Class 23 insurance: Opportunity for non-resident insurers to pursue tax relief in Belgium

On 7 November 2024, the Court of Justice of the European Union (CJEU) handed down a crucial ruling concerning the discriminatory taxation of dividends received by non-resident insurers in the Netherlands. This ruling could have significant implications for non-resident insurers in Belgium.

Context

A UK insurance company offering “unit-linked insurance plans” in the Netherlands was subject to a 15% withholding tax on dividends received in the Netherlands. The company challenged the withholding tax on the grounds that Dutch insurance companies engaged in similar activities were not taxed in the same way. In fact, the burden of withholding tax is neutralised for resident insurers only. The CJEU ruled that this difference in treatment constituted an unjustified restriction on the free movement of capital.

Precedents

This decision is reminiscent of the famous “Aberdeen” case of 18 June 2009: Finnish companies investing in companies in the same country were exempt from withholding tax, whereas foreign companies investing in the same Finnish companies were subject to withholding tax, which was deemed to be contrary to the free movement of capital.

A ruling on 25 October 2012 also condemned Belgium, which applied a similar regime to SICAVs. At the time, the Belgian legislator had to amend the applicable tax regime as a result of this case.

Implications for non-resident insurers in Belgium

Unit-linked insurance plans” are known as “Class 23” insurance.

The situation is similar to that in the case before the CJEU. When non-resident insurance companies are subject to withholding tax, the regulations take into account gross dividends without deducting “technical provisions” (taxation on gross dividends). Conversely, resident insurance companies may offset the withholding tax against corporate income tax and deduct these “technical provisions” (taxation on net dividends), which constitutes a difference in treatment.

The CJEU's decision paves the way for recourse by non-resident insurers that have invested in Belgian companies and suffered unjustified withholding tax on dividends. They could now seek repayment of the withholding taxes unduly withheld.

Next steps

The claim for repayment of the withholding tax overpaid in 2020 must be submitted to the Belgian tax authorities by 31 December 2024 at the latest.

Do not miss out on this opportunity. Contact your tax advisers now to start the necessary steps.