Withholding Tax Rates: India to Belgium Under DTAA

India to Belgium Withholding Tax Rates Under DTAA

The India-Belgium DTAA sets the withholding rates an Indian company applies to cross-border payments to a Belgian resident — dividends, interest, royalties or fees for technical services — on which it must deduct withholding tax at source under section 393(2) of the Income-tax Act, 2025 (Table, Sl. No. 17; section 195 of the Income-tax Act, 1961). The India-Belgium DTAA, originally signed on 26 April 1993, provides reduced rates compared to India's domestic withholding rates. An Amending Protocol entered into force on 26 June 2025, but it left every withholding rate untouched — see the section below for what it did change.

A critical feature of this treaty is the Most Favoured Nation (MFN) clause in the original Protocol, which has reduced the royalty and FTS rate from the treaty's original 20% down to 10%. This makes the India-Belgium DTAA rates competitive with other European DTAAs. For a comprehensive treaty analysis, see our India-Belgium DTAA complete guide.

The treaty rates apply only when the Belgian recipient is the beneficial owner of the income and holds a valid Tax Residency Certificate (TRC) from the Belgian Federal Public Service Finance (SPF Finances).

The 2025 Amending Protocol: What It Changed

India and Belgium signed an Amending Protocol on 9 March 2017 at New Delhi, which entered into force on 26 June 2025. It was gazetted as S.O. 5074(E) and notified by the CBDT through Notification No. 160/2025 dated 10 November 2025.

The Protocol replaced two articles, and only two: Article 26 (Exchange of Information) and Article 27 (Assistance in the Collection of Taxes). The new Article 26 extends information exchange to taxes of every kind and description rather than only the taxes covered by the treaty, and provides that a country may not decline to supply information solely because it is held by a bank or other financial institution — bank secrecy is no longer a ground for refusal. The new Article 27 obliges each country to assist the other in collecting revenue claims, including interest, penalties, and costs of collection.

The Protocol did not change any withholding tax rate. Dividends remain capped at 15%, interest at 15% (10% on loans granted by a bank), and royalties and FTS at 10% under the MFN-based amendment notified in 2001. The tables below therefore state the position both before and after 26 June 2025. What changed is transparency and enforcement: the two tax administrations now exchange a wider class of information and can assist each other in recovering tax, so the documentation supporting a treaty-rate claim should be capable of withstanding scrutiny from either side.

Dividend Withholding Rates

Under Article 10 of the India-Belgium DTAA, dividends paid by an Indian company to a Belgian resident are subject to a maximum withholding tax of 15% of the gross amount. This is a single-tier rate — unlike some Indian DTAAs that offer lower rates for substantial shareholdings, the India-Belgium treaty applies a flat 15% regardless of the percentage of equity held.

The domestic withholding rate on dividends to non-residents is 20% plus applicable surcharge and cess (effective rate approximately 20.8% to 21.84%). The treaty provides a 5 percentage point reduction. For Belgian holding companies with Indian subsidiaries, this rate impacts the after-tax return on equity investments significantly when compared to jurisdictions offering 5% or 10% treaty rates on dividends.

Interest Withholding Rates

Article 11 governs interest payments from India to Belgium. It sets a two-tier cap — 10% or 15% — and the tier turns on who granted the loan, not on who receives the interest:

The 10% tier turns on a single word in Article 11(2)(a): the interest must be paid on a loan granted by a bank. Belgian banks such as KBC, BNP Paribas Fortis and ING Belgium therefore qualify on their lending to Indian borrowers. A Belgian lender that is not a bank does not — a group finance company, a debt fund, an insurer or a leasing arm is capped at 15% under Article 11(2)(b) however “financial” it looks. Some Indian treaties do widen the lower tier to financial institutions generally; this one does not, so establish the lender's status before applying 10%.

Note also what Article 11 does not contain: there is no exemption leg. Interest paid to the Belgian State, to a political subdivision, to the National Bank of Belgium, or on a government-guaranteed loan is not exempt under this treaty and takes the ordinary 10% or 15% cap. Article 11(3) does mention Government securities, but it is the definition of interest, not an exemption — it brings such income into the article rather than taking it out.

If the interest is connected with a permanent establishment that the Belgian recipient maintains in India, the interest is taxed as business profits under Article 7 rather than under these preferential rates.

Royalty & FTS Withholding Rates

The India-Belgium DTAA's treatment of royalties and FTS is unique due to the MFN clause. The convention as signed in 1993 set the rate at 20%. However, the Protocol included a critical provision: if India subsequently agreed to a lower rate or more restricted scope for royalties and FTS with any OECD member state, the same rate and scope would apply to Belgium.

