The New Double Tax Treaty Between Belgium And France Will Not Come Into Force Any Time Soon

Belgium and France signed a new double taxation treaty on 9 November 2021, which will replace the current treaty dating back to 1964.

It is still a long way from coming into force.

It should be noted that, on the Belgian side, the treaty was signed by the federal government and five regional and community governments. In Belgium, the treaty will therefore have to be ratified by the Belgian federal parliament, the Flemish parliament, the parliament of the French Community, the parliament of the German-speaking Community, the parliament of the Walloon Region, and the parliament of the Brussels-Capital Region.

But that is not the problem : the treaty has not yet been submitted to the federal parliament or to the regional or community parliaments.

The competent French and Belgian authorities have met to examine various possible adjustments, particularly with regard to the new rules on the taxation of public sector remuneration.

The issue of public sector remuneration

Remuneration paid by a public entity is governed by Article 10 of the 1964 Treaty. This provision establishes the principle of exclusive taxation of public sector remuneration in the paying State, the source State. Salaries paid by a State, a political subdivision or a local authority are taxable only in that State.

However, Article 10 §3 provides that this rule does not apply when the remuneration is paid to a resident of the other State who is also a national of that State, but the Convention does not specify which State may then tax such remuneration.

Differences and first interpretative agreement

The French tax authorities took the position that the State of residence had the power of taxation by application of Article 18, the residual article.

The Belgian authorities, on the other hand, considered that the exclusion in Article 10 implied a return to the general regime for remuneration provided for in Article 11, based on the place where the activity is carried out.

An interpretative agreement in 2009 confirmed the French position. When the source state rule is disregarded under Article 10 §3, Article 18 applies : the power to tax lies exclusively with the state of residence.

This interpretation was validated by the Belgian Supreme Court in two rulings handed down on 27 January 2011 and 17 March 2011.

Dual nationality

The interpretative agreement went a step further and clarified that the exception in Article 10 §3 did not apply when the beneficiary had dual nationality, that of their State of residence and that of the paying State. In this situation, Article 10 §1 gives exclusive power of taxation to the paying State.

However, this solution has been strongly contested, as the text of Article 10 §3 does not distinguish between beneficiaries with one or two nationalities, but only requires that they be residents of the other State and hold its nationality.

In a ruling dated 17 September 2020, the Supreme Court settled this issue by deciding that this distinction could not be upheld. Article 10 §3 must apply in full, including in cases of dual nationality, so that remuneration paid by the paying State to a resident of the other State is liable to tax exclusively in the State of residence.

New mutual agreement

Following this decision, a new amicable agreement was concluded between the Belgian and French authorities (Belgian Official Gazette of 24 March 2025), but it was immediately denounced by the French tax authorities.

This agreement provided, on the one hand, that the application of Article 10 §3 no longer automatically entailed the application of Article 18, with Articles 11 and 12 becoming applicable again to remuneration and pensions paid by a public entity.

On the other hand, it specified that, for the application of Article 10 §3, it was sufficient for the worker to have the nationality of his State of residence, regardless of whether he also had the nationality of the paying State.

Let us forget this agreement : it was denounced by the competent Belgian and French authorities (Belgian Official Gazette, 12 November 2025). It is therefore considered null and void and without any legal effect.

Following the withdrawal of the 2025 agreement, the Belgian administration clarified its position in an opinion issued by the Federal Ministry of Finance on 2 July 2025. When the paying state rule is disregarded, the power of taxation is granted to the state of residence in accordance with Article 18. This solution also applies to beneficiaries who have dual nationality, as Article 10 §3 applies regardless of this circumstance.

Public sector remuneration in the new double tax treaty

The 2021 treaty expressly incorporates the conditions for applying the derogatory regime by adding an additional condition, i.e. the actual exercise of the activity in the State of residence.

The State of residence has the power to tax if the remuneration is paid to a resident who is a national of that State for services rendered in the State of residence.

However, where the beneficiary is also a national of the paying State, the right to tax the remuneration or pensions lies with the paying State.

Renegotiation of the new double tax treaty

At the initiative of the French authorities, targeted renegotiations have been opened concerning the taxation of public sector remuneration, in particular to take account of the concerns expressed by Belgian public hospitals and their medical staff residing in France. They prefer to be taxed in France rather than in Belgium.

These discussions have led to the drafting of an amendment to the 2021 Treaty to establish a transitional period during which public sector remuneration would continue to be taxed in accordance with the 1964 Treaty. In concrete terms, this transitional regime would allow Articles 10 and 18 of the 1964 Treaty to continue to apply temporarily to the public sector workers concerned, despite the future ratification of the framework of the new treaty.

During these discussions, Belgium stated its desire to reopen discussions on other provisions of the 2021 Treaty, considering that it presents an imbalance to the detriment of the Belgian State.

It has not been clarified which provisions are concerned, but these could include :

Income from real estate

A Belgian resident owning real estate located in France is currently exempt from progressive personal income tax in Belgium, but the new Convention adds the condition that the real estate must be subject to taxation in France.

However, the negotiators seem to have lost sight of the fact that Belgium taxes income from real estate even if it is not rented out : this is a tax on cadastral income, theoretical rental income. For property that is not rented out, property tax cannot be considered as income tax and Belgium would have the right to tax income from property that is not rented out. It would appear that this was not the intention of the drafters of the Convention.

Capital gains on real property

A Belgian resident will remain taxable in France in the event of a capital gain realised on the sale of property in France (provided that the property has been owned for less than thirty years).

However, the new Convention enshrines the position of the French tax authorities and the French Council of State with regard to civil real estate companies with a predominantly real estate focus. These are vehicles (shares, units, companies, trusts or comparable institutions) whose assets consist of more than 50% of their value, directly or indirectly, of real estate located in France, that are not used by these companies in the course of their business activities. The new Treaty provides that real estate companies will therefore be taxable in France.

Capital gains realised on the sale of shares in a real estate investment company will remain taxable in France, regardless of the tax regime applicable, under the personal income tax regime. French domestic law provides that non-residents are taxed under the personal income tax regime on the sale of shares in a predominantly real estate company, whether it is subject to income tax or corporation tax.

Income distributed by a French SCI

When a French société civile immobilière that is not liable to French to corporation tax files a tax return in France, the tax due on (property) income is collected by France on behalf of the (Belgian) partner of the SCI. If this income is then distributed by the SCI, Belgium taxes this income with respect to the Belgian partner on the basis of the residual clause of the current Convention (see our article of 26 November 2024).

As a result, a Belgian partner will be taxed twice on the same income : once by France on the SCI's income and a second time by Belgium when this income is distributed by the SCI. It should be noted that this Belgian power to tax distributions from a French translucent SCI has been confirmed twice by the Belgian Court of Cassation.

What now ?

Ratification of the new Convention is now conditional not only on the adoption of the amendment relating to the public sector, but also, where necessary, on the amendment of certain other clauses. Discussions are still ongoing, and the Convention and its protocol will be subject to a single ratification procedure.

It is difficult to predict when the negotiations will be concluded, and pending a comprehensive agreement between the two States, the 1964 Convention remains in force. This is sure to delight Belgian shareholders of French companies. The 2021 Convention abolishes the QFIE (quotité forfaitaire d'impôt étranger, or flat-rate foreign tax credit), which partially neutralises double taxation (see our article of 7 January 2025), and reduces the tax burden on French dividends from 38.96% to 25.88%.

Marc QUAGHEBEUR, partner, and Solène AUGE-COLLOMB, intern

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