U.S.-Belgium tax treaty: withholding rates on interest, dividends, royalties and services

What sets the U.S.-Belgium treaty apart

The 2006 U.S.-Belgium treaty is one of the most modern in the U.S. network: interest and royalties are exempt at source, there is a 0% rate for dividends to qualifying parents and pension funds, there is no independent personal services article, and disputes go to mandatory arbitration. Two features are particular to it. The U.S. 0% dividend rate was tied to Belgium's commitment to exchange bank information, with a sunset and a U.S. right to end it. And the limitation-on-benefits article includes a headquarters company test.

Common payments at a glance

Assumes the payee is the beneficial owner, is resident under the treaty, meets its limitation-on-benefits article and gives a valid W-8BEN, W-8BEN-E or Form 8233. Article references are to the treaty as amended.

Rates on investment and other income

Treaty in effect generally from Jan. 1, 2008. Protocols in effect from: none listed. IRS country code BE.

"n/a" means the payment type is not covered by the royalty article: equipment leasing is business profits (no withholding without a permanent establishment) or other income. Superscript letters are the IRS's own conditions, listed at the end of this page.

Pay for personal services performed in the United States

Each row is an exemption the treaty gives, with the limits the IRS lists. All conditions in a row must be met; if any is not, the pay is withheld on at 30% (contractors) or under the wage rules (employees). Services performed entirely outside the United States are foreign-source and need no treaty claim.

Reading the U.S.-Belgium treaty as a payer

Documents and dates

The convention and its protocol were signed in Brussels on November 27, 2006, replacing the 1970 treaty. The IRS tables list January 1, 2008 as the general effective date; withholding taxes apply to amounts paid or credited from the first day of the second month after entry into force. A person could keep the 1970 treaty for 12 months, but only in its entirety. Mandatory arbitration applies to cases pending at entry into force.

Residence and transparent entities

Pension funds and organizations established exclusively for religious, charitable, scientific, artistic, cultural or educational purposes are residents even though exempt (Art. 4(3)). The technical explanation lists 401(a) and 401(k) plans, 403(b) plans, IRAs and Roth IRAs, SEPs, SIMPLE plans, 457(b) trusts and the Thrift Savings Fund as U.S. pension funds. Income through an entity transparent under either country's law counts as derived by a Belgian resident only to the extent Belgian law treats it as that resident's income (Art. 1(6)). A dual-resident entity the competent authorities do not assign gets almost no benefits (Art. 4(5)).

Limitation on benefits

Article 21 qualifies individuals, governments, listed companies whose shares are regularly traded and either trade primarily in their home region (the EU or EEA for a Belgian company) or are managed there, subsidiaries at least 50% owned by five or fewer listed companies, pension funds and exempt organizations, and companies passing an ownership and base erosion test. Derivative benefits require 95% ownership by seven or fewer equivalent beneficiaries in the EU, EEA, NAFTA countries or Switzerland. The technical explanation's example: a Belgian company owned by an Italian parent cannot reach the U.S. 0% dividend rate through derivative benefits, because the U.S.-Italy rate is 5%.

A headquarters company that supervises a group active in at least five countries, each producing 10% of group income, with no more than 25% of its own income from the U.S., qualifies for all benefits (Art. 21(5)). A triangular rule allows the U.S. to tax interest and royalties at up to 15% where they are routed through a third-country branch of a Belgian company taxed at less than 60% of the Belgian rate (Art. 21(6)).

Dividends and the 0% sunset

The 5% rate needs a company owning directly at least 10% of the voting stock, tested on the record date. The U.S. 0% rate needs a Belgian company that has owned, directly or indirectly, 80% or more of the voting power for the 12 months ending on the date entitlement is fixed, and that either: is listed or a listed company's subsidiary; passes both the ownership and base erosion test and the active business test; qualifies under derivative benefits; or has a competent-authority grant (Art. 10(3)(a)). Belgian pension funds get 0% on dividends not derived from a business (Art. 10(3)(b)).

The rule runs differently in the other direction: Belgium exempts dividends paid by Belgian companies to a U.S. company holding directly 10% of the capital for 12 months (Art. 10(4)). Article 10(12) made the U.S. 0% rate end in the sixth year unless Treasury certified Belgium's compliance with the information exchange article, and lets the U.S. terminate it by notice if Belgium's conduct materially alters the balance of benefits. The treaty documents do not show whether that certification or a termination happened, so a payer relying on the 0% rate should confirm its current status.

