U.S. GOVERNMENT PRINTING OFFICE

WASHINGTON : 

1 

59–112 

" ! SENATE 110TH CONGRESS

1st Session 

TREATY DOC. 

2007

110–3 

TAX CONVENTION WITH BELGIUM 

MESSAGE 

FROM

THE PRESIDENT OF THE UNITED STATES 

TRANSMITTING

CONVENTION BETWEEN THE GOVERNMENT OF THE UNITED 

STATES OF AMERICA AND THE GOVERNMENT OF THE KINGDOM 

OF BELGIUM FOR THE AVOIDANCE OF DOUBLE TAXATION AND 

THE PREVENTION OF FISCAL EVASION WITH RESPECT TO 

TAXES ON INCOME AND ACCOMPANYING PROTOCOL, SIGNED 

ON NOVEMBER 27, 2006, AT BRUSSELS (THE ‘‘PROPOSED TREATY’’) 

JUNE 21, 2007.—Treaty was read the first time, and together with the 

accompanying papers, referred to the Committee on Foreign Relations 

and ordered to be printed for the use of the Senate 


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LETTER OF TRANSMITTAL 

THE WHITE HOUSE, June 21, 2007. 

To the Senate of the United States: 

I transmit herewith, for Senate advice and consent to ratification, the Convention Between the Government of the United States 

of America and the Government of the Kingdom of Belgium for the 

Avoidance of Double Taxation and the Prevention of Fiscal Evasion 

with Respect to Taxes on Income, and accompanying Protocol, 

signed on November 27, 2006, at Brussels (the ‘‘proposed Treaty’’). 

The proposed Treaty will replace the existing income tax treaty between the two countries that was concluded in 1970 and amended 

by protocol in 1987. Also transmitted for the information of the 

Senate is the report of the Department of State with respect to the 

proposed Treaty. 

The proposed Treaty eliminates the withholding tax on certain 

cross-border dividend payments, including dividend payments to 

pension funds. The proposed Treaty also provides for mandatory 

arbitration of certain cases brought before the competent authorities. This provision is only the second of its kind in a proposed U.S. 

tax treaty. In addition, the proposed Treaty includes provisions, 

consistent with current U.S. tax-treaty policy, that are designed to 

prevent so-called treaty shopping. 

I recommend that the Senate give early and favorable consideration to the proposed Treaty and give its advice and consent to 

ratification. 

GEORGE W. BUSH. 


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LETTER OF SUBMITTAL 

DEPARTMENT OF STATE, 

Washington, April 29, 2007. 

THE PRESIDENT, The White House. 

THE PRESIDENT: I have the honor to submit to you, with a view 

to its transmission to the Senate for advice and consent to ratification, the Convention Between the Government of the United States 

of America and the Government of the Kingdom of Belgium for the 

Avoidance of Double Taxation and the Prevention of Fiscal Evasion 

with Respect to Taxes on Income, and accompanying Protocol, 

signed on November 27, 2006, at Brussels (the ‘‘proposed Treaty’’). 

The proposed Treaty will replace the existing income tax treaty 

which was concluded in 1970 and amended by protocol in 1987. 

The proposed Treaty eliminates the withholding tax on certain 

cross-border dividend payments, including dividend payments to 

pension funds. The proposed Treaty also provides for mandatory 

arbitration of certain cases before the competent authorities. This 

provision is only the second of its kind in a U.S. tax treaty. The 

proposed Treaty also modernizes the provisions, consistent with 

current U.S. tax-treaty policy, that are designed to prevent socalled treaty shopping. 

The proposed Treaty was concluded in recognition of the importance of the United States’ economic relations with Belgium. The 

Department of the Treasury and the Department of State cooperated in the negotiation of the proposed Treaty. It has the full approval of both Departments. 

Respectfully submitted, 

CONDOLEEZZA RICE. 

Enclosure: Key Provisions of Proposed Treaty between the 

United States and Belgium. 

KEY PROVISIONS OF THE U.S.-BELGIUM INCOME TAX TREATY AND

PROTOCOL

The attached Convention and accompanying Protocol (proposed 

Treaty) is proposed to replace the income tax treaty between the 

United States and the Kingdom of Belgium, which was concluded 

in 1970, and amended by protocol in 1987 (Convention). The proposed Treaty was negotiated to bring the current Convention into 

closer conformity with current U.S. tax treaty policy. There are, as 

with all bilateral tax conventions, some variations from these 

norms. In the proposed Treaty, these differences reflect particular 

aspects of Belgian law and treaty policy, the interaction of U.S. and 

Belgian law, and U.S.-Belgium economic relations. 


