIUs) in 2004, applies to the portion of assets that foreign funds market to Belgian investors. Since this extension, foreign UCIs face the risk of double taxation, as they may also be subject to a similar tax in their country of residence. Some Luxembourg funds consider that this contravenes the Belgium–Luxembourg Double Taxation Convention of 17 September 1970, which was ratified in Belgium by the Act of 14 August 1971.
The nature of the tax is at the heart of the debate
For Vilma Domenicucci, ALFI’s Head of Tax, the key issue is to understand the nature of the Belgian subscription tax. Does the subscription tax fall within the scope of the convention between Luxembourg and Belgium for the avoidance of double taxation and the settlement of certain other matters relating to taxes on income and on capital? “In Luxembourg, for example, the subscription tax is a registration duty. It is therefore distinct from taxes on income and capital and is not covered by the convention,” explains Vilma Domenicucci. “In Belgium, the question is likewise one of the nature of the subscription tax: if it constitutes a tax on capital, it falls within the scope of the convention; if, on the contrary, as the Court of Cassation appears to have held, this is not the case, the matter falls solely under Belgian domestic law, and Belgium is therefore free to determine its taxation independently,” she continues.
However, this interpretation remains contested by other courts, such as the Ghent Court of Appeal, which, in its judgement of 5 November 2024 (2023/AR/761), held that the subscription tax was a wealth tax covered by the Belgian-Luxembourg Double Taxation Convention, thereby preventing Belgium from levying it on Luxembourg SICAVs. The judgment of the Brussels Court of Appeal of 25 April 2023, which had ruled in favour of Fidelity Funds SA and paved the way for refunds for several Luxembourg funds, has now been quashed.
“Ultimately, it is Belgian investors investing in a Luxembourg SICAV who pay the price of this double taxation, with the Luxembourg SICAV, as an investment fund distributed in Belgium, being liable for both the Luxembourg subscription tax and the Belgian subscription tax (on the proportion of shares marketed to Belgian investors). As a Belgian investor, you bear both taxes at the same time. This double burden increases the cost of the investment.” She adds: “If we take a broader perspective, namely that of developing investment as advocated by the European Commission, with the aim of directing savings towards investments, including through investment funds, this decision is not conducive to achieving that objective,” she continues.
A legal and economic issue
“For the Belgian State, the judgement handed down last Friday by the Court of Cassation significantly reduces this major budgetary risk,” states the Federal Public Service Finance in its press release, adding that it “provides legal certainty regarding the application of this tax and confirms the interpretation it has always upheld”. The rulings by the Brussels Court of Appeal potentially paved the way for the Belgian State to reimburse more than €1.5bn to Luxembourg-based collective investment undertakings.
When contacted by the editorial team, Henri Vanderlinden, Advocate General at the Belgian Court of Cassation, recalls the role of the highest court in this type of case: “The Court of Cassation does not constitute a third level of jurisdiction. It exercises judicial review over the decision challenged by the parties in their appeal on points of law. This review concerns the proceedings and the correct application of the legal provisions.”
“The Court of Cassation ruled, at the hearing of 4 September 2026, that the contested decisions should be annulled.” The Advocate General specifies that the case has been referred back to the Antwerp Court of Appeal and that, in civil matters, it is for the parties themselves to request that the case be placed on the court’s docket before the court to which it has been referred.
Luxembourg funds in limbo
According to Vilma Domenicucci, the heart of the debate comes down to one question: is the Belgian subscription tax a “tax on capital” within the meaning of the convention? If so, it must give way to Luxembourg’s exclusive taxing rights; if not, as confirmed by this judgment, Belgium remains free to levy it without any treaty constraint.
More than 2,700 Luxembourg funds are currently distributed in Belgium, the Head of Tax points out, and in this respect ALFI would obviously have preferred a different decision. “However, since this is a legal question concerning the nature of a Belgian tax, the Court of Cassation, which rules on matters of law, is the only court that can decide the issue. From an economic and fund-development perspective, we would have preferred a different decision.” “Nevertheless, Belgium remains an important market for Luxembourg funds,” stresses Vilma Domenicucci.
“The Luxembourg SICAVs concerned have, of course, taken precautionary measures and have therefore, for several years, filed claims for reimbursement of the subscription tax paid in Belgium. Had the decision been different and favorable, they would thus have been able to obtain a refund.”
The Belgian Federal Public Service Finance is still analysing the Court of Cassation’s ruling. One thing is already clear, however: in its view, the Court has sent a strong signal. It considers that the ruling does not require any amendment to the double taxation treaty with Luxembourg.
In the meantime, the Luxembourg funds will have to wait, as the case is starting from scratch before the Antwerp judges.
