Circular nr. AFZ/97.0060 (AFZ 4/2005) dd. 31.03.2005
CIRC 31.03.05/2
Circular nr. AFZ/97.0060 (AFZ 4/2005) dd. 31.03.2005
INTERNATIONAL AGREEMENTS
HONGKONG
Agreement between Belgium and Hong Kong for the avoidance of double taxation and the prevention of fiscal evasion with respect to taxes on income and on capital.
I. IMPORTANT DATES
Application in Belgium :
II. GENERAL FEATURES
The main intention of this Agreement is to avoid double taxation and to prevent fiscal evasion with respect to - existing or future - taxes on income.
Article 25 regulates, according to the usual rules and with the usual limitations, the exchange of such information between the competent authorities as is necessary for carrying out the provisions of the Agreement and of the domestic laws concerning taxes covered by the Agreement. For the application of the provisions of Article 25 reference is made to the instruction Ci.R.9 Div/460.792 of November 27,1996.
The Agreement does not provide for any administrative assistance for the recovery of taxes.
Since the Agreement bears a strong resemblance to other Agreements signed by Belgium, only the most principal or specific provisions shall be examined hereinafter.
III. SCOPE AND DEFINITIONS
1. Contracting Parties
Since July 1, 1997 Hong Kong is an actual part of the People's Republic of China, of which it has become a Special Administrative Region. Nevertheless, neither the Convention of April 18, 1985 between Belgium and China for the avoidance of double taxation and the prevention of fiscal evasion with respect to taxes on income, nor the additional Protocol of November 27, 1996 do apply to Hong Kong.
The aforementioned Convention applies to "the territory of the People's Republic of China in which the laws relating to Chinese tax are in force". Within the People's Republic of China however, the Hong Kong Special Administrative Region enjoys a special tax status which is a continuation of the tax law that was in force before Hong Kong returned to China.
This Agreement is binding on the Kingdom of Belgium and the Hong Kong Special Administrative Region of the People's Republic of China. It applies to the territory of the Hong Kong Special Administrative Region, including Hong Kong Island, Kowloon, the New Territories and the waters of Hong Kong.
2. Taxes covered (Article 2)
In the case of Belgium the Agreement applies to the individual income tax, the corporate income tax, the income tax on legal entities, the income tax on non-residents and to the different prepayments (withholding tax on movable income, withholding tax on immovable income, withholding tax on earned income) as well as to the surcharges on these taxes and prepayments (inclusive of the supplementary crisis contribution).
Article 3, § 2 provides that the Agreement does not apply to any penalty or interest imposed under the tax laws of Belgium or Hong Kong. Item 1 of the Protocol explains that, as for Hong Kong, "penalty or interest" includes any sum added to the tax in default of payment, as well as any additional tax assessed for infringement of or failure to comply with the tax laws.
With regard to Belgium :
X, a resident of Belgium, is seconded to the permanent establishment which his employer has in Hong Kong. The secondment is limited to 12 months (from January 1, 2004 till December 31, 2004). Since X has kept his centre of vital interests in Belgium, he is a resident of Belgium under article 4 of the Agreement. X has no other income in 2004 and does not submit a tax return in Belgium for the taxable period 2004.
After an audit at X's employer by the tax authorities, the Belgian tax administration makes an estimated assessment in the individual income tax in respect of the remuneration derived by X in 2004. That assessment is coupled with a tax increase of 20 % on the non-declared income (2nd infringement without the intention to evade taxes) and an administrative fine of 50 € for not having submitted a tax return (2nd infringement without the intention to evade taxes).
X appeals against the estimated assessment and does not pay the tax. After examination it turns out that the renumeration is taxable in Hong Kong under Article 14 of the Agreement (the renumeration is borne by the permanent establishment) and that Belgium has to exempt the renumeration from tax according to Article 22, § 2 of the Agreement. Consequently, the assessment has to be discharged completely; this goes also for the tax increases and the possible interest for late payment. The administrative fine can be maintained.
3. Definitions (Articles 3, 4 and 5)
The Agreement contains the usual definitions (general definitions, resident and permanent establishment) of the OECD Model Tax Convention. Those definitions are applicable every time a defined term is used in the Agreement.
A. Estates, trusts and partnerships being residents of Hong Kong (Article 3, § 1, (i))
Each of these entities is deemed to be a person in the sense of the Agreement (in the same way as individuals, companies and bodies of persons) and thus to be a resident in the sense of the Agreement when it is liable to tax in Hong Kong as such.
B. Residence (Article 4)
With regard to Hong Kong, the term "resident" is not defined in the law but it is defined in the administrative guidelines. For the application of the first sentence of Article 4, § 1, it is explained in item 2, subsection 1 of the Protocol under which circumstances a person is deemed to be a resident of Hong Kong.
The aim of item 2, subsection 2 of the Protocol is to assure that Belgium construes the second sentence of Article 4, § 1 in conformity with the OECD commentary on Article 4. According to that commentary, a person who is liable to tax in Hong Kong on the basis of his domicile is not excluded from the scope of the Agreement on account of the fact that he is taxed on a territorial basis in Hong Kong. Companies of Hong Kong which are not taxed on their income from foreign sources are resident of Hong Kong if they are incorporated in the Hong Kong Special Administrative Region or - when incorporated outside the Hong Kong Special Administrative Region - if they have their central management and control in the Hong Kong Special Administrative Region. In that respect, those companies benefit from the advantages of the Agreement.
C. Permanent establishment (Article 5)
The definition of permanent establishment differs from the OECD model as regards the following :
1. Income from immovable property (Article 6)
In accordance with the customary rules, income from immovable property may be taxed in the Contracting Party where the immovable property is situated.
According to the Agreement, rights to variable or fixed payments as consideration for the right to explore for natural resources also constitute immovable property. The assignment of the right to impose these payments is thus provided for by Article 6, whereas this is normally done in accordance with the provisions of Article 7 (business profits).
Article 6, § 4 defines the location where the immovable property is situated. That definition does not differ from what is usually considered as the situation of immovable property.
2. Business profits (Article 7)
Article 7 corresponds for the greater part to the OECD Model Tax Convention. Taking into consideration the definition of the term "business" in Article 3, § 1, (b), Article 7 also applies to income from professional services and other activities of an independent character.