India's subsequent DTAAs with OECD members — notably the India-Sweden convention effective 1998 — provided a 10% rate and a narrower scope, and the CBDT gave formal effect to the change for Belgium through Notification S.O. 54(E) dated 19 January 2001, which substituted the operative text of Article 12. The effective rate under the India-Belgium DTAA is therefore 10%.

Important Note on MFN Clause Application

The Supreme Court of India in its 2023 ruling on MFN clauses held that the automatic application of MFN provisions requires a separate notification by the Indian Government. Belgium stands on firmer ground than the treaties at issue in that ruling: the CBDT formally notified the MFN-based amendment to the India-Belgium treaty through Notification S.O. 54(E) dated 19 January 2001, so the 10% rate rests on a notified amendment rather than an un-notified MFN claim. Note also that the substituted royalty definition contains no limb for the use of industrial, commercial or scientific equipment, so equipment rentals are not royalties under this treaty at all; they fall to Article 7 as business profits, taxable in India only if there is a PE. Indian payers should still document the basis for the rate applied.

Capital Gains Treatment

Capital gains under the India-Belgium DTAA are governed by Article 13. The key provisions are:

• Immovable property: Gains from sale of immovable property (real estate) in India are fully taxable in India at domestic rates (long-term gains at 12.5% without indexation under the Finance (No. 2) Act 2024; short-term gains at the rates applicable to the seller).
• Movable property of PE: Gains from sale of movable property forming part of a Belgian enterprise's PE in India are taxable in India.
• Ships/aircraft: Gains from the alienation of ships or aircraft operated in international traffic, and of movable property pertaining to their operation, are taxable only in the State of which the alienator is a resident (Article 13(3)). This treaty uses residence, not the place of effective management that the OECD Model uses — do not assume the Model wording.
• Substantial shareholdings (10% or more): Under Article 13(5), gains from the alienation of shares forming part of a participation of at least 10% of the capital stock of an Indian company may be taxed in India. Shares of companies whose property consists principally of immovable property are covered separately by Article 13(4).
• Other shares and assets: Gains not covered by Article 13(1) to 13(5) — including holdings below 10% that do not derive value principally from immovable property — are taxable only in Belgium under Article 13(6). India's domestic provisions on indirect transfers (section 9 of the Income-tax Act, 2025 (section 9(1)(i) of the Income-tax Act, 1961)) and GAAR may still need to be considered.

Belgian investors should be aware that India's capital gains tax planning strategies are subject to both treaty provisions and domestic anti-avoidance rules.

How to Apply Reduced Rates

To apply the reduced DTAA rates, the following compliance steps are mandatory:

1. Tax Residency Certificate (TRC): The Belgian recipient must obtain a TRC from SPF Finances/FOD Financien confirming tax residency in Belgium.
2. Form 41 (formerly Form 10F): Submit Form 41 electronically on the Indian e-filing portal with details including name, status, nationality, the Belgian tax identification number (for a company, its enterprise number on the BCE/KBO register; for an individual, the national number), period of residency, and address.
3. Self-Declaration: A declaration confirming beneficial ownership, absence of PE in India (if applicable), and that the income is not connected with any PE.
4. Basis for the 10% rate: For royalties and FTS, reference Notification S.O. 54(E) dated 19 January 2001, which substituted Article 12 following the Protocol's MFN clause. The 10% rests on that notified amendment, not on an un-notified MFN claim.
5. Form 146 (formerly Form 15CB): The Indian payer must obtain a CA certificate in Form 146 certifying the applicable rate, treaty article, and nature of remittance.
6. Form 145 (formerly Form 15CA): File Form 145 electronically before remittance, providing complete payment and tax details.
7. Lower Withholding Certificate: Belgian recipients with expected income below threshold or carry-forward losses can apply under section 395(1) of the Income-tax Act, 2025 (section 197 of the Income-tax Act, 1961) for a lower or nil withholding certificate.

For step-by-step guidance, read our article on claiming DTAA lower withholding tax.

Domestic Rates vs Treaty Rates Comparison

The following comparison shows the tax savings available under the India-Belgium DTAA:

Note: The domestic rate of 20% under the Income Tax Act is subject to surcharge (2% to 5% depending on income) and Health & Education Cess of 4%, making the effective domestic rate between 20.8% and 21.84%. Treaty rates work the other way: the 10% or 15% is a ceiling on the gross amount and is not grossed up by surcharge or cess, so the capped figure is the whole of the Indian tax. For a broader comparison, see our DTAA withholding tax rates by country guide.

