Liquidation bonuses: extension for capital increase

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The Program Law of 28 June 2013 introduced an increase of the dividend withholding tax for liquidation bonuses from 10% to 25% (i.e. the normal dividend withholding tax rate).

However, a transitory regime gives companies the opportunity, provided a certain timing is met, to distribute their reserves included in the last annual accounts approved before 1 April 2013 as a dividend at a rate of 10%, provided these distributed reserves are immediately contributed into the statutory capital of the company.
This part of the capital will be treated as fiscally paid-up capital when it is retained within the company for at least 8 years (4 years for small companies) after its contribution, thus not giving rise to withholding tax upon any later distribution to the shareholders.

On 1 October 2013, the Belgian tax authorities issued a circular letter regarding this transitory regime, providing for additional information on the conditions that must be fulfilled for the dividend distribution and for the contribution into the capital of the company.

In our Tax Alert of 16 October 2013 (click here for the full text of that Tax Alert), we warned that the timing for the capital increase could cause problems since, according to the law, the capital increase must be made ultimately during the last accounting period ending prior to 1 October 2014. For a company whose accounting period coincides with the calendar year, this rule resulted in an obligation to proceed with the capital increase (before a notary public) on 31 December 2013 at the latest. For a company with accounting periods ending on 31 October, for example, this meant that the capital increase must have been made by 31 October 2013 already.

The tax authorities now grant an extension for the capital increase for the most extreme cases in an addendum to the circular letter published on 14 November 2013. Click for the text of the addendum to the circular letter:

The Belgian Accounting Standards Board has in the meantime also published a discussion draft on the accounting treatment of the operations under the transitory regime. Please click here for this document:

Addendum to the circular letter: extension for capital increase

The addendum to the circular letter provides an extension for the contribution into the capital under the transitory regime for companies whose accounting period ends between 1 October 2013 and 30 March 2014.

The tax authorities will allow that the contribution is done in these cases on 31 March 2014 at the latest. The reference date for the contribution is the date of the deed of the notary public establishing the capital increase.
It should be noted that the waiting period of 8 years (or 4 years for small companies) for capital reductions in the transitory regime only starts on the date of the deed of the notary public establishing the capital increase. The length of the waiting period is not affected by the abovementioned extension.

No changes on the timing for the dividend distribution

The extension is only granted for performing the capital increase. The deadlines for the distribution of the dividends under the transitory regime remain unchanged.
This means that the dividend distribution must still be done on 31 December 2013 at the latest for companies whose accounting period coincides with the calendar year and at the closing date of the accounts for accounting periods ending as from 1 January 2014 until 30 March 2014.
The 10% dividend withholding tax must also still be paid within a period of 15 days after the payment or grant of the dividend.


EY Tax Consultants welcomes the extension granted by the tax authorities. As indicated in our previous Tax Alert on this matter, there are still other unanswered questions relating to this transitory measure, for example how the dividend policy over the preceding 5 years needs to be measured, how the new transitory regime applies to Belgian shareholders of companies established outside Belgium, etc. Hopefully, additional clarifications by the tax authorities will follow.
It should be noted that this rate increase only affects situations where no withholding tax exemption (based on a treaty, the EU Parent-Subsidiary Directive or domestic law) would be available, and should therefore (if properly structured) not have a material impact for multinational groups.

Do not hesitate to get in touch with the contact persons listed here or with your regular contact at EY Tax Consultants for more information or assistance in this matter.