As recommended in the OECD Model Tax Convention, the Agreement with Hong Kong does no longer include a particular provision concerning professional services and other activities of an independent character. Consequently, all income from professional activities that is not referred to in another provision of the Agreement, falls within the scope of Article 7. This goes especially for income accrued to managers performing their duties outside the scope of an employment contract and not being a partner of a company, other than a company with share capital, nor a member of the board of directors or a similar organ (such managers are indeed not referred to in Articles 14 or 15 - cf. nr. 10 hereinafter).
The second and third sentence of Article 7, § 3 are a supplement to the OECD Model. According to these sentences, in determining the profits of a permanent establishment and except for the reimbursement of actual expenses, no account shall be taken of payments in return for the use of patents or other rights, of commissions paid for specific services performed or for management and, except in the case of a banking enterprise, of interest between the permanent establishment and the other offices of the enterprise.
These rules are somewhat more restrictive than those which, according to the current OECD Model, are applicable for lack of particular rules. With regard to services, the OECD commentary agrees that it is appropriate to charge a service to an amount that corresponds with the amount that would be charged to an independent customer and thus to add a profit margin.
3. Shipping and air transport (Article 8)
Article 8, § 3, the wording of which is not the same as usual, more or less adopts the terms of Article 9 of the Agreement between the government of the Kingdom of Belgium and the government of Hong Kong Special Administrative Region of the People's Republic of China concerning air services of April 6, 1998. Notwithstanding the unusual formulation, the rules that are laid down in Article 8, including Article 8, § 3, correspond to the common rules.
The Agreement of April 6, 1998 concerning air services entered into force on July 1, 2003 and Article 9, permitting the avoidance of double taxation, applies in Belgium to the years of assessment beginning on or after April 1, 1998. (see publication in the Official Gazette of October 14, 2003). According to the provisions of Article 9 of the Agreement, that article does no longer apply to taxes to which the present Agreement applies (see item I above).
4. Dividends (Article 10)
Taxation in the State of source :
5. Interest (Article 11)
In the State of source the tax on interest is limited to 10 % of the gross amount of the interest.
Under Article 11, § 3, however, the state of source has to grant an exemption from tax for :
In the State of source the tax on royalties is limited to 5 % of the gross amount of the royalties.
7. Movable income from Belgian sources, derived by residents of Hong Kong
The reductions of or the exemptions from Belgian tax are granted in the usual way, on production of a form 276 Div-Aut, 276 Int-Aut or 276 R, as the case may be.
8. Interest and royalties from sources in Hong Kong, derived by residents of Belgium
Since the rules for the application of the reduction of Hong Kong tax are not known to date, the residents of Belgium who derive interest or royalties from that territory are requested to submit an application to the Hong Kong tax office under within whose jurisdiction the debtor of such income falls.
To their application they must attach all the documents certifying that, by virtue of the Agreement, they qualify for the reduction. They can prove their status of Belgian resident with a certificate 276 CONV, issued by the Belgian tax office within whose jurisdiction they fall. To obtain that certificate, the beneficiary of the income has to produce an accurate description of the nature and the amount of the income for which the application of the Agreement is asked.
9. Capital gains (Article 13)
This article is in line with the OECD Model Tax Convention.
However, the scope of Article 13, § 4 concerning capital gains from the alienation of shares of a company which is engaged mainly in immovable property is more limited than the scope of Article 13, § 4 of the OECD Model concerning the same matter. It does not apply to gains derived from the alienation of :
Article 14, § 2 contains an additional condition compared to the OECD Model Tax Convention. The remuneration is only and exclusively taxable in the Party where the recipient is present if it is taxable according to the laws in force in that Party.
Insofar as it is necessary, item 5 of the protocol confirms that an employment is exercised where the employee is physically present.
According to Article 15, § 2, remuneration that is derived by a director in respect of the discharge of day-to-day functions of a managerial or technical nature may be taxed in accordance with the provisions that are laid down in Article 14.
According to item 6 of he Protocol, the provisions of Article 14 also apply to remuneration that a resident of Hong Kong receives in respect of his personal activity as a partner of a company, other than a company with share capital, which is a resident of Belgium. Thus, these provisions apply, even if there is no bond of subordination between a partner and the company (e.g. when a partner, having a majority interest in the capital, is the manager of the company).
11. Pensions and annuities (Article 17)
Pensions and other similar renumeration, paid in consideration of past private employment as well as annuities and pensions and other similar remuneration paid by a Contracting Party under the social security legislation in force in that Party or under a public scheme in force in that Party in order to supplement the benefits of the social security legislation, may be taxed in the Contracting Party in which they arise.
In accordance with the OECD commentary, Article 17 does not only apply to periodic payments (referred to as "pensions") but also to non-periodic payments such as lump-sum payments from group insurance contracts (referred to as " other similar remuneration").
Article 17 also applies to pensions paid under the Belgian social security legislation to former self-employed persons.
Finally, Article 17 applies to income referred to in the following articles :
Paragraph 4 makes it possible to determine when a pension arises in a Contracting Party. On the basis of that paragraph, a pension is deemed to arise in Belgium if it is paid by or out of a pension fund or other institution that is recognised for tax purposes by Belgium or - if such is not the case - if such fund or institution has managerial control over the pension scheme with which the pension is connected. A pension fund or other institution is recognised for tax purposes by Belgium when the contributions giving rise to the payment of the pension result in a tax benefit at the taxation in Belgium of the employee and/or his employer. This provision applies, irrespective of the location where the fund or the institution is situated (Belgium, Hong Kong or a third State).
By virtue of paragraph 3, alimony shall be taxable only in the State of residence of the debtor of the income.
According to the taxation laws currently in force in Hong Kong, alimony paid by a resident of Hong Kong to a resident of Belgium can not be deducted from the taxable income of the debtor of the income and can not be taxed in the hands of the recipient. In such case, by virtue of paragraph 3, Belgium assumes that the alimony has been taxed in Hong Kong and thus that it must be exempted from tax in accordance with Article 22, § 2, (a). Alimony paid by a resident of Belgium to a resident of Hong Kong can be deducted from the taxable income of the debtor of the income under the conditions laid down in Article 104, 1° ITC 1992 and can be taxed in the hands of the recipient.
12. Other income (Article 20)
Items of income, wherever arising, not dealt with in the Articles 6 to 19 shall in principle be taxable only in the Contracting Party of which the recipient is a resident. This provision applies to all income arising in third States and to income such as income from an individual life insurance policy, prizes and grants awarded to scholars or writers from the other Contracting Party.
With regard to income arising in the other Contracting Party however, Article 20, § 3 allows that such income may also be taxed in that other Party. In such case, the Party of which the recipient of the income is a resident shall avoid double taxation as pursuant to Article 22.
