The Court of Justice of the European Union (ECJ) is to hear the European Commission's (EC) case against two 'discriminatory' provisions in Belgian tax law.

The court action concerns the manner in which Belgium taxes certain income of foreign cooperative societies and those pursuing a social objective, as well as interest paid to foreign companies.

At present, Belgium grants a withholding tax exemption on the first tranche of dividends paid by cooperative societies and for the first tranche of dividends (or interest) allocated or attributed by societies pursuing a social objective. Only societies authorised in Belgium and cooperatives established under Belgian law are able to take advantage of this tax break.

The EC views this provision as discriminatory as it discourages investment in comparable foreign bodies and therefore constitutes an unjustified restriction on the free movement of capital, as established in European Union (EU) treaties.

In October, 2012, the EC formally requested that the Belgian authorities amend the relevant provisions.

Belgium's decision to charge withholding tax on interest from debt-claims not represented by securities and paid to foreign investment companies, and on interest relating to securities deposited or registered in an account with financial institutions established outside the country is also being challenged as no such levy is imposed on Belgian investment companies or financial institutions established in Belgium.

The EC believes this imposes unjustified restrictions on the freedom to provide services and on the free movement of capital as established in EU treaties and could discourage cross-border investment.

Belgium was asked to amend the relevant provisions in February 2013.

These two matters have been referred to the ECJ as the Belgian authorities have not responded to the EC's requests.

More details are available HERE