Common Mistakes & Compliance Tips

1. Applying the Wrong Royalty/FTS Rate

The most frequent error is applying the 1993 treaty rate of 20% for royalties and FTS instead of the 10% now written into Article 12(2). Indian payers should reference the MFN clause in the Protocol and document the basis for applying 10%. For Belgium, the reduced rate is supported by CBDT Notification S.O. 54(E) dated 19 January 2001, which notified the MFN-based amendment to Article 12 — cite it when documenting the 10% rate.

2. Assuming All Share-Sale Gains Are Exempt in India

Belgian investors sometimes assume every capital gain on shares of an Indian company is taxable only in Belgium. Under Article 13(5), gains on the sale of a participation of at least 10% of the capital stock of an Indian company may be taxed in India; only smaller holdings (not deriving value principally from immovable property) fall within the residence-only rule of Article 13(6).

3. Not Filing TRC and Form 41

Applying treaty rates without a valid TRC from SPF Finances and electronically filed Form 41 is the most common compliance failure. Indian tax authorities regularly deny treaty benefits during assessments when these documents are missing.

4. Ignoring PE Implications

If the Belgian recipient maintains a permanent establishment in India and the income is connected to that PE, the reduced withholding rates do not apply. The income must be taxed as business profits under Article 7.

5. Incorrect Forms 145 and 146

Errors in Forms 145 and 146 — including wrong article references, incorrect rates, or inconsistent payment details — can trigger tax queries and delayed remittances. Ensure the CA certifying Form 146 is familiar with the India-Belgium DTAA, including the MFN clause.

6. Beneficial Ownership and Anti-Abuse

Under the MLI's Principal Purpose Test, treaty benefits can be denied if obtaining benefits was a principal purpose. Belgian conduit entities with no substance may face challenges. Ensure the Belgian entity has genuine economic substance and is not merely routing payments through Belgium.

For expert assistance with FEMA compliance and cross-border structuring, contact our tax advisory team.

Frequently Asked Questions

What is the effective royalty rate under the India-Belgium DTAA?

The effective royalty rate is 10%, down from the 20% in the 1993 convention. The Protocol's Most Favoured Nation clause was triggered by India's convention with Sweden, and Notification S.O. 54(E) of 19 January 2001 substituted Article 12 to write the 10% cap into the treaty. The 10% rate applies to royalties for copyrights, patents, trademarks, designs, and know-how.

Is the 15% dividend rate applicable to all Belgian investors?

The 15% rate applies to all Belgian residents who are the beneficial owners of the dividends. There is no differentiated rate based on the level of shareholding — the same 15% applies whether the Belgian entity holds a minority or majority stake.

How does the MFN clause work in practice?

The MFN clause in the Protocol states that if India agrees to lower royalty/FTS rates with any OECD member state, the same rates apply to Belgium. Since India has 10% rates with Sweden, Finland, and other OECD members, Belgium benefits from the same 10% rate. Indian payers should document the MFN basis when filing Form 146 and reference the specific OECD country treaties.

What documents does a Belgian company need to claim treaty benefits?

A Belgian company needs: (1) Tax Residency Certificate from SPF Finances, (2) Form 41 filed electronically on the Indian portal, (3) Self-declaration of beneficial ownership and PE status, (4) MFN clause documentation for royalty/FTS claims. The Indian payer needs Form 146 from a CA and must file Form 145 before remittance.

Is there a lower rate for interest on loans from Belgian banks?

Yes. Interest on any loan granted by a bank is capped at 10% instead of the general 15%. Article 11(2)(a) says “a bank”, so non-bank Belgian lenders — finance companies, debt funds, insurers, leasing arms — stay at 15%. There is no exemption in Article 11 for interest paid to the Belgian State or the National Bank of Belgium; it takes the ordinary cap.

Did the 2025 Amending Protocol change the India-Belgium withholding rates?

No. The Amending Protocol — signed 9 March 2017 at New Delhi and in force from 26 June 2025 (S.O. 5074(E); CBDT Notification No. 160/2025 dated 10 November 2025) — replaced only Article 26 (exchange of information, now covering taxes of every kind, with bank secrecy no longer a ground for refusal) and Article 27 (assistance in the collection of taxes). Dividends remain at 15%, interest at 15% (10% on loans granted by a bank), and royalties and FTS at 10%.