13. Avoidance of double taxation with regard to income derived by a resident of Belgium (Article 22, § 2)
A. General rule : exemption with progression (Article 22, § 2, (a))
Income, not being dividends, interest or royalties, which is taxed in Hong Kong in accordance with the provisions of the Agreement, shall be exempted from tax in Belgium but shall be taken into account in determining the tax rate that is applicable to the remaining taxable income of the recipients.
Insofar as it is necessary, item 7 (a) of the Protocol stipulates explicitly that elements of income which are not taxable by the laws in force in Hong Kong or which are exempt from tax in Hong Kong, shall not be considered to be taxed and, consequently, shall not be exempted in Belgium.
On that subject it should be noticed that the application of the territorial principle by Hong Kong may not have as a result that Belgium should not exempt the profits that an enterprise which is a resident of Belgium derives through a permanent establishment situated in Hong Kong. For the purposes of Article 22, § 2, (a), the profits of a permanent establishment shall be considered as a whole to determine if such profits have been submitted to tax in Hong Kong. If the profits are taxed in Hong Kong, Belgium is bound by Article 22, § 2, (a), to exempt those profits, even if the real tax burden is lower in Hong Kong than in Belgium (1).
[ (1) The exemption scheme that is laid down in the Agreement with Hong Kong is stricter than the exemption scheme provided for by the OECD Model Tax Convention. The latter stipulates that the State of residence shall exempt from tax income which "may be taxed" in the other State, i.e. even if that other State does not exercise its right to tax (e.g. if the taxable profits of a permanent establishment are fully exempted from tax by the taxation laws of that other State to promote the economic development of the economic zone where the permanent establishment is situated).]
This global approach is confirmed by item 7 (b) of the Protocol. If an enterprise which is a resident of Belgium has a permanent establishment in Hong Kong, and Belgium exempts the profits of that permanent establishment, the exemption shall, according to the abovementioned item 7 (b), apply to the aggregate profits of the permanent establishment, including the dividends, interest and royalties attributable to the permanent establishment. Once the profits of the permanent establishment have been submitted to tax in Hong Kong, Belgium exempts the total amount of the profits which are attributable to the permanent establishment (calculated according to Belgian taxation law), even if the taxable basis on which the tax in Hong Kong was charged does not include the aforementioned dividends, interest or royalties. Thus, the total amount of the profits which are attributable to the permanent establishment in Hong Kong and which are exempted from taxation in Belgium includes :
Dividends paid to a Belgian company by a company which is a resident of Hong Kong, enjoy the participation exemption regime (definitief belaste inkomsten or DBI) under the conditions and within the limits provided for by Belgian law.
The application of Article 22, § 2, (b), is amplified below with regard to the taxation of companies in Hong Kong in keeping with the legislation that is currently in force :
C. Interest and royalties (Article 22, § 2, (c))
According to the provisions of Articles 285 to 289 ITC 1992, a fixed foreign tax credit (forfaitair gedeelte van buitenlandse belasting - FBB) applies.
14. Non-discrimination (Article 23)
Article 23, § 3, prohibits that the deduction of interest, royalties and other disbursements should be limited or lifted when the beneficiary is a resident of Hong Kong and the deduction of such payments is allowed without reservations for a beneficiary who is a resident of Belgium.
However, Article 23, § 3 does not affect the application of Articles 9, § 1 (adjustment of profits of associated enterprises), 11, § 7 (excessive interest) and 12, § 6 (excessive royalties). Consequently, Article 23, § 3 does not prohibit Belgium from applying Article 54 ITC 1992 (payments not fulfilling real and genuine transactions and exceeding the normal limits) or Article 55 ITC 1992 (interest exceeding the amount that corresponds to the current market interest rate).
For that matter, Article 23, § 3 does not prohibit Belgium from applying Article 198, 11° ITC 1992 (provisions concerning undercapitalization) to interest paid to a resident of Hong Kong, even when Articles 9, § 1 or 11, § 7 are not applicable. Indeed, Article 198, 11° ITC 1992 also applies to interest on loans paid to a recipient who is a resident of Belgium when such interest is not submitted to tax in Belgium or when it is submitted to a separate tax arrangement that is considerably more favourable than the common law system in Belgium.
One of the conditions for the application of Articles 54 and 198, 11° ITC 1992 is that the income to which these provisions apply are not subject to tax in the State of residence of the recipient. On the basis of the territorial system of Hong Kong, the income in question from Belgian sources is not subject to tax in Hong Kong in respect of the recipient/resident. Consequently, this condition for the application of Articles 54 and 198, 11° ITC 1992 is fulfilled.
OVERVIEW SHARTS
The overview charts merely give a survey of the provisions that apply to the different categories of income. It is essential to refer to the relevant provisions of the Agreement for the examination of each practical case.
1. Taxation system for income derived by residents of Belgium
(1) Exemption with progression : in determining the tax rate which is applicable to the taxable income, Belgium takes the exempted income into account (this only goes for the individual income tax). The exemption is granted on condition that the income in question is taxable in accordance with the legislation of Hong Kong or that it is not exempted from tax in Hong Kong. (2) The participation exemption regime (DBI) is granted under the conditions and within the limits provided for by Belgian law. (3) The legislation in force in Hong Kong does not provide for a taxation at source on dividends. 2. Taxation system for income derived by residents of Hong Kong
Paul NECKEBROECK
Deputy administrator general
Circular nr. AFZ/97.0060 (AFZ 4/2005) dd. 31.03.2005
INTERNATIONAL AGREEMENTS
HONGKONG
Agreement between Belgium and Hong Kong for the avoidance of double taxation and the prevention of fiscal evasion with respect to taxes on income and on capital.
I. IMPORTANT DATES
| Signature of the Agreement | December 10, 2003 |
| Approval | Law of September 13, 2004 |
| Entry into force | Official Gazette of November 10, 2004 (French and Dutch text) |
| Publication | Official Gazette of December 3, 2004 (English text) |
- in respect of taxes due at source on income credited or payable from January 1, 2004;
- in respect of other taxes charged on income of taxable periods beginning on or after
January 1, 2004.
II. GENERAL FEATURES
The main intention of this Agreement is to avoid double taxation and to prevent fiscal evasion with respect to - existing or future - taxes on income.
Article 25 regulates, according to the usual rules and with the usual limitations, the exchange of such information between the competent authorities as is necessary for carrying out the provisions of the Agreement and of the domestic laws concerning taxes covered by the Agreement. For the application of the provisions of Article 25 reference is made to the instruction Ci.R.9 Div/460.792 of November 27,1996.
