1. The topics addressed by the coalition agreement
After eight months of negotiations, Belgium’s new federal government, known as the Arizona coalition, has been established and has reached an agreement on numerous issues including tax reform.
The following article summarises the tax proposals of the new coalition government in Belgium:
2. Companies
2.1. Dividend received deduction
The tax regime of “Dividend received deduction” (arising from the transposition into Belgian law of the regime provided for in the European Parent-Subsidiary Directive) aims, under certain conditions, to avoid the double taxation of capital gains and dividends from a qualifying participation.
This regime will be changed from a deduction regime to an exemption regime. The income will henceforth be directly exempted, instead of being added to the tax base and then deducted.
The exemption is applied when three conditions are met: the participation condition, the permanence condition, and the taxation condition.
The participation condition had provided for a minimum participation of 10% or EUR 2.5 million. This threshold has now been increased to EUR 4 million for large companies and the transactions between them.
Importantly, this increase does not apply to SMEs where the existing threshold of 10% or EUR 2.5 million remains unchanged.
DBI-BEVEKs / RDT SICAVs are also involved: a tax of 5% will be applied to the capital gain upon exit. Moreover, the possibility to offset the withholding tax (levied by a financial intermediary established in Belgium) against corporate tax will only be possible if the receiving company grants the minimum director's remuneration in the year of receipt of the distribution.
2.2. Emigration of companies - exit tax
A company emigrating from Belgium (i.e. the place of effective management is moved to another country) without maintaining an establishment in Belgium is in principle subject to corporate income tax. The question was discussed whether this should be fully equated with a fictitious liquidation (without distribution of the company's assets), which involves not only corporate tax but also the application of withholding tax on the liquidation bonus, which is deemed to be distributed to the shareholders. It was decided that the emigration of a legal entity will be treated for tax purposes as a fictitious liquidation with application of withholding tax.
2.3. VVPRbis and the liquidation reserve
The VVPRbis regime allows SMEs, under certain conditions, to apply a withholding tax of 15% on dividend distributions to individuals. This regime remains in place.
As for the liquidation reserve, a regime that can also be applied under conditions by SMEs, the regime allowed for a reserve to be built up and then distributed at a favourable rate. At the time of transfer to the reserve, a separate contribution of 10% applied (e.g. profit after tax is 110 and the company transfers 10). At the time of distribution, which must take place at least five years later, additional withholding tax was applied at a rate of 5% (over the balance of 100).
This meant that under the current liquidation reserve regime, an effective tax rate of 15 / 110 or 13.64% applied.
The coalition agreement provides for the following changes.
The waiting period for applying the reduced rate for the liquidation reserve withholding tax is shortened from five to three years. The withholding tax rate increases from 5% to 6.5%. Taking into account the separate contribution paid at the time of transfer to the reserve, payment of the withholding tax at a rate of 6.5% after three years leads to an effective rate of 15% (i.e. 16.5 / 110, which was previously 13.64%).
Early distributions made within the waiting period of three years will be subject to a withholding tax rate of 30%.
2.4. Directors’ remuneration
In principle, the corporate income tax rate is 25%. By way of exception, the rate for SMEs is reduced to 20% on the first 0 to EUR 100,000, except in certain circumstances. The reduced rate of 20% does not apply if the SME does not allocate at least one director a remuneration charged to the result of the taxable period of at least EUR 45,000 from the fifth taxable period since its constitution. If the directors’ remuneration is less than EUR 45,000, this remuneration charged to the result of the taxable period must be equal to or higher than the taxable income of the company
The existing minimum remuneration of EUR 45,000 for directors to qualify for the reduced corporate income tax rate is increased to EUR 50,000 and will be indexed.
Directors' remuneration may in future consist of benefits in kind of up to a maximum of 20% of annual gross salary. Additional bonuses on top of gross salary are still possible.
3. Individuals
3.1. Capital gains on financial assets
The partners of the Arizona coalition decided to introduce a tax of 10% on capital gains (“solidarity contribution”) on financial assets, including crypto-assets.
The tax is not retroactively applicable; it will only apply to capital gains generated from the date when the legislation introducing the tax takes effect.
For small investors, an exemption of EUR 10,000 is provided. This amount will be indexed annually.
The rules regarding capital gains will be as follows:
- Substantial participations of at least 20%; capital gains realised for an amount of less than EUR 1 million: no tax on capital gains;
- Capital gains realised for an amount between EUR 1 million and EUR 2.5 million: tax on capital gains levied at a rate of 1.25%;
- Capital gains realised for an amount between EUR 2.5 million and EUR 5 million: tax on capital gains levied at a rate of 2.50%;
- Capital gains realised for an amount between EUR 5 million and EUR 10 million: tax on capital gains levied at a rate of 5%;
- Capital gains realised for an amount of more than EUR 10 million: tax on capital gains levied at a rate of 10%.
