Hong Kong / Belgium structure: No tax on dividends in Europe

On 10 December 2003 Belgium and Hong Kong entered into a Double Tax Agreement (DTA), based upon the OECD model convention. The agreement is effective from 2004 and translates into tax savings to Belgian and Hong Kong investors doing business in each other's countries through the allocation of taxing rights and provision of tax relief. The agreement allows for Belgium as an international holding location for Asian investors and gateway to the European markets and 27 Member States of the European Union through the use of EU Directives (dividends, interest and royalties).

European Holding Location: No withholding tax on dividends

Under the agreement the tax rate on dividends paid by the Belgian company can be reduced to 0% if the beneficial owner is a Hong Kong company in possession of more than 25% of the shares. This principal benefit of the agreement allows for a number of tax planning opportunities. Belgian companies can be used as European holding companies by Asian investors. Dividend income and capital gains from qualifying shareholdings in European subsidiaries can be received in Belgium at a 0% tax rate, and paid to the Hong Kong holding company at 0% withholding tax rate.

Royalties and interest

The rate of withholding tax under the agreement for royalty payments is reduced to 5%. Belgian withholding tax on interest payments to a Hong Kong company is reduced to 10%. Further tax planning is however permitted for financing structures and IP planning.

Hong Kong / Belgium structure

Our Hong Kong / Belgium Structure can be most efficient when investing in Belgium and throughout Europe, and consists of a Hong Kong limited company and a Belgian limited company (BVBA), its shares being held by the Hong Kong company.