The Agreement does not provide for any administrative assistance for the recovery of taxes.
Since the Agreement bears a strong resemblance to other Agreements signed by Belgium, only the most principal or specific provisions shall be examined hereinafter.
III. SCOPE AND DEFINITIONS
1. Contracting Parties
Since July 1, 1997 Hong Kong is an actual part of the People's Republic of China, of which it has become a Special Administrative Region. Nevertheless, neither the Convention of April 18, 1985 between Belgium and China for the avoidance of double taxation and the prevention of fiscal evasion with respect to taxes on income, nor the additional Protocol of November 27, 1996 do apply to Hong Kong.
The aforementioned Convention applies to "the territory of the People's Republic of China in which the laws relating to Chinese tax are in force". Within the People's Republic of China however, the Hong Kong Special Administrative Region enjoys a special tax status which is a continuation of the tax law that was in force before Hong Kong returned to China.
This Agreement is binding on the Kingdom of Belgium and the Hong Kong Special Administrative Region of the People's Republic of China. It applies to the territory of the Hong Kong Special Administrative Region, including Hong Kong Island, Kowloon, the New Territories and the waters of Hong Kong.
2. Taxes covered (Article 2)
In the case of Belgium the Agreement applies to the individual income tax, the corporate income tax, the income tax on legal entities, the income tax on non-residents and to the different prepayments (withholding tax on movable income, withholding tax on immovable income, withholding tax on earned income) as well as to the surcharges on these taxes and prepayments (inclusive of the supplementary crisis contribution).
Article 3, § 2 provides that the Agreement does not apply to any penalty or interest imposed under the tax laws of Belgium or Hong Kong. Item 1 of the Protocol explains that, as for Hong Kong, "penalty or interest" includes any sum added to the tax in default of payment, as well as any additional tax assessed for infringement of or failure to comply with the tax laws.
With regard to Belgium :
- interest for late payments (to which Articles 414 to 417 ITC 1992 relate) and tax increases (to which Article 444 ITC 1992 relates) are covered by the Agreement according to the principle that matters of secondary importance follow the main matter;
- administrative fines (to which Article 445 ITC 1992 relates) and criminal fines (to which Articles 449 to 452 ITC 1992 relate) are not covered by the Agreement and apply according to the national law.
X, a resident of Belgium, is seconded to the permanent establishment which his employer has in Hong Kong. The secondment is limited to 12 months (from January 1, 2004 till December 31, 2004). Since X has kept his centre of vital interests in Belgium, he is a resident of Belgium under article 4 of the Agreement. X has no other income in 2004 and does not submit a tax return in Belgium for the taxable period 2004.
After an audit at X's employer by the tax authorities, the Belgian tax administration makes an estimated assessment in the individual income tax in respect of the remuneration derived by X in 2004. That assessment is coupled with a tax increase of 20 % on the non-declared income (2nd infringement without the intention to evade taxes) and an administrative fine of 50 € for not having submitted a tax return (2nd infringement without the intention to evade taxes).
X appeals against the estimated assessment and does not pay the tax. After examination it turns out that the renumeration is taxable in Hong Kong under Article 14 of the Agreement (the renumeration is borne by the permanent establishment) and that Belgium has to exempt the renumeration from tax according to Article 22, § 2 of the Agreement. Consequently, the assessment has to be discharged completely; this goes also for the tax increases and the possible interest for late payment. The administrative fine can be maintained.
3. Definitions (Articles 3, 4 and 5)
The Agreement contains the usual definitions (general definitions, resident and permanent establishment) of the OECD Model Tax Convention. Those definitions are applicable every time a defined term is used in the Agreement.
A. Estates, trusts and partnerships being residents of Hong Kong (Article 3, § 1, (i))
Each of these entities is deemed to be a person in the sense of the Agreement (in the same way as individuals, companies and bodies of persons) and thus to be a resident in the sense of the Agreement when it is liable to tax in Hong Kong as such.
B. Residence (Article 4)
With regard to Hong Kong, the term "resident" is not defined in the law but it is defined in the administrative guidelines. For the application of the first sentence of Article 4, § 1, it is explained in item 2, subsection 1 of the Protocol under which circumstances a person is deemed to be a resident of Hong Kong.
The aim of item 2, subsection 2 of the Protocol is to assure that Belgium construes the second sentence of Article 4, § 1 in conformity with the OECD commentary on Article 4. According to that commentary, a person who is liable to tax in Hong Kong on the basis of his domicile is not excluded from the scope of the Agreement on account of the fact that he is taxed on a territorial basis in Hong Kong. Companies of Hong Kong which are not taxed on their income from foreign sources are resident of Hong Kong if they are incorporated in the Hong Kong Special Administrative Region or - when incorporated outside the Hong Kong Special Administrative Region - if they have their central management and control in the Hong Kong Special Administrative Region. In that respect, those companies benefit from the advantages of the Agreement.
C. Permanent establishment (Article 5)
The definition of permanent establishment differs from the OECD model as regards the following :
- a building site or a construction, assembly, installation or dredging project constitutes a permanent establishment when it lasts more than six months within any 12-month period (Article 5, § 2, (g));
- supervisory activities in connection with a building site, or a construction, assembly, installation or dredging project constitute a permanent establishment when such activities last more than six months within any 12-month period (Article 5, § 3, (a));
- the furnishing of services constitutes a permanent establishment when such activities are carried out through employees or other personnel for a period or periods aggregating more than six months within any 12-month period (Article 5, § 3, (b)); this provision is applicable even if the activities which last for a period aggregating more than six months are carried out for a number of clients as part of projects between which there is no interrelationship at all; only the activities carried out within the territory where the services are furnished are taken into account in calculating the six month-period (activities carried out within the territory of the Party of which the enterprise is a resident in order to furnish services within the other territory, are not taken into account);
- activities carried out by an agent of an independent status who does not have an authority to conclude contracts on behalf of the enterprise constitute a permanent establishment if that agent habitually fills orders on behalf of the enterprise by withdrawing goods or merchandise from a stock that is maintained within the territory where he carries out his activities (Article 5, § 5, (b)).
1. Income from immovable property (Article 6)
In accordance with the customary rules, income from immovable property may be taxed in the Contracting Party where the immovable property is situated.
According to the Agreement, rights to variable or fixed payments as consideration for the right to explore for natural resources also constitute immovable property. The assignment of the right to impose these payments is thus provided for by Article 6, whereas this is normally done in accordance with the provisions of Article 7 (business profits).
