by Rijkele Betten
In a recent case, the Belgian Court of Appeal of Ghent had to decide on the determination of the amount of foreign income that was eligible for an exemption (with progression) for the avoidance of international double taxation.
The decision of 27 October 2015 concerned a professional cyclist, who was also active outside Belgium.
The case dealt not with specific income won during the participation in cycle races abroad. Instead, at issue was the determination of the part of the fixed salary that was eligible for such exemption. Rather surprisingly, the Court of Second Instance considered that training days spent in Belgium were attributable to games participated in abroad and hence the fixed salary earned during those training days was also eligible for exemption (with progression) in Belgium. The only limitation the Court imposed was that only group training days were taken into account and not individual training days.
Decision of the Lower Court of Bruges
The cyclist, in 2007, was engaged by the cycling team Unibet.com, and, in 2008 and 2009, by Predictor-Lotto. The cyclist claimed the exemption for the avoidance of double taxation by multiplying his taxable income by the multiplier consisting of the amount (foreign racing and training days) divided by (total racing and training days). In 2007, the salary amounted to € 64,703, and the number of working days spent in Belgium was 52 and abroad 68. Exemption was claimed for 68/(52+68) = 56.66% of the fixed salary.
In 2008, the salary was € 75,000, and the working days in Belgium 27 and abroad 20, so that exemption was claimed for 20/47 = 42.55% of the fixed salary. Finally, in 2009, the salary was € 80,000 and the working days in Belgium 31 and abroad 40, so that exemption was claimed for 40/71 = 56.33 %.
The tax authorities asked for further information, and decided to allow an exemption based on using as the multiplier the number of working days by the total number of working days in a year (i.e. 220 days).
The taxpayer did not accept these amendments and, after the internal appeal procedure already some points were admitted by the administration, the taxpayer took the case to the First Court of Bruges. This Court held that it is clear that the fixed salary is paid with a view to racing in cycle races and so that the team get publicity through the racing activity.
The tax authorities again appealed, and they maintained that the number of working days of 220 should be taken into account. Also, the number of foreign days was still at issue.
Decision of the Ghent Court of Appeal
The Court of Appeal of Ghent confirmed the decision of the Lower Court.
It reiterated that the salary, which the cyclist received from the cycling team, is connected with the participation in cycle races and that the interest of the team owner is to obtain publicity.
The Court also held that it was of reduced importance that the fixed salary would also be paid in case of illness or non-availability due to an accident.
By itself, the decision seems rather logical. Indeed, all training days are undertaken with a view to the participation in cycle racing. And, where these races take place abroad, a connection therewith can be made.
Still, the international result may be double non-taxation in case the country where the racing takes place would only impose income tax on prizes won during the race event.
It is conceivable that such country would also tax the proportionate share of the fixed salary for the days spent in that country. It is less obvious that this country would also ask the cyclist how many days he has trained in his home country for the race, and then tax the proportionate share of the fixed salary.
It seems a rather surprising decision, which certainly for Belgian resident cyclists and other sportspersons (e.g. golf or tennis players) could open the door for obtaining an additional exemption (with progression) for the avoidance of international double taxation.
 International tax adviser, The Netherlands.
 Decision of 25 June 2014.