The tax administration still requires that an organizer of Belgian shows deducts a professional withholding tax from every amount paid to a non-resident company. This practice has three consequences:
1. The first consequence is that the payments actually are taxable profits of the company which will be taxed in the country of origin of the producer of the shows. This implies double taxation.
2. The second consequence is that the tax administration suspects that all companies which organize shows, are screen companies, and that a contract concluded between the organizer of the show and a foreign company is a contract with the foreign organizer.
3. The third consequence is that the deduction of the professional withholding tax increases the selling price, in order to obtain a corresponding amount. The company cannot reduce this amount by an equal amount to the professional withholding tax of 18%. The tax administration considers the amounts received to be profits which will be taxed in the country of origin and refuses that the amounts are reduced as a result of the deduction of the professional withholding tax.
A distinction should be made between the double tax treaties prepared in accordance with the OECD Model of 1977 and those prepared in accordance with the (old) OECD Model 1963. The models according to the OECD Model 1977 provide that the principles of the national law are applicable mutatis mutandis, this means that the contracts concluded between a Belgian organizer and a non-resident foreign company that organizes the show, are only contracts between the organizer of the exhibition and another person who is not the artist himself, but the person he represents.
Nevertheless the tax administration applies article 17 § 2 of this treaties for the prevention of the double taxation to force the Belgian organizer to deduct the professional withholding tax from the purchase price of the shows, despite the negative tax consequences. This practice can be contested.
Recent case law teaches that the filing of a demand for an exemption is indeed possible. This may be a solution for the organizer of Belgian shows who is too late to file a complaint within the legal period. The evidence must be supplied that the co-contractor is taxed abroad on the received amounts.
Moreover since 1 January 2013 the “catch all” provision of article 228 § 3 of the Internal Tax Code applies. This implies that foreign artists will be subject to professional withholding tax of 18% in Belgium in any situation where there is no evidence that the amounts were subject to tax abroad. This regardless of the fact that article 228 § 2, 8 ° of the Internal Tax Code has not been changed.
We believe that this modification applicable since 1 January 2013 is certainly disputable.