Article 6, § 4 defines the location where the immovable property is situated. That definition does not differ from what is usually considered as the situation of immovable property.
2. Business profits (Article 7)
Article 7 corresponds for the greater part to the OECD Model Tax Convention. Taking into consideration the definition of the term "business" in Article 3, § 1, (b), Article 7 also applies to income from professional services and other activities of an independent character.
As recommended in the OECD Model Tax Convention, the Agreement with Hong Kong does no longer include a particular provision concerning professional services and other activities of an independent character. Consequently, all income from professional activities that is not referred to in another provision of the Agreement, falls within the scope of Article 7. This goes especially for income accrued to managers performing their duties outside the scope of an employment contract and not being a partner of a company, other than a company with share capital, nor a member of the board of directors or a similar organ (such managers are indeed not referred to in Articles 14 or 15 - cf. nr. 10 hereinafter).
The second and third sentence of Article 7, § 3 are a supplement to the OECD Model. According to these sentences, in determining the profits of a permanent establishment and except for the reimbursement of actual expenses, no account shall be taken of payments in return for the use of patents or other rights, of commissions paid for specific services performed or for management and, except in the case of a banking enterprise, of interest between the permanent establishment and the other offices of the enterprise.
These rules are somewhat more restrictive than those which, according to the current OECD Model, are applicable for lack of particular rules. With regard to services, the OECD commentary agrees that it is appropriate to charge a service to an amount that corresponds with the amount that would be charged to an independent customer and thus to add a profit margin.
3. Shipping and air transport (Article 8)
Article 8, § 3, the wording of which is not the same as usual, more or less adopts the terms of Article 9 of the Agreement between the government of the Kingdom of Belgium and the government of Hong Kong Special Administrative Region of the People's Republic of China concerning air services of April 6, 1998. Notwithstanding the unusual formulation, the rules that are laid down in Article 8, including Article 8, § 3, correspond to the common rules.
The Agreement of April 6, 1998 concerning air services entered into force on July 1, 2003 and Article 9, permitting the avoidance of double taxation, applies in Belgium to the years of assessment beginning on or after April 1, 1998. (see publication in the Official Gazette of October 14, 2003). According to the provisions of Article 9 of the Agreement, that article does no longer apply to taxes to which the present Agreement applies (see item I above).
4. Dividends (Article 10)
Taxation in the State of source :
- Nil if the beneficial owner of the dividends is a company which at the moment of the payment of the dividends holds, for an uninterrupted period of at least twelve months, shares representing directly at least 25 % of the capital of the company paying the dividends;
- 5 per cent of the gross amount of the dividends if the beneficial owner is a company which holds directly at least 10 % of the capital of the company paying the dividends;
- 15 % of the gross amount of the dividends in all other cases.
5. Interest (Article 11)
In the State of source the tax on interest is limited to 10 % of the gross amount of the interest.
Under Article 11, § 3, however, the state of source has to grant an exemption from tax for :
- interest on commercial debt-claims resulting from deferred payments for goods, merchandise or services supplied by an enterprise (according to Belgian legislation, such interest is not a movable property income but an earned income which is not subject to withholding tax on movable income);
- interest paid in respect of a loan granted, guaranteed or insured under a scheme organized by a Contracting Party or one of its political subdivisions or local authorities in order to promote the export; with respect to Belgium, an exemption from tax is granted in any case in Hong Kong for interest paid in respect of a loan or credit for which a financial support is granted after advice of the Committee for financial support to export ("Finexpo") or that is granted by the Association for the coordination of medium-term financing of Belgian export ("Creditexport") or that is insured by the Natinal Office of Del Credere;
- interest on debt-claims or loans of any nature - not represented by bearer instruments - paid to banking enterprises;
- interest on deposits made by an enterprise with a banking enterprise ;
- interest of which the beneficially owner is the other Contracting Party, one of its political subdivisions or local authorities.
In the State of source the tax on royalties is limited to 5 % of the gross amount of the royalties.
7. Movable income from Belgian sources, derived by residents of Hong Kong
The reductions of or the exemptions from Belgian tax are granted in the usual way, on production of a form 276 Div-Aut, 276 Int-Aut or 276 R, as the case may be.
8. Interest and royalties from sources in Hong Kong, derived by residents of Belgium
Since the rules for the application of the reduction of Hong Kong tax are not known to date, the residents of Belgium who derive interest or royalties from that territory are requested to submit an application to the Hong Kong tax office under within whose jurisdiction the debtor of such income falls.
To their application they must attach all the documents certifying that, by virtue of the Agreement, they qualify for the reduction. They can prove their status of Belgian resident with a certificate 276 CONV, issued by the Belgian tax office within whose jurisdiction they fall. To obtain that certificate, the beneficiary of the income has to produce an accurate description of the nature and the amount of the income for which the application of the Agreement is asked.
9. Capital gains (Article 13)
This article is in line with the OECD Model Tax Convention.
However, the scope of Article 13, § 4 concerning capital gains from the alienation of shares of a company which is engaged mainly in immovable property is more limited than the scope of Article 13, § 4 of the OECD Model concerning the same matter. It does not apply to gains derived from the alienation of :
- shares listed on an approved stock exchange of one of the Contracting Parties;
- shares alienated or exchanged in the framework of a reorganisation, a merger, of a scission or of a similar operation;
- shares more than 50 per cent of the value of which is derived from immovable property in which the company carries out its activity.
Article 14, § 2 contains an additional condition compared to the OECD Model Tax Convention. The remuneration is only and exclusively taxable in the Party where the recipient is present if it is taxable according to the laws in force in that Party.
Insofar as it is necessary, item 5 of the protocol confirms that an employment is exercised where the employee is physically present.
According to Article 15, § 2, remuneration that is derived by a director in respect of the discharge of day-to-day functions of a managerial or technical nature may be taxed in accordance with the provisions that are laid down in Article 14.
According to item 6 of he Protocol, the provisions of Article 14 also apply to remuneration that a resident of Hong Kong receives in respect of his personal activity as a partner of a company, other than a company with share capital, which is a resident of Belgium. Thus, these provisions apply, even if there is no bond of subordination between a partner and the company (e.g. when a partner, having a majority interest in the capital, is the manager of the company).
