Article 4
This decision is addressed to the Kingdom of Belgium. Done at Brussels, 24 June 2003. For the Commission Mario Monti Member of the Commission (1) OJ C 30, 8.2.2003, p. 21. (2) OJ C 2, 6.1.1998, p. 1. (3) OJ C 384, 10.12.1998, p. 3. (4) See footnote 1. (5) In addition, under the United States regime, the "foreign trade income" of an FSC is excluded from the income of a United States company controlling that FSC, otherwise considered as taxable income under Subpart F of the IRC 1986. More particularly, pursuant to Section 954 (d)-(e) of the IRC 1986, the above income would ordinarily be characterised as deemed dividend income of the controlling United States company and would be subject to tax as "foreign base company income" of a controlled foreign company (CFC). (6) US Pub. L. No. 106-519 (2000). The scheme that replaced the FSC scheme, the Extraterritorial Income Act, was subsequently found to be incompatible with the WTO by the WTO Panel and Appellate Body. (7) See, in particular, Article 26 of the United States - Belgium Income Tax Convention signed in Brussels on 9 July 1970, which contains provisions on the "exchange of information". (8) See, in particular, Articles 5 and 7, entitled "permanent establishments" and "business profits" respectively, of the aforementioned United States-Belgium Income Tax Convention. (9) See the answer given on 10 June 1985 by Mr De Clerq on behalf of the Commission to Written Question No 1664/84 by Mrs Marijke Van Hemeldonck (OJ C 197, 5.8.1985, p. 6). (10) OJ L 83, 27.3.1999, p. 1. (11) See footnote 1. (12) See Case C-295/97 Piaggio [1999] ECR I-3735. (13) See footnote 3. (14) Under the regime for FSCs, "export property" means goods that are 1. manufactured, produced, grown or extracted in the United States by a person other than the FSC, 2. held primarily for sale or lease in the ordinary course of FSC business, and 3. sold or leased for direct consumption, use or disposition outside of the United States - Section 927(a)(1) of the IRC 1986. Furthermore, not more than 50 % of the value of export property may be attributed to materials or components imported into the United States - Section 927(a)(1)(C) of the IRC 1986 and Reg. Section 1.927(a)-1T(e). (15) Under the United States legislation, the FSC's income from the controlled sale, lease and service transactions is determined using one of the following three inter-company pricing regimes: (a) the combined taxable income method; (b) the gross receipt method; or (c) the arm's-length pricing rule. Whichever method produces the highest taxable income for the FSC is the one accepted. Under the tax exemption, such "exempt foreign source income" is deemed to be foreign-source income that is "not effectively connected" with the conduct of an activity in the United States. (16) See footnote 1. (17) See footnote 7. (18) See footnote 1. (19) See footnote 1. (20) Case C-265/85 Van den Bergh en Jurgens BV v Commission [1987] ECR 1155, paragraph 44. (21) See footnote 9. (22) Written Question No 1735/90 (OJ C 63, 11.3.1991).