On August 24, 2017 the Belgian Ministry of Finance issued a press release announcing that the Convention between the Kingdom of Belgium and the Oriental Republic of Uruguay for the Avoidance of Double Taxation with respect to Taxes on Income and on Capital and for the Prevention of Fiscal Evasion, which was signed on August 23, 2013 (Hereafter: the DTA) entered into force on August 4, 2017.

 

Based on Article 28, Paragraph 2 of the DTA (“Entry into force”) the fact that the DTA entered into force on August 4, 2017 means that the provisions of the DTA shall have effect:

a)   in respect of taxes due at source, for amounts credited or payable on or after January 1, 2018;

b)   in respect of other income taxes, for the taxable periods beginning on or after January 1, 2018; and

c)   in respect of any other taxes, in respect of taxes due in respect of taxable events taking place on or after January 1, 2018.

 

Below we will discuss a selection of provisions included in the DTA of which we think they might interest our readers.

 

Taxes covered

Based on Article 2, Paragraph 3 of the DTA (“Taxes covered”), the existing taxes to which the DTA shall apply are in particular:

a)   in the case of Belgium:

(i)   the individual income tax;

(ii)  the corporate income tax;

(iii) the income tax on legal entities;

(iv) the income tax on non-residents;

including the prepayments and the surcharges on these taxes and prepayments;

b)   in the case of Uruguay:

(i)   the tax on business income (Impuesto a las Rentas de las Actividades Económicas - IRAE);

(ii)  the personal income tax (Impuesto a las Rentas de las Personas Físicas - IRPF);

(iii) the non-residents income tax (Impuesto a las Rentas de los No Residentes - IRNR);

(iv) the tax for social security assistance (Impuesto de Asistencia a la Seguridad Social - IASS); and

(v)  the capital tax (Impuesto al Patrimonio - IP);

 

Article 2, Paragraph 4 subsequently arranges that the DTA shall apply also to any identical or substantially similar taxes that are imposed after the date of signature of the Convention in addition to, or in place of, the existing taxes.

 

Residency

Article 4, Paragraph 3 of the DTA (“Resident”) arranges that where by reason of the provisions of paragraph 1 a person other than an individual is a resident of both Contracting States, then it shall be deemed to be a resident only of the State in which its place of effective management is situated.

 

Permanent establishment

Article 5, Paragraph 3 of the DTA (“Permanent establishment”) arranges that the term “permanent establishment” likewise includes:

a)   a building site or a construction or installation project, but only if such site or project lasts more than 6 months;

b)   the furnishing of services in a Contracting State, including consultancy services, by an enterprise through employees or other personnel engaged by the enterprise for such purpose, but only where these employees or personnel are present in that Contracting State (for the same or a connected project) for a period or periods aggregating more than six months within any twelve-month period.

 

Article 7, Paragraph 4 of the DTA (“Business profits”) contains a so-called appropriate adjustment clause that applies in situations that a Contracting State adjusts the profits that are attributable to a permanent establishment of an enterprise of one of the Contracting States and taxes accordingly profits of the enterprise that have been charged to tax in the other State.

 

Immovable property

Article 6, Paragraph 1 of the DTA (“Income from immovable property”) arranges that income derived by a resident of a Contracting State from immovable property (including income from agriculture or forestry) situated in the other Contracting State may be taxed in that other State.

 

With respect to immovable property Article 13, Paragraph 1 of the DTA (“Capital gains”) arranges that gains derived by a resident of a Contracting State from the alienation of immovable property referred to in Article 6 and situated in the other Contracting State may be taxed in that other State.

 

Article 13, Paragraph 4 of the DTA subsequently arranges that gains derived by a resident of a Contracting State from the alienation of shares deriving more than 50 per cent of their value directly or indirectly from immovable property situated in the other Contracting State may be taxed in that other State. However, this paragraph shall not apply to gains derived from the alienation of shares of companies that are listed on an approved stock exchange of one of the Contracting States, to gains derived from the alienation of shares in the course of a merger or division of the company holding the shares, or where the immovable property from which the shares derive their value is immovable property in which an active trade or business is carried on.

 

Associated enterprises

Article 9, Paragraph 2 of the DTA (“Associated enterprises”) contains a so-called appropriate adjustment clause.

 

Article 9, Paragraph 3 subsequently arranges that the provisions of paragraph 2 shall not apply in cases where one or more transactions leading to an adjustment of profits in accordance with paragraph 1 are regarded as fraudulent according to an administrative or judicial decision.

 

Dividends

If the beneficial owner of the dividends is a resident of the other Contracting State, Article 10, Paragraph 2 of the DTA (“Dividends”) maximizes the withholding tax a Source State is allowed to withhold over dividends to:

a)   5 per cent of the gross amount of the dividends if the beneficial owner is a company (other than a partnership) which holds directly at least 10 per cent of the capital of the company paying the dividends;

b)   15 per cent of the gross amount of the dividends in all other cases.

 

(Dividends shall however not be taxed in the Contracting State of which the company paying the dividends is a resident if the beneficial owner of the dividends is a pension fund that is a resident of the other Contracting State, provided that the shares or other rights in respect of which such dividends are paid are held for the purpose of an activity mentioned under Article 3, paragraph 1, m) of the DTA.)

 

Interest

If the beneficial owner of the interest is a resident of the other Contracting State, Article 11, Paragraph 2 of the DTA (“Interest”) maximizes the withholding tax a Source State is allowed to withhold over such interest to 10 per cent of the gross amount of the interest.

 

Article 11, Paragraph 3 subsequently arranges that notwithstanding the provisions of Article 11, Paragraph 2, interest shall be exempted from tax in the Contracting State in which it arises if it is:

a)   interest paid to a pension fund, provided that the debt-claim in respect of which such interest is paid is held for the purpose of an activity mentioned under Article 3, paragraph 1, m);

b)   interest paid to the other Contracting State, to one of its political subdivisions or local authorities or to a public entity.

 

Royalties

If the beneficial owner of the royalties is a resident of the other Contracting State Article 12, Paragraph 2 of the DTA (“Royalties”) maximizes the withholding tax a Source State is allowed to withhold over such royalties to 10 per cent of the gross amount of the royalties.

 

Other

Furthermore the DTA contains a.o. provisions regarding a Mutual Agreement Procedure (Article 24), regarding the Exchange of Information (Article 25) and regarding the assistance in the collection of taxes (Article 26).

 

Click on the language of your choice to be forwarded to the text of the DTA in that language as available on the website of the Belgian Ministry of Finance. (English, French or Dutch)

 

Are you looking for other DTAs? Then check our section DTAs & TIEAs, a very efficient way to locate numerous DTAs.

 

 

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