Belgium’s new CFC rule: the ‘Cayman tax’

The Belgian Federal Parliament recently adopted a new controlled foreign corporation provision, known as the “Cayman tax”, that allows Belgian tax authorities to look through low-taxed offshore structures to directly tax their Belgian resident founders and third-party beneficiaries on the structure’s income. Belgium’s introduction of the Cayman tax is in line with the international trend toward increased scrutiny of offshore legal structures that are merely aimed at lowering the tax burden of the founders or controlling shareholders. The Cayman tax may face practical issues, however, and it is unclear how it will interact with international tax principles and European Union law.