11. Pensions and annuities (Article 17)
Pensions and other similar renumeration, paid in consideration of past private employment as well as annuities and pensions and other similar remuneration paid by a Contracting Party under the social security legislation in force in that Party or under a public scheme in force in that Party in order to supplement the benefits of the social security legislation, may be taxed in the Contracting Party in which they arise.
In accordance with the OECD commentary, Article 17 does not only apply to periodic payments (referred to as "pensions") but also to non-periodic payments such as lump-sum payments from group insurance contracts (referred to as " other similar remuneration").
Article 17 also applies to pensions paid under the Belgian social security legislation to former self-employed persons.
Finally, Article 17 applies to income referred to in the following articles :
- Article 34, § 1, 2°, b) and c) ITC (scheme organised by the law of April 28, 2003 on supplementary pensions and the tax system applicable to those pensions and to some supplementary benefits in the matter of social security);
- Article 34, § 1, 2°bis ITC (supplementary pensions for self-employed persons, as referred to in title II, chapter I, section 4, of the programme law of December 24, 2002);
- Article 34, § 1, 3° ITC (income from pension funds),
Paragraph 4 makes it possible to determine when a pension arises in a Contracting Party. On the basis of that paragraph, a pension is deemed to arise in Belgium if it is paid by or out of a pension fund or other institution that is recognised for tax purposes by Belgium or - if such is not the case - if such fund or institution has managerial control over the pension scheme with which the pension is connected. A pension fund or other institution is recognised for tax purposes by Belgium when the contributions giving rise to the payment of the pension result in a tax benefit at the taxation in Belgium of the employee and/or his employer. This provision applies, irrespective of the location where the fund or the institution is situated (Belgium, Hong Kong or a third State).
By virtue of paragraph 3, alimony shall be taxable only in the State of residence of the debtor of the income.
According to the taxation laws currently in force in Hong Kong, alimony paid by a resident of Hong Kong to a resident of Belgium can not be deducted from the taxable income of the debtor of the income and can not be taxed in the hands of the recipient. In such case, by virtue of paragraph 3, Belgium assumes that the alimony has been taxed in Hong Kong and thus that it must be exempted from tax in accordance with Article 22, § 2, (a). Alimony paid by a resident of Belgium to a resident of Hong Kong can be deducted from the taxable income of the debtor of the income under the conditions laid down in Article 104, 1° ITC 1992 and can be taxed in the hands of the recipient.
12. Other income (Article 20)
Items of income, wherever arising, not dealt with in the Articles 6 to 19 shall in principle be taxable only in the Contracting Party of which the recipient is a resident. This provision applies to all income arising in third States and to income such as income from an individual life insurance policy, prizes and grants awarded to scholars or writers from the other Contracting Party.
With regard to income arising in the other Contracting Party however, Article 20, § 3 allows that such income may also be taxed in that other Party. In such case, the Party of which the recipient of the income is a resident shall avoid double taxation as pursuant to Article 22.
13. Avoidance of double taxation with regard to income derived by a resident of Belgium (Article 22, § 2)
A. General rule : exemption with progression (Article 22, § 2, (a))
Income, not being dividends, interest or royalties, which is taxed in Hong Kong in accordance with the provisions of the Agreement, shall be exempted from tax in Belgium but shall be taken into account in determining the tax rate that is applicable to the remaining taxable income of the recipients.
Insofar as it is necessary, item 7 (a) of the Protocol stipulates explicitly that elements of income which are not taxable by the laws in force in Hong Kong or which are exempt from tax in Hong Kong, shall not be considered to be taxed and, consequently, shall not be exempted in Belgium.
On that subject it should be noticed that the application of the territorial principle by Hong Kong may not have as a result that Belgium should not exempt the profits that an enterprise which is a resident of Belgium derives through a permanent establishment situated in Hong Kong. For the purposes of Article 22, § 2, (a), the profits of a permanent establishment shall be considered as a whole to determine if such profits have been submitted to tax in Hong Kong. If the profits are taxed in Hong Kong, Belgium is bound by Article 22, § 2, (a), to exempt those profits, even if the real tax burden is lower in Hong Kong than in Belgium (1).
[ (1) The exemption scheme that is laid down in the Agreement with Hong Kong is stricter than the exemption scheme provided for by the OECD Model Tax Convention. The latter stipulates that the State of residence shall exempt from tax income which "may be taxed" in the other State, i.e. even if that other State does not exercise its right to tax (e.g. if the taxable profits of a permanent establishment are fully exempted from tax by the taxation laws of that other State to promote the economic development of the economic zone where the permanent establishment is situated).]
This global approach is confirmed by item 7 (b) of the Protocol. If an enterprise which is a resident of Belgium has a permanent establishment in Hong Kong, and Belgium exempts the profits of that permanent establishment, the exemption shall, according to the abovementioned item 7 (b), apply to the aggregate profits of the permanent establishment, including the dividends, interest and royalties attributable to the permanent establishment. Once the profits of the permanent establishment have been submitted to tax in Hong Kong, Belgium exempts the total amount of the profits which are attributable to the permanent establishment (calculated according to Belgian taxation law), even if the taxable basis on which the tax in Hong Kong was charged does not include the aforementioned dividends, interest or royalties. Thus, the total amount of the profits which are attributable to the permanent establishment in Hong Kong and which are exempted from taxation in Belgium includes :
- dividends paid in respect of a holding effectively connected with the permanent establishment;
- interest paid in respect of a debt-claim effectively connected with the permanent establishment;
- royalties paid in respect of a right or property effectively connected with the permanent establishment.
Dividends paid to a Belgian company by a company which is a resident of Hong Kong, enjoy the participation exemption regime (definitief belaste inkomsten or DBI) under the conditions and within the limits provided for by Belgian law.
The application of Article 22, § 2, (b), is amplified below with regard to the taxation of companies in Hong Kong in keeping with the legislation that is currently in force :
- The provisions of common law with regard to taxes that apply on a company that is situated in Hong Kong, are not "considerably more favourable than in Belgium" : common law determines the nominal rate on corporation profits to be 17,5 % and it is not because Hong Kong adopts a territorial system that the taxation law of Hong Kong can be deemed to be considerably more favourable.
According to the commentary on Article 4 of the OECD Model Tax Convention, residents of countries adopting a territorial system in their taxation may not be excluded from the scope of the Convention. Moreover, the effects of a territorial system are not fundamentally different from those of the exemption regime that is applied by Belgium on the basis of numerous Conventions for the avoidance of double taxation that were signed by Belgium. On that subject it should be noticed that Hong Kong does not figure in the list of "tax havens" which is included in the Royal Decree of February 13, 2003 (Official gazette of February 21, 2003). Consequently, the exclusion that is laid down in Article 203, § 1, 1° of the ITC 1992 does not apply.