RIC dividends get 15% (0% for pension funds). REIT dividends get those rates only for an individual or pension fund holding 10% or less, a holder of 5% or less of a listed class, or a holder of 10% or less of a diversified REIT (Art. 10(6)). The branch profits tax is capped at 5% and is 0% for companies that qualify for the 0% dividend rate.

Interest and royalties

Both are taxable only in Belgium (Arts. 11(1), 12(1)). U.S. contingent interest that is not portfolio interest may be taxed at up to 15%, and REMIC excess inclusions in full (Art. 11(2)). The royalty definition expressly includes cinematographic films and software. The technical explanation excludes equipment leasing, after-sales and warranty service, technical assistance and professional services, and treats retail shrink-wrap software as a sale.

Services

There is no independent personal services article: "business" includes professional services (Art. 3(1)(e)), so a Belgian contractor's fees are taxable only through a U.S. permanent establishment, and construction projects become one only after 12 months. Employees are exempt only if present 183 days or fewer in any 12-month period beginning or ending in the tax year, paid by a non-U.S. employer and not borne by a U.S. permanent establishment (Art. 14(2)). The 2006 protocol says employment is exercised where the employee is physically present, regardless of where the contract was signed or the pay received.

Directors' fees are taxable in the company's country for services rendered there, with no threshold (Art. 15); the protocol extends this to a gérant or zaakvoerder of a company without share capital, but day-to-day management work falls under the employment article. Performers and athletes are taxable once gross receipts for the year of payment, including reimbursed expenses, exceed $20,000 (Art. 16). Payments to a loan-out company are taxable at source only if the contract names or lets the client designate the performer.

Pensions and Social Security

Private pensions, periodic or lump sum, are taxable only in the country of residence, which must exempt what the source country would (a Roth IRA distribution, for example) (Art. 17(1)). Social Security, including tier 1 Railroad Retirement, is taxable only in the paying country, so U.S. Social Security paid to a Belgian resident is withheld on (Art. 17(2)). Alimony is taxable only in the recipient's country; child support only in the payer's.

Students, trainees and teachers

A Belgian student or business trainee in full-time education or training is exempt on payments from abroad and on up to $9,000 a year of personal-services income; trainees for up to two years from first arrival (Art. 19(1)). Teachers and researchers at an educational or research institution are exempt for up to two years from arrival; research primarily for private benefit is excluded (Art. 19(2)).

Other income and arbitration

Other income, including gambling winnings, punitive damages, covenants not to compete, securities lending fees and most guarantee fees, is taxable only in Belgium (Art. 20). Gains other than on U.S. real property or permanent establishment assets are taxable only in the residence country (Art. 13). Mandatory "final offer" arbitration applies two years after a case begins.

Where payers get it wrong

• Confusing the two 0% rules. Belgium exempts dividends to a 10% U.S. parent; the U.S. 0% rate needs 80% for 12 months and one of four limitation-on-benefits routes.
• Applying 5% or 0% to RIC or REIT dividends. They are capped at 15%, with REIT dividends limited further.
• Exempting all interest. Non-portfolio contingent interest, REMIC excess inclusions and interest routed through a low-taxed third-country branch can be taxed.
• Treating equipment rent or shrink-wrap software as royalties. Both are business profits.
• Counting the 183 days by calendar year. The test runs over any 12-month period beginning or ending in the tax year.

Read from the treaty documents: Convention and Protocol of Nov. 27, 2006; Treasury Technical Explanation. Texts and technical explanations: United States income tax treaties, A to Z.

How the payee claims these rates

• Individuals claim a reduced rate on interest, dividends, royalties or pensions in Part II of Form W-8BEN: treaty country, article, rate and any conditions. Most claims need a U.S. TIN or a foreign TIN on the form.
• Entities claim in Part III of Form W-8BEN-E, which also asks which limitation-on-benefits test the entity meets (the Belgium treaty's LOB provision is Article 21).
• Pay for services performed in the United States by an individual is exempted on Form 8233, not the W-8BEN, one form per tax year and per payer.
• The payer reports the payment on Form 1042-S with the income code shown above and chapter 3 exemption code 04 (exempt or reduced withholding under a tax treaty). From 2026 an exemption code is required whenever less than 30% is withheld.