The first problems of interpretation are already arising. For example, there is still debate as to whether the reduced rates will apply only to substantial participations of at least 20% or to all capital gains on financial assets.
Moreover, there is no clarity on how this new measure relates to the current regime that distinguishes three types of income: income from normal management of private assets (i.e. not taxed), miscellaneous income (i.e. taxed at a separate rate of 33%), and professional income (i.e. taxed at progressive rates). Losses in the year will be deductible without the possibility of carryforwards.
The implementation of the measure in practice is also not specified.
3.2. Annual tax on securities accounts
The annual tax on securities accounts whose average value of taxable financial instruments in the account exceeds EUR 1 million during the reference period should remain unchanged. It is the securities account as such that is taxed. The tax is applied to securities accounts based on the content of the account and the tax residence of the account holder.
Ultimately no clarity was given. The increase in the rate from 0.15% to 0.25% discussed during negotiations was not included in the coalition agreement.
3.3. Tax regime on copyright income
The tax regime on copyright income offers the possibility to benefit from a withholding tax of 15% (and application of significant flat-rate costs) on qualifying remunerations.
After a recent reform, it appeared that digital professions generally could no longer apply this regime.
The tax regime for copyright income will be expanded to end existing discrimination between digital professions (which currently cannot benefit from this regime according to the tax authorities) and other professions.
Works protected under Book XI, Title 6, of the Code of Economic Law will qualify for the tax regime for copyright income.
Based on the coalition agreement, the existing rate likely will not be changed.
3.4. Changes to the expatriate tax regime
The expatriate tax regime provides significant tax benefits for foreign executives: under certain conditions significant amounts received by these executives are deductible for the company paying them and not taxable for the recipient.
The government plans to make the expatriate tax regime more attractive by increasing the tax-free allowance from 30% to 35%, abolishing the ceiling of EUR 90,000 and lowering the required minimum gross remuneration from EUR 75,000 to EUR 70,000.
3.5. Carried interest
The government will introduce a special regime for carried interest, a form of performance-related remuneration received by fund managers mainly in private equity sector.
This regime aims to stimulate activity by private equity funds in Belgium, providing for a maximum tax rate of 30% on movable income.
At the time of publication, how this measure will be implemented is still not clear.
3.6. Tax regularisation
The government plans to reintroduce a permanent system of tax and social regularisation. The rate will increase to 30% for non-prescribed capital and 45% for prescribed capital. There will be an exception for taxpayers acting in good faith, but the conditions have not yet specified.
4. Tax procedure
The government is considering changes to the tax procedure, although the proposed changes are not limited to a single area.
It plans to transform tax mediation service into "tax arbitration", which will only be available when administrative procedure has ended.
The government also plans to introduce a new "charter" for taxpayers vis-à-vis tax authorities emphasising "right to make mistakes in good faith" for taxpayer, and to issue a deduction prohibition in corporate income tax in case of good faith violations or administrative oversights. Henceforth, the deduction prohibition will only apply in case of repeated violations where a tax increase of at least 10% is effectively applied.
The government also plans to hire staff to fight tax fraud and deploy multidisciplinary investigation teams.
The deadlines for investigation and taxation in tax matters may be adjusted.
The system of penalties currently applicable when a taxpayer deliberately hinders a tax visit will be replaced by the introduction of a minimum taxable profit.
The Central Point of Contact (CPC) can be consulted by the tax authorities in case of clear indications of fraud or an indicative shortfall after notification of the taxpayer within a month. Cryptocurrency accounts and the accounts of online gambling players of more than EUR 10,000 will be included in the CPC.
5. Other measures
The coalition agreement also lists a series of other measures, such as:
- Regarding personal income tax, the government aims to ensure that everyone who works earns at least EUR 500 net more than a non-active person. This system will be realised, among other things, by increasing the tax-free amount for everyone who works.
- A digital services tax will be introduced by 2027 at the latest, either at the EU level or unilaterally by the Belgian government.
- The coalition agreement provides for a simplification of transfer pricing documentation, mainly for SMEs.
- Furthermore, the federal interest deduction for homes other than the main residence will be abolished.
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Without fundamentally reforming the tax system in Belgium, the proposed measures bring some significant changes.
Although the partners of the Arizona coalition have agreed to these measures, they still need to be passed in parliament. According to the coalition agreement, the "measures that come into force this legislature will all be introduced in 2026."
Whether this statement refers to the income year 2026 or the assessment year 2026 is not clear.
Some measures may also be gradually introduced during the term of office.
Thus, the issue of entry into force remains unresolved.
While the agreement covers many points, some are open to interpretation, leaving certain areas uncertain or even shaky. It is certain that there will be further discussions between the government partners when the envisaged provisions are voted on in parliament.
Taxpayers are thus not immune to surprises or unforeseen events.