- Companies that are situated in Hong Kong are submitted to a territorial tax system in Hong Kong (cf. above) which shall not be deemed to be a system referred to in Article 203, § 1, 2° or in Article 203, § 1, 3° ITC 1992, because such companies are subject to Hong Kong common law and do not enjoy in Hong Kong the benefits of a "separate tax arrangement that derogates from common law".
C. Interest and royalties (Article 22, § 2, (c))
According to the provisions of Articles 285 to 289 ITC 1992, a fixed foreign tax credit (forfaitair gedeelte van buitenlandse belasting - FBB) applies.
14. Non-discrimination (Article 23)
Article 23, § 3, prohibits that the deduction of interest, royalties and other disbursements should be limited or lifted when the beneficiary is a resident of Hong Kong and the deduction of such payments is allowed without reservations for a beneficiary who is a resident of Belgium.
However, Article 23, § 3 does not affect the application of Articles 9, § 1 (adjustment of profits of associated enterprises), 11, § 7 (excessive interest) and 12, § 6 (excessive royalties). Consequently, Article 23, § 3 does not prohibit Belgium from applying Article 54 ITC 1992 (payments not fulfilling real and genuine transactions and exceeding the normal limits) or Article 55 ITC 1992 (interest exceeding the amount that corresponds to the current market interest rate).
For that matter, Article 23, § 3 does not prohibit Belgium from applying Article 198, 11° ITC 1992 (provisions concerning undercapitalization) to interest paid to a resident of Hong Kong, even when Articles 9, § 1 or 11, § 7 are not applicable. Indeed, Article 198, 11° ITC 1992 also applies to interest on loans paid to a recipient who is a resident of Belgium when such interest is not submitted to tax in Belgium or when it is submitted to a separate tax arrangement that is considerably more favourable than the common law system in Belgium.
One of the conditions for the application of Articles 54 and 198, 11° ITC 1992 is that the income to which these provisions apply are not subject to tax in the State of residence of the recipient. On the basis of the territorial system of Hong Kong, the income in question from Belgian sources is not subject to tax in Hong Kong in respect of the recipient/resident. Consequently, this condition for the application of Articles 54 and 198, 11° ITC 1992 is fulfilled.
OVERVIEW SHARTS
The overview charts merely give a survey of the provisions that apply to the different categories of income. It is essential to refer to the relevant provisions of the Agreement for the examination of each practical case.
1. Taxation system for income derived by residents of Belgium
| Articles of the Agreement | Nature of the income | In Hong Kong | In Belgium (Article 22, § 2) |
| Article 6 | Income from immovable property situated in Hong Kong. | Taxation according to domestic law. | Exemption (1). |
| Article 7 | Business profits and profits from professional services and other activities of an independent character which are attributable to a permanent establishment situated in Hong Kong. | Taxation according to domestic law. | Exemption (1). |
| Article 8 | Business profits derived from the operation of ships or aircraft in international traffic in Hong Kong. | Exemption. | Taxation according to domestic law. |
| Article 10 | Dividends paid by a company which is a resident of Hong Kong to a Belgian company which holds, for an uninterrupted period of 12 months, at least 25 % of the capital. | Exemption. | Taxation according to the provisions of domestic law and participation exemption regime (2). |
| Dividends paid by a company which is a resident of Hong Kong to a Belgian company which holds at least 10 % of the capital. | Taxation at source limited to 5 % (3) | Taxation according to domestic law and participation exemption regime (2). | |
| Other dividends paid by a company which is a resident of Hong Kong. | Taxation at source limited to 15 % (3) | Taxation according to domestic law. | |
| Article 11 | Interest on commercial debt-claims paid to a Belgian enterprise; interest paid in respect of a loan granted, guaranteed or insured under a scheme organized by Belgium or the Regions in order to promote the export; interest paid to Belgian banking enterprises; interest on deposits made by an enterprise of Hong Kong with a Belgian banking enterprise; interest paid to the Belgian State or one of its political subdivisions or local authorities. | Exemption. | Taxation according to domestic law. |
| Other interest arising in Hong Kong | Taxation at source limited to 10 % | Taxation with allowance of the fixed foreign tax-credit according to domestic law. | |
| Article 12 | Royalties arising in Hong Kong |
| Taxation with allowance of the fixed foreign tax-credit according to domestic law. | |||
| Article 13 | Capital gains realised on the alienation of : - immovable property situated in Hong Kong; - movable property forming part of a permanent establishment situated in Hong Kong; - a permanent establishment situated in Hong Kong; - of shares of companies which are engaged mainly in immovable property and the immovable assets of which are mainly situated in Hong Kong. | Taxation according to domestic law. | Exemption (1). |
| Capital gains realised in Hong Kong on ships or aircraft operated in international traffic or on movable property pertaining to such operation. | Exemption. | Taxation according to domestic law. | |
| Capital gains realised in Hong Kong on any other property. | Exemption. | Taxation according to domestic law. | |
| Article 14 | General rule for remuneration derived with respect to dependent personal services exercised in Hong Kong. | Taxation according to domestic law. | Exemption (1). |
| Remuneration for a stay in Hong Kong of or = 183 days and which is not paid by or on behalf of an employer from Hong Kong or a permanent establishment situated in Hong Kong. | Exemption. | Taxation according to domestic law. | |
| Remuneration derived in respect of an employment exercised aboard a ship or aircraft operated in international traffic by an enterprise of Hong Kong. | Taxation according to domestic law. | Exemption (1). | |
| Article 15 | Directors' fees derived by directors of companies which are residents of Hong Kong | Taxation according to domestic law. | Exemption (1). |
| Remuneration in respect of the discharge of day-to-day functions by directors of companies which are residents of Hong Kong. | Cf. Article 14. | Cf. Article 14. | |
| Article 16 | Income from personal activities exercised in Hong Kong by artistes and sportsmen. | Taxation according to domestic law. | Exemption (1). |
| Article 17 | Pensions and other remuneration, arising in Hong Kong and paid in consideration of past private employment or under the social security legislation. | Taxation according to domestic law. | Exemption (1). |
| Alimony | Taxation according to domestic law. | Exemption (1). | |
| Article 18 | Remuneration paid by Hong Kong to a resident of Belgium who became a resident of Belgium solely for the purpose of rendering the services there. | Taxation according to domestic law. | Exemption (1). |
| Remuneration paid by Hong Kong to a resident of Belgium who did not become a resident of Belgium solely for the purpose of rendering the services there. | Exemption. | Taxation according to domestic law. | |
