25 November 2022

Exemption from withholding tax on dividends: who is UBO?

The Court of Justice has ruled in its jurisprudence that the exemption from withholding tax on dividends only takes effect on condition that the dividend is attributed to the parent company that qualifies as the ‘Ultimate Beneficial Owner’ (hereinafter: UBO). This jurisprudence is now also seeping through the Ruling Commission’s rulings, where importance is given to the decision-making process on the part of the parent company with regard to the dividends received.

In General

If a parent company holds a share participation of at least 10% or an amount of 2 500 000 EUR of a Belgian subsidiary for at least one year, a dividend distribution by the subsidiary can take place with exemption from withholding tax as far as there is no abuse. 

The use of pure conduit companies or complex artificial structures aimed at avoiding this withholding tax is, according to the Court of Justice an indicator pointing to abuse. This leads to the non-application of the aforementioned withholding tax exemption to dividends paid by the subsidiary to the parent company.

The Court of Justice ruled on 26 February 2019 that this exemption only applies if the parent company, to which the dividends belong, is also the UBO of this income. The qualification of UBO is obtained when that person has full right of use and enjoyment over the dividends received and has no contractual or legal duty of transfer to a third party. However, the tax legislation related to the withholding tax exemption does not mention this UBO concept. 

The Ruling Commission and the UBO concept

Following the jurisprudence of the Court of Justice, the Ruling Commission now also focuses on the UBO concept when assessing whether the withholding tax exemption can be applied.

In its analysis, the Ruling Commission attaches importance to substance (e.g. sufficient personal property to carry out its activities and bear the associated risks) and the beneficial ownership of the parent company to whom the dividend payments belong.

With regard to the ultimate beneficial ownership, it is crucial for the Ruling Commission that the parent company has a free decision-making power over the received dividends. 

Relevant criteria for UBO

Recent rulings show the relevant criteria to which importance is attached in order for the receiving parent company to qualify as a UBO.

If the parent company can make its own analysis on how it will use the dividend income received, specifically:

  • as working capital; or
  • to ensure its liquidity; or
  • for creating reserves for investment or short-term investments; or 
  • for reinvestment in its subsidiary or subsidiaries; or
  • to be used for its own dividend payments, it may be decided that the parent company qualifies as a UBO.

Even if the amount of the dividend distribution is determined by the parent company itself and is independent of the dividend amount received from the subsidiary, this again indicates the parent company’s free decision-making power.

However, the aforementioned criteria are not exhaustive, but are positive elements to conclude that the parent company is UBO of the received dividend income. This also implies that the broader the decision-making power of the parent company is formulated, the more likely it is to qualify as UBO.


In its rulings, the Ruling Commission attaches great importance to the decision-making process on the part of the parent company regarding the received dividends. A detailed documented decision-making process, showing the different uses of the dividends, is therefore appropriate to prove that it is effectively UBO of the received dividends. This avoids possible discussions regarding the withholding tax exemption.

Eline Depaepe and Evert Moonen
De Langhe Attorneys

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