The double taxation treaty, signed on 4 May 2026 by the Prime Minister of Liechtenstein, Brigitte Haas, and the Belgian Prime Minister, Bart De Wever, currently constitutes a new instrument for wealth and tax structuring. This agreement, which has not yet been ratified, aims to prevent double taxation with respect to income and wealth taxes between the two nations.
The instability and increasing rigidity of European tax policies highlight the importance of a genuine strategy for investors and businesses. This contribution provides an overview of the legal, tax, and economic implications of this new convention.
I. Background and Doctrine
Until the signing of this convention in May 2026, tax relations between Belgium and the Principality of Liechtenstein existed in a genuine treaty vacuum.
In the absence of a treaty, resident individuals and companies with their registered office in either jurisdiction were often exposed to juridical double taxation on their cross-border income and wealth. This situation resulted from the parallel application of domestic legislation, each state claiming taxing rights based either on residence or on the source of the income.
The Fundamental Distinction Between the Convention Principles
As is often the case, the structure of the convention is based on a fundamental distinction:
- The OECD Model Convention (Organisation for Economic Cooperation and Development): it serves as the global reference “architecture” and establishes residence as the primary criterion for taxation, while source taxation remains a subsidiary criterion for specific categories such as dividends, interest, or real estate income.
- The BEPS Project (Base Erosion and Profit Shifting): directly incorporated into the text, this OECD and G20 standard specifically aims to close normative loopholes preventing multinational enterprises from reducing their tax burden by exploiting asymmetries between national tax systems.
II. The Main Pillars of the Agreement
The bilateral tax landscape has been profoundly reshaped by the signing of this text. Opportunities for optimisation without genuine economic substance have been reduced.
A. Exemption from Withholding Taxes
This is the most significant provision for cross-border financial flows:
- General framework: the convention introduces a full exemption from withholding taxes on intra-group dividends, loans between related companies, and royalties.
- Departure from domestic law: under Belgian domestic law, dividends paid to a foreign company are, in principle, subject to a 30% withholding tax. Since Liechtenstein is not a member state of the European Union (although it has been part of the European Economic Area since 1995), it could not benefit from the EU Parent-Subsidiary Directive.
The convention therefore introduces a rule that European secondary legislation could not provide, thereby removing a major obstacle to the free movement of capital.
B. Tax Treatment of Wealth Structures and Funds
Liechtenstein is a leading principality managing more than EUR 500 billion in assets and is characterised by specific legal entities:
- Specific structures: the agreement establishes clear rules for Anstalten (establishments), Stiftungen (foundations), and Treuhänderschaften (trusts). These structures, which have no direct equivalent, previously generated considerable uncertainty under Belgian anti-abuse legislation. Indeed, under Belgian tax law, such entities fall within the scope of the “Cayman Tax”.
The convention now introduces an “analytical framework” allowing a more precise determination of whether a Liechtenstein structure is regarded as “transparent” or “opaque” by the tax authorities.
If one of these structures is classified as a legal arrangement lacking substance, Belgium may apply the Cayman Tax. The structure’s income would then be taxed directly in the hands of the Belgian resident as if it had been received personally.
Conversely, if the structure demonstrates genuine economic activity or satisfies the opacity criteria validated by the convention, it will provide legal certainty and put an end to systematic reassessments based solely on the fact that the entity is located in Liechtenstein.
- Collective investment vehicles: Liechtenstein investment and pension funds are subject to special provisions enabling a more functional tax treatment.
C. Mutual Agreement Procedure and Mandatory Arbitration
To guarantee taxpayers’ legal certainty, the text establishes a mutual agreement procedure in the event of interpretative disputes. In addition, arbitration becomes mandatory if the procedure does not lead to a resolution within three years, thereby offering a genuine procedural safeguard against residual double taxation.
D. Strengthening of Anti-Abuse Compliance
Compliance requirements have been significantly reinforced. To counter aggressive tax optimisation schemes using Liechtenstein as an intermediary jurisdiction, the text incorporates rigorous tax due diligence clauses derived from BEPS standards.
- The LOB Clause (Limitation on Benefits): ensures that treaty benefits are granted only to genuine residents of the contracting states (primarily a form-based analysis).
- The PPT Clause (Principal Purpose Test): allows the tax administration to deny treaty benefits where a legal arrangement has been established primarily to avoid taxation (primarily a substance-based analysis).
III. Potential Economic Consequences for Belgium
From a macroeconomic perspective, the impact is expected to be broadly positive in the long term:
- Attractiveness for foreign direct investment: the existence of a stable framework enables Liechtenstein family offices, foundations, and private equity funds to structure investments in Belgium with legal certainty. By way of comparison, similar conventions concluded by Belgium (such as those with Switzerland or Luxembourg) have generated an average increase in bilateral foreign direct investment within five years of their entry into force.
- Competitiveness of Belgian companies: Belgian groups with subsidiaries in Liechtenstein will benefit from improved net cash flow due to the abolition of repatriation taxes on dividends, interest, and royalties, thereby encouraging further investment and shareholder distributions.
IV. Conclusion
In 2026, the convention between Belgium and Liechtenstein fills a historic gap between two interconnected economies and aligns with the best practices of contemporary international tax law.
It confirms Liechtenstein’s position as a transparent financial centre and provides Belgium with a new instrument to secure tax revenues while enhancing attractiveness.
Its successful implementation will now require absolute legal and tax rigor from taxpayers in both states.
The text must still be ratified by the parliaments of both countries (most likely during 2026), with entry into force estimated for 1 January 2027. If ratification only occurs in 2027, entry into force will most likely be set for 1 January 2028.
For any questions relating to this new legal framework, or to explore the opportunities and potential advantages it may offer to your structure or assets, please do not hesitate to contact Vanbelle Law Boutique.