| Government pensions arising in Hong Kong and paid to a resident of Belgium. | Taxation according to domestic law. | Exemption (1). | |
| Article 19 | Payments arising from sources abroad and which a student, trainee or business apprentice receives for the purpose of his maintenance, education or training in Hong Kong. | Exemption. | Taxation according to domestic law. |
| Article 20 | Other income arising in Hong Kong | Taxation according to domestic law. | Exemption (1). |
(1) Exemption with progression : in determining the tax rate which is applicable to the taxable income, Belgium takes the exempted income into account (this only goes for the individual income tax). The exemption is granted on condition that the income in question is taxable in accordance with the legislation of Hong Kong or that it is not exempted from tax in Hong Kong. (2) The participation exemption regime (DBI) is granted under the conditions and within the limits provided for by Belgian law. (3) The legislation in force in Hong Kong does not provide for a taxation at source on dividends. 2. Taxation system for income derived by residents of Hong Kong
| Taxation at source limited to 5 % | |||
| Articles of the Agreement | Nature of the income | In Belgium | In Hong Kong (Article 22, § 1) |
| Article 6 | Income from immovable property situated in Belgium. | Taxation according to domestic law. | Taxation + allowance of Belgian tax as a tax credit against Hong Kong tax. |
| Article 7 | Business profits and profits from professional services and other activities of an independent character which are attributable to a permanent establishment situated in Belgium. | Taxation according to domestic law. | Taxation + allowance of Belgian tax as a tax credit against Hong Kong tax. |
| Article 8 | Business profits derived from the operation of ships or aircraft in international traffic in Belgium. | Exemption. | Taxation according to domestic law. |
| Article 10 | Dividends paid by a Belgian company to a company of Hong Kong which holds directly, for an uninterrupted period of 12 months, at least 25 % of the capital of the company which is a resident of Belgium. | Exemption. | Taxation according to the provisions of domestic law. |
| Dividends paid by a Belgian company to a company of Hong Kong which holds directly at least 10 % of the capital of the company which is a resident of Belgium. | Taxation at source limited to 5 %. | Taxation + allowance of Belgian tax at source as a tax credit against Hong Kong tax. | |
| Other dividends paid by a company which is a resident of Belgium. | Taxation at source limited to 15 %. | Taxation + allowance of Belgian tax as a tax credit against Hong Kong tax. | |
| Article 11 | Interest on commercial debt-claims paid to an enterprise of Hong Kong; interest paid in respect of a loan granted, guaranteed or insured under a scheme organized by Hong Kong in order to promote the export; interest paid to banking enterprises of Hong Kong; interest on deposits made by an enterprise of Belgium with a banking enterprise of Hong Kong; interest paid to the Hong Kong Region or one of its political subdivisions or local authorities. | Exemption. | Taxation according to domestic law. |
| Other interest arising in Belgium | Taxation at source limited to 10 %. | Taxation + allowance of Belgian tax at source as a tax credit against Hong Kong tax. | |
| Article 12 | Royalties arising in Belgium | Taxation at source limited to 5 %. | Taxation + allowance of Belgian tax at source as a tax credit against Hong Kong tax. |
| Article 13 | Capital gains realised on the alienation of : - immovable property situated in Belgium; - movable property forming part of a permanent establishment situated in Belgium; - a permanent establishment situated in Belgium; - of shares of companies which are engaged mainly in immovable property and the immovable assets of which are mainly situated in Belgium. | Taxation according to domestic law. | Taxation + allowance of Belgian tax as a tax credit against Hong Kong tax. |
| Capital gains realised in Belgium on ships or aircraft operated in international traffic or on movable property pertaining to such operation. | Exemption. | Taxation according to domestic law. | |
| Capital gains realised in Belgium on any other property. | Exemption. | Taxation according to domestic law. | |
| Article 14 | General rule for remuneration derived with respect to dependent personal services exercised in Belgium. | Taxation according to domestic law. | Taxation + allowance of Belgian tax as a tax credit against Hong Kong tax. |
| Remuneration for a stay in Belgium of or = 183 days and which is not paid by or on behalf of a Belgian employer or a permanent establishment situated in Belgium and which is taxable in Hong Kong according to the laws in force in Hong Kong. | Exemption. | Taxation according to domestic law. | |
| Remuneration derived in respect of an employment exercised aboard a ship or aircraft operated in international traffic by a Belgian enterprise. | Taxation according to domestic law. | Taxation + allowance of Belgian tax as a tax credit against Hong Kong tax. | |
| Article 15 | Directors' fees derived by directors of Belgian companies. | Taxation according to domestic law. | Taxation + allowance of Belgian tax as a tax credit against Hong Kong tax. |
| Remuneration in respect of the discharge of day-to-day functions by directors or partners of companies, other than companies with share capital, which are residents of Belgium. | Cf. Article 14. | Cf. Article 14. | |
| Article 16 | Income from personal activities in Belgium by artistes and sportsmen. | Taxation according to domestic law. | Taxation + allowance of Belgian tax as a tax credit against Hong Kong tax. |
| Article 17 | Pensions and other similar remuneration, arising in Belgium and paid in consideration of past private employment or under the social security legislation. | Taxation according to domestic law. | Taxation + allowance of Belgian tax as a tax credit against Hong Kong tax. |
| Alimony | Taxation according to domestic law. | Taxation + allowance of Belgian tax as a tax credit against Hong Kong tax. | |
| Article 18 | Governmental remuneration paid by Belgium to a resident of Hong Kong who became a resident of Hong Kong solely for the purpose of rendering the services there. | Taxation according to domestic law. | Exemption. |
| Governmental remuneration paid by Belgium to a resident of Hong Kong who did not become a resident of Hong Kong solely for the purpose of rendering the services there. | Exemption. | Taxation according to domestic law. | |
| Government pensions from Belgian sources and paid to a resident of Hong Kong. | Taxation according to domestic law. | Exemption. | |
| Article 19 | Payments arising from sources abroad and which a student, trainee or business apprentice receives for the purpose of his maintenance, education or training in Belgium. | Exemption. | Taxation according to domestic law. |
| Article 20 | Other income from Belgian sources. | Taxation according to domestic law. | Taxation + allowance of Belgian tax as a tax credit against Hong Kong tax. |
Paul NECKEBROECK
Deputy administrator general
Bron: FisconetPlus