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The most important aspect of the proposed Treaty relates to the 

taxation of cross-border dividend payments. Under the proposed 

Treaty, generally no withholding tax is imposed in the United 

States on a dividend paid by a U.S. company to a Belgian company 

that owns directly or indirectly at least 80 percent of the stock of 

the U.S. company, and generally no withholding tax is imposed in 

Belgium on a dividend paid by a Belgian company to a U.S. company that owns directly at least 10 percent of the stock of the Belgian company. Otherwise, the proposed Treaty provides withholding rates of 15 percent in the case of a portfolio dividend and 

5 percent in the case of a direct dividend (a holding of at least 10 

percent of the stock of the company paying the dividend). The proposed Treaty also provides that there shall be no withholding tax 

on a cross-border dividend payment to a pension fund. Eliminating 

withholding taxes on certain cross-border dividends and cross-border dividend payments to pension funds is consistent with an overall view that investment income should be taxed by the country of 

residence, not the country of source. Further, the 15 percent maximum rate of withholding on a cross-border interest payment under 

the Convention is generally eliminated. 

The proposed Treaty also provides for mandatory arbitration in 

cases in which the competent authorities of the Contracting States 

are unable to reach agreement on how to resolve a complaint by 

a taxpayer; such arbitration is generally available no sooner than 

two years after the matter was first presented to the competent authorities. The proposed Treaty provides that the determination of 

an arbitration board constitutes a resolution of the matter by mutual agreement of the competent authorities and is binding on both 

countries, unless the taxpayer does not accept the determination. 

This is only the second time that a proposed U.S. tax treaty has 

included such a provision and it will be well received by the business community. 

In addition, the proposed Treaty also updates the current Convention’s treatment of pensions. It removes barriers to the flow of 

personal services between the United States and Belgium that 

could otherwise result from discontinuities in the laws of the two 

countries regarding the deductibility of pension contributions. 

The proposed Treaty also strengthens the Convention’s provisions preventing so-called treaty shopping, which is the inappropriate use of a tax treaty by third-country residents, and applies 

particularly strong anti-treaty shopping rules in the case of a Belgian company claiming exemption of taxation on dividends from an 

80-percent-owned U.S. corporation. In connection with the conclusion of the proposed Treaty, the United States and Belgian delegations discussed how the derivative benefits test in the proposed 

Treaty would apply to a Belgian company (itself owned by persons 

of diverse countries of residence) owning 80 percent or more of the 

voting power of a U.S. company and claiming the exemption from 

tax on dividends. In general, the derivative benefits test permits a 

company to qualify for benefits under the proposed Treaty if a significant portion of its owners would qualify for equivalent or better 

benefits under a treaty between the United States and the owners’ 

countries of residence. In their discussions, the delegations confirmed their shared understanding that, in applying the derivative 


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VII

benefits test, it is necessary to allow each owner to assume the 

same ownership percentage that the Belgian company has in the 

U.S. payer of the dividend. This ‘‘step in the shoes’’ shared understanding with respect to ownership is consistent with the application of the derivative benefits tests in comparable U.S. tax treaties 

with other countries. 

Moreover, the proposed Treaty updates the current Convention to 

reflect U.S. and Belgian legislative changes since 1987. For example, the proposed Treaty updates the ‘‘saving clause’’ to provide 

that former citizens or long-term residents of the United States 

may, for the period of ten years following the loss of such status, 

be taxed in accordance with the laws of the United States. 

The proposed Treaty also modernizes our treaty relationship and 

brings it into closer conformity with current U.S. tax treaty policy 

by making technical changes to the article dealing with the elimination of double taxation and by eliminating the article dealing 

with the taxation of independent personal services. 

The proposed Treaty also significantly expands the circumstances 

in which the United States will be able to obtain information from 

Belgium that is necessary to enforce U.S. domestic tax rules. In 

particular, Belgium will provide information held by financial institutions, despite its bank secrecy rules. Moreover, Belgium agreed 

to certain other provisions that override aspects of its domestic 

laws that currently prevent effective information exchange. 

The proposed Treaty explicitly links the elimination of withholding in the United States on certain dividends paid to a Belgium resident to Belgium’s obligations with respect to information 

exchange, and, in some cases, Belgium’s compliance with the mutual agreement provisions of the proposed Treaty. The proposed 

Treaty provides that if the so-called zero rate is eliminated, then 

Belgium is no longer required to provide bank information. 

The United States and Belgium shall notify each other through 

the diplomatic channel, accompanied by an instrument of ratification, when each has completed its required procedures for entry 

into force. The proposed Treaty will enter into force on the date on 

which the later of the notifications is received. It will have effect, 

with respect to taxes withheld at source, for amounts paid or credited on or after the first day of the second month next following the 

date upon which the proposed Treaty enters into force and, with respect to other taxes, for taxable years beginning on or after the 

first day of January next following the date upon which the proposed Treaty enters into force. However, where any person would 

be entitled to greater benefits under the prior Convention, the prior 

Convention, at the election of the person, shall generally continue 

to have effect in its entirety with respect to such person for a period of twelve months from the date the provisions of the proposed 

Treaty are effective. The election described in the preceding sentence, however, does not affect the application of the new exchange 

of information provisions discussed above. 


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