Questions payers ask

The IRS notes behind the figures

Notes to the rates (IRS Table 1)

• f Includes alimony.
• g Exemption or reduced rate does not apply to an excess inclusion for a residual interest in a real estate mortgage investment conduit (REMIC).
• u If enterprise earns income from leasing of equipment in the conduct of a trade or business, covered by Business Profits article (net tax). If passive income from the leasing of equipment, and not in Royalty article, covered by the Other Income article, if any. In Pakistan payment for TV broadcasting rights are covered by the Royalty article but not rental income from motion picture films.
• dd Amounts paid to certain pension funds that are not derived from the carrying on of a business, directly or indirectly, by the fund are exempt. This includes dividends paid by a REIT only if the conditions in footnote mm are met. For Sweden, to be entitled to the exemption, the pension fund must not sell or make a contract to sell the holding from which the dividend is derived within 2 months of the date the pension fund acquired the holding. The United States has competent authority arrangements (MAP) with some treaty jurisdictions (e.g. Netherlands and Switzerland) that describe which pension funds are eligible for the exemption. See the Competent Authority Arrangements page on irs.gov.
• jj The rate is 15% (10% for Bulgaria and Spain; 30% for Austria, Germany, and Switzerland) for contingent interest that does not qualify as portfolio interest. In general, contingent interest is interest that is determined with reference to (a) receipts, sales, income, profits or other cash flow of the debtor or a related person, (b) any change in the value of any property of the debtor or a related person, or (c) any dividend, partnership distribution, or similar payment made by the debtor or related person. For Sweden and Germany, contingent interest is covered by the dividends article of the treaty.
• mm The rate in column 6 applies to dividends paid by a regulated investment company (RIC) or real estate investment trust (REIT). However, that rate applies to dividends paid by a REIT only if the beneficial owner of the dividends is (a) an individual (or pension fund, in some cases) holding not more than a 10% interest in the REIT, (b) a person holding not more than 5% of any class of the REIT's stock and the dividends are paid on stock that is publicly traded, or (c) a person holding not more than a 10% interest in the REIT and the REIT is diversified.
• oo Dividends received from an 80% owned corporate subsidiary are exempt if certain ownership period and limitation on benefits conditions are met by the recipient. For Japan, greater than 50% ownership is necessary. See specific treaty article to determine other conditions.
• ss 15% rate applies if income is attributable to a permanent establishment which that enterprise has in a third state, if the tax that is actually paid with respect to such income in the third state is less than 60 percent of the tax that would have been payable in the treaty country if the income were earned in by the enterprise and were not attributable to the permanent establishment in the third state, unless derived in the active conduct of a trade or business in that third state.

Notes to the services table (IRS Table 2)

• 4 Does not apply to compensation for research work primarily for private benefit.
• 12 Fees paid to a resident of the treaty country for services performed in the United States as a director of a U.S. corporation are subject to U.S. tax.
• 17 The exemption does not apply if the employee's compensation is borne by a permanent establishment (or in some cases a fixed base) that the employer has in the United States.
• 25 Exemption does not apply if gross receipts (including reimbursements) exceed this amount.
• 45 The time limit pertains only to an apprentice or business trainee.
• 53 Treated as business profits under Article 7 (VII) of the treaty.
• 57 Remuneration for employment exercised aboard a ship or aircraft operated in international traffic by a resident of a contracting State may be taxed in that State. Canada may tax the income from employment if the income is derived by a resident of Canada and the ship or aircraft is operated by a resident of Canada. If operated by a Luxembourg resident and Luxembourg fails to tax the income, such income shall be taxed in the State of which the employee is a resident. The income may be taxed in Tunisia only if the ship or aircraft is operated by an enterprise that is managed and controlled in Tunisia.

Transcribed from the IRS Tax Treaty Tables. Treaty texts and technical explanations: United States income tax treaties, A to Z.

Other treaty countries

Australia · Austria · Bangladesh · Barbados · Bulgaria · Canada · Chile · China · Commonwealth of Independent States · Cyprus · Czech Republic · Denmark · Egypt · Estonia · Finland · France · Germany · Greece · Iceland · India · Indonesia · Ireland · Israel · Italy · Jamaica · Japan · Kazakhstan · Latvia · Lithuania · Luxembourg · Malta · Mexico · Morocco · Netherlands · New Zealand · Norway · Pakistan · Philippines · Poland · Portugal · Romania · Slovak Republic · Slovenia · South Africa · South Korea · Spain · Sri Lanka · Sweden · Switzerland · Thailand · Trinidad and Tobago · Tunisia · Turkey · Ukraine · United Kingdom · Venezuela