Belgian Taxation: two pieces of good news for shareholders

Victoria: Hello Thierry, thank you for joining us today. In recent years, there’s been a lot of talk about increasing tax burdens in Belgium… but apparently, you have two pieces of good news to share?

Thierry Litannie: Hello Victoria, thank you for the invitation. Indeed, good tax news is rare, but it does exist and we might as well share it with our readers. It concerns the VVPR-bis regime and liquidation reserves, now called VVPR-ter.

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Victoria: Let’s start with VVPR-bis. Could you remind us what it is and what’s changing?

Thierry Litannie: With pleasure. The VVPR-bis regime allows shareholders of Belgian companies to benefit from a reduced withholding tax of 15% instead of 30% on certain dividends. It’s an attractive advantage, especially in today’s tax environment.

Good news: the recent program law of July 10 didn’t touch it. The principle and conditions remain unchanged, even though its repeal was discussed in government talks.

The only change is that the reduced rate is no longer available if the dividend is paid before five years. Apart from that, the regime remains intact.

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Victoria: What are the conditions to qualify for this regime?

Thierry Litannie: The shares must have been issued after July 1, 2013, and only in exchange for a cash contribution. Contributions in kind or of services are excluded.

Dividends may only be paid from the third financial year following the contribution year. The shares must be fully paid up before the dividend is distributed, and they may not offer any special financial privileges to the holder.

Lastly, be careful: if the shares are sold, you lose the benefit of the regime. However, in the event of a donation or death, direct heirs or the spouse can still benefit under certain conditions.

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Victoria: Very clear. Let’s move on to the second piece of good news, which concerns liquidation reserves. What should we know?

Thierry Litannie: This too is an interesting mechanism for shareholders. Until now, liquidation reserves could be distributed after five years, subject to a 10% levy when they were created and a 5% withholding tax at the time of distribution.

The reform shortens this period to three years. Admittedly, the withholding tax increases from 5% to 6.5%, but it’s still good news.

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Victoria: Why is it advantageous, even with the slightly higher rate?

Thierry Litannie: Because when you take inflation into account and the two extra years of income a shareholder can earn by receiving dividends earlier, it results in a net financial gain.

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Victoria: And what about the liquidation reserves that were already constituted before this reform?

Thierry Litannie: Great question. They can also benefit from the new regime on a voluntary basis. In other words, you can choose to distribute them after three years at 6.5%, or wait five years and keep the 5% rate.

In the event of liquidation of the company, nothing changes: there’s still nothing more to pay, except for the 10% already paid at the time the reserve was created.

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Victoria: So, in the end, two tax regimes that remain particularly interesting for Belgian shareholders.

Thierry Litannie: Exactly. These are two favorable mechanisms that still exist in an increasingly restricted tax environment. It’s wise to make use of them while they’re still available.

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Victoria: Thank you very much Thierry for these insights. It’s always a pleasure to have you help us decode tax matters.

Thierry Litannie: Thank you Victoria, always a pleasure.