Belgium As A New Springboard Into The EU? – Corporate/Business Regulation

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A recent tax ruling of the Belgian tax authority (the Tax

Ruling) confirms that a transfer of the registered seat of a

company from the United States to The Netherlands via Belgium

should not trigger any tax consequences in Belgium. Although the

Tax Ruling does not create a legal precedent, the decision may open

up a new gateway into the European Union for companies that would

like to re-domicile to an EU country that does not otherwise allow

a direct transfer of registered seat from a non-EU


Registered seat

In this article, “registered seat” refers to its

nationality and the laws that apply to it. There are two different

theories: the “center of management seat” model and the

“country of incorporation” model.

According to the “center of management seat” model,

a company is subject to the laws of the state where its effective

center of management is located, irrespective of its country of

incorporation. Jurisdictions applying this model include

Luxembourg, Germany, France and Spain.

According to the “country of incorporation” model, a

company is subject to the laws of the state where it was

incorporated (i.e., where its “registered

office” or “statutory seat” is), irrespective of

where it is effectively managed. Under this model, a company

retains the nationality of the country in which it was originally

incorporated, even if it transfers the center of its management to

another country. Jurisdictions using this model include England,

The Netherlands and the United States.

However, in many jurisdictions that use the “country of

incorporation” model, whether a company is subject to tax in

those jurisdictions does not depend (at least not exclusively) on

its country of incorporation. Instead, this may be determined by

other independent connecting factors, such as its “central

management and control” for UK tax purposes or its

“effective management” for Dutch tax purposes.

Transfer of registered seat (or re-domiciliation)

The transfer of a company’s registered seat is also known as

re-domiciliation. Generally, the transfer of a company’s

registered seat will only affect the corporate law applicable to

the company. Re-domiciliation may have non-tax rationales, such as

benefitting from the destination country’s network of

(non-tax) treaties and regulatory framework. Sometimes, a

re-domiciliation to a more tax-friendly jurisdiction may bring tax

advantages if the company is subject to tax in its original

jurisdiction because it was incorporated or has its registered seat

there. For example, if a company is subject to tax in a

“country of incorporation” model jurisdiction because

its effective management is situated there, a re-domiciliation

coupled with a transfer of the location of their effective

management to another jurisdiction may reduce their administrative

burden ensuring that they are subject to both the corporate laws

and taxing regime of the destination jurisdiction.

Whether re-domiciliation (into or out of a country) is permitted

depends on the domestic law of that country. A line of case law of

the European Court of Justice (including Cartesio (2008),

Vale (2012) and Polbud (2018)) is relevant in

this context. These cases, subject to certain conditions, allow a

company that is formed in accordance with the legislation of an EU

Member State to convert itself into a company governed by the law

of another EU Member State. Some EU Member States that do not

otherwise allow re-domiciliation (such as The Netherlands) have

relied on this case law to allow cross-border conversions or

divisions from and to other EU Member States.

Belgium as a springboard

Belgium can potentially be a springboard for a non-EU company

that would like (and is allowed under its domestic law) to

re-domicile to a specific EU state not accepting re-domiciliation

other than from an EU Member State (such as The Netherlands).

Pursuant to the new Belgian Code of Companies and Association

(the CCA), Belgium recently adopted the “country of

incorporation” model. Accordingly, from a Belgian law

perspective, the applicable company law is determined on the basis

of the formal criterion of the “statutory seat.” A

formal procedure for a cross-border transfer of a company’s

registered seat into and from Belgium has also been introduced in

the CCA. However, for the purposes of Belgian corporate tax, the

company’s effective management remains the criterion. A new

rebuttable presumption has been added such that a company with a

Belgian statutory seat will be presumed to have its effective

management in Belgium. This presumption can be rebutted if it can

be demonstrated that:

  1. the effective management of the

    company (for the purposes of Belgian tax law) is not located in

    Belgium but in another state; and
  2. the company is tax resident in a

    state other than Belgium pursuant to both domestic tax law in that

    other state and applicable tax treaties.

The Tax Ruling examined an arrangement that would take advantage

of the new regime in the CCA by re-domiciling a company from the

United States to The Netherlands via Belgium. The arrangement would

broadly involve the following steps in accordance with the CCA

(where applicable):

  • First, the company would transfer its

    seat of effective management from the United States to The

    Netherlands. It would register as a foreign company in the trade

    register of The Netherlands Chamber of Commerce. In doing so, it

    would also become a Dutch tax resident.
  • Second, it would transfer its

    statutory seat from the United States to Belgium. It would thereby

    be converted into a Belgian limited company and become subject to

    Belgian company law.
  • Third, after waiting for two months

    as required by the CCA, it would transfer its statutory seat from

    Belgium to The Netherlands. It would finally be converted into a

    Dutch limited company.

The Tax Ruling held that the presumption would be rebutted under

these circumstances. The company in question would not be

considered a Belgian resident company, so it could not be subject

to Belgian corporate tax. It may only be subject to some minor

compliance formalities, such as filing an annual account for the

financial year in which the statutory seat would be registered in


Further considerations

It is worth noting that the Tax Ruling above does not create a

legal precedent.  Each case must therefore still be considered

on its own merits. Also, one should also carefully assess the tax

and non-tax consequences of the re-domiciliation in the

company’s original and destination jurisdictions.

Useful for UK companies after Brexit?

How useful will this potential gateway for re-domiciliation be

for companies in the UK before and after Brexit? At present, UK law

does not include any provisions that allow a true re-domiciliation

(i.e., transfer of “registered office”) into

or out of the UK. Even though the European Court of Justice’s

case law (such as Cartesio, Vale and

Polbud) bind the UK (at least before Brexit), most

practitioners note that these cases have not been enshrined in UK


Some practitioners suggest that although the European Commission

can commence infringement proceedings against the UK for failing to

implement EU law, in practice it seems unlikely that the UK

government will introduce any such provisions in the UK before the

end of the Brexit transition period. Even if such provisions were

introduced into UK law, it would be unnecessary to use Belgium as a

springboard into the EU as a UK company could directly re-domicile

to any EU Member State.

Originally Published by Cadwalader, December 2020

The content of this article is intended to provide a general

guide to the subject matter. Specialist advice should be sought

about your specific circumstances.

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