Global Tax Alert | 18 November 2013

Belgian Tax Authorities grant extension for capital increase under transitory regime for liquidation bonuses

  • Share

Belgium's domestic withholding tax on liquidation bonuses will increase from 10% to 25% as of 1 October 2014. In this respect, a transitory regime has been established. On 13 November 2013, the Belgian Tax Authorities issued an addendum to the original circular letter dated 1 October, granting an extension of the deadline of part of the actions required to benefit from this transitory regime.


The Program Law of 28 June 2013 introduced an increase of the dividend withholding tax for liquidation bonuses (i.e., the amount reimbursed to shareholders in excess of the paid-in capital upon liquidation) from 10% to 25%, hereby bringing the rate to the same percentage as for regular dividends.

However, a transitory regime gives companies the opportunity, provided 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 eight years (four years for small companies based on article 15 of the Belgian Company Code) 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 additional information on the conditions that must be fulfilled for the dividend distribution and for the contribution into the capital of the company.

Initially it appeared that the timing for a 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 2014.1 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 already been made by 31 October 2013.

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. 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.

Addendum to the circular letter allows 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 for these cases that the contribution is done 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 eight years (or four years for small companies based on article 15 of the Belgian Company Code) 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.


Notwithstanding the addendum, it appears that there are still other unanswered questions relating to this transitory measure, such as how the dividend policy over the preceding five years needs to be measured and how the new transitory regime applies to Belgian shareholders of companies established outside Belgium, among other considerations.

It is important to note 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.


1 See EY Global Tax Alert, Belgium's transitory regime for liquidation bonuses requires action by 31 December 2013, dated 16 October 2013.

For additional information with respect to this Alert, please contact the following:

Ernst & Young Tax Consultants SCCRL/BCVBA, Brussels
  • Herwig Joosten
    +32 2 774 9349
  • Werner Huygen
    +32 2 774 9404
  • Steven Claes
    +32 2 774 9420
  • Kurt Van Der Voorde
    +32 2 774 9281
  • Peter Moreau
    +32 2 774 9187
  • Arne Smeets
    +32 2 774 6363
Ernst & Young LLP, Belgium-Netherlands Tax Desk, New York
  • Bart Desmet
    +1 212 773 3068

EYG no. CM3970