{"id":4603,"date":"2025-10-21T15:09:00","date_gmt":"2025-10-21T13:09:00","guid":{"rendered":"https:\/\/denisemmanuelphilippetax.be\/?p=4603"},"modified":"2025-10-21T15:09:00","modified_gmt":"2025-10-21T13:09:00","slug":"case-law-application-of-the-general-anti-abuse-rule-art-344%c2%a71-itc-gaar-denial-of-domestic-foreign-tax-credit-on-royalties-received-by-a-belgian-scs-hybrid-trib-liege-21-octobre-2024","status":"publish","type":"post","link":"https:\/\/denisemmanuelphilippetax.be\/en\/tax-news-en\/case-law-application-of-the-general-anti-abuse-rule-art-344%c2%a71-itc-gaar-denial-of-domestic-foreign-tax-credit-on-royalties-received-by-a-belgian-scs-hybrid-trib-liege-21-octobre-2024\/","title":{"rendered":"Case-law: Application of the general anti-abuse rule (art. 344,\u00a71 ITC, GAAR) : denial of domestic foreign tax credit on royalties received by a Belgian SCS (Hybrid) (Trib. Li\u00e8ge, 21 octobre 2024)"},"content":{"rendered":"

On 21 October 2024, the Court of First Instance of Li\u00e8ge rendered a remarkable judgement in favour of the tax authorities, denying the application of the domestic foreign tax credit (“QFIE” \/ “FBB”) on royalties received by a Belgian SCS (“soci\u00e9t\u00e9 en commandite simple”) based on the general anti-abuse rule (Art. 344, \u00a71 ITC).<\/strong><\/p>\n

This ruling shows that the Belgian tax authorities are increasingly challenging international tax planning arrangements, and sometimes successfully (see also [1]<\/a> the Johnson Controls case)!<\/p>\n

1\ufe0f\u20e3 IP Structure<\/strong><\/p>\n

\ud83d\udd38 The Belgian SCS had entered into a “General License Agreeement” with a German group entity (X Services GmbH).
\n\ud83d\udd38 Under this agreement, the Belgian SCS had to pay to X Services GmbH 97% of the royalties received (in its capacity as “licensee”).
\n\ud83d\udd38 The SCS applied the domestic foreign tax credit (QFIE\/FBB, art. 285 ITC), thereby mitigating its corporate income tax bill.<\/p>\n

2\ufe0f\u20e3 Group restructuring involving an Hybrid entity : the Belgian SCS<\/strong><\/p>\n

\ud83d\udd38 While the Belgian SCS is opaque from a Belgian tax perspective, it is treated as a tax transparent entity from a German tax point of view.
\n\ud83d\udd38 The use of a SCS precluded the royalties paid to X Services GmbH from being subject to German commercial tax (Gewerbesteuer).
\n\ud83d\udd38 The role\/function of the Belgian SCS was previously performed by a Luxembourg SCS. The group had decided to carry out a restructuring and set up a Belgian company instead (a Belgian SA, which was later converted into a Belgian SCS) to manage the licenses, in order to benefit from the domestic foreign tax credit on royalties received.<\/p>\n

3\ufe0f\u20e3 Tax abuse<\/strong><\/p>\n

\ud83d\udd38 The Court considered that the whole structure was not set up for genuine business purposes, but for the main purpose of obtaining a tax advantage (foreign tax credit) contrary to the purpose of the relevant tax provision (Art. 285 ITC):
\n\u27a1\ufe0f The SCS had chosen to receive “royalties” instead of a standard fee (“r\u00e9mun\u00e9ration”) in order to benefit from the tax credit;
\n\u27a1\ufe0f The SCS had a very limited degree of substance: it did not bear any risks and performed merely administrative and accounting services;
\n\u27a1\ufe0f The court conducted a detailed analysis of the General License Agreement and concluded that the SCS did not have any freedom with respect to the granting of sub licences,…<\/p>\n

4\ufe0f\u20e3 Key takeaways<\/strong><\/p>\n

\u2600\ufe0f It is quite clear that the lack of substance of the Belgian entity had a significant influence on the court’s decision.
\n\u2600\ufe0f The fact that the restructuring took place with a view to obtain a (new) tax advantage (tax credit), without apparent economic\/financial reasons, also played an important role.
\n\u2600\ufe0f And, last but not least, the use of an hybrid entity!<\/p>\n

Denis-Emmanuel Philippe\u00a0<\/strong><\/em><\/p>\n

[1]<\/a> Recent case-law (Johnson Controls case): (i) EU principle of prohibition of abuse – (ii) Transfer pricing (Court of First Instance of Leuven, 6 June 2025 – Denis-Emmanuel Philippe<\/a><\/p>\n","protected":false},"excerpt":{"rendered":"

On 21 October 2024, the Court of First Instance of Li\u00e8ge rendered a remarkable judgement in favour of the tax authorities, denying the application of the domestic foreign tax credit […]<\/p>\n","protected":false},"author":2,"featured_media":408,"comment_status":"closed","ping_status":"closed","sticky":false,"template":"","format":"standard","meta":{"_acf_changed":false,"_et_pb_use_builder":"","_et_pb_old_content":"","_et_gb_content_width":"","om_disable_all_campaigns":false,"inline_featured_image":false,"_monsterinsights_skip_tracking":false,"iawp_total_views":31,"footnotes":"","_links_to":"","_links_to_target":""},"categories":[37],"tags":[],"class_list":["post-4603","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry","category-tax-news-en"],"acf":[],"aioseo_notices":[],"aioseo_head":"\n\t\t\n\t\n\t\n\t\n\t\n\t\n\t\t\n\t\t\n\t\t\n\t\t\n\t\t\n\t\t\n\t\t\n\t\t\n\t\t\n\t\t\n\t\t\n\t\t\n\t\t\n\t\t\n\t\t\n\t\t