Belgium – Federal Government Agreement 2025-2029: Corporate taxation

The "Arizona" Government Agreement of 31 January 2025 contains a series of measures that will substantially impact taxpayers subject to corporate income tax ("CIT") and their shareholders.

The first category of measures is budgetary, aimed at generating additional revenue for the Belgian State. These measures include tightening the conditions for application of the Belgian dividend received deduction regime, and introducing an exit tax on outbound transfer of seat for Belgian resident companies.

The second category of measures is aimed at reducing the administrative burden on corporate taxpayers, including the application of an optional and simplified regime for fiscally disallowed expenses and the reduction of transfer pricing documentation requirements.

The below is an overview of the main measures.

Dividend received deduction

To address the increased criticism that the current regime is not able to fully meet the European legislator’s objectives, the government has decided to convert the current Dividend Received Deduction (“DRD”) into a Dividend Received Exemption. This exemption will be materialised in the CIT return by increasing the corporate taxpayer’s opening balance of reserves.

At the same time, the conditions for benefiting from this regime will be tightened. The 10% participation requirement remains unchanged, while the €2.5 million threshold is increased to €4 million. However, this higher threshold will, not apply to small and medium-sized companies.

For “DRD” UCITs, a separate assessment of 5% will be applied to capital gains on redemptions of shares. 

The possibility to offset the withholding tax against the CIT payable will only be possible to the extent  the receiving company allocates, in the income year in which the payment is received, a minimum remuneration to its company director.

Exit tax 

Taxpayers currently challenge the view of the tax administration that the outbound transfer of a Belgian company’s seat abroad, without maintaining a permanent establishment in Belgium, but with legal and accounting continuity in the host country, results in the recognition of a liquidation gain in the hands of its shareholders subject to withholding tax.

The new government intends to put an end to this discussion for the future - any outbound transfer of seat will be considered a liquidation for tax purposes triggering the application of a withholding tax.

Intra-group transfer regime

The intra-group transfer regime, Belgium’s version of tax consolidation, is in dire need of an administrative simplification to be more attractive. The government therefore plans to also consider the indirect shareholdings (and no longer just direct shareholdings), to no longer excluding new companies, and to allow offsetting the DRD against the amount of the received intra-group transfer.

Investment deductions

The unused portions of the investment deduction will be carried over indefinitely and without any reservations. See our newsletter “Innovation and taxation”.

Accelerated depreciation

Investments in R&D, defence and energy transition will benefit from accelerated depreciation schemes. See our newsletter “Innovation and taxation”.

Meal vouchers

The social partners will be tasked to increase the respective employer and employee contributions for meal vouchers each by 2 euros. The tax deductibility of the meal voucher cost for the employer will be increased accordingly.

Abolishment of the "rental" annex

The government wants to abolish the annex no. 270 MLH as soon as possible. This is the annex that the tenant of a property must attach to his CIT return as of this year to be allowed to deduct the rent paid for CIT purposes.

The government will introduce a less administratively burdensome alternative, taking into account the information already available to the authorities.  

Transfer pricing documentation

The government will also simplify the transfer pricing documentation rules, particularly for small and medium-sized enterprises, and limit them to the essentials. 

Simplification of CIT rules

The government will assess whether a simple and optional system can be introduced for fiscally disallowed expenses, replacing the current complex rules and separate detailed calculations.

In addition, various minor exceptions and exemptions will be abolished with the view of simplifying business taxation.

The tax exemption for social liabilities, for the private PC plan and for capital gains on company cars will be abolished.

The increase due to insufficient advance payments will no longer be affected by the signing of a framework agreement under a tax shelter scheme.

The deductibility limits for car expenses will be simplified to reduce administrative complexity. Hybrid vehicles will benefit from a longer transition period.

The existing mobility budget will be radically reformed to become a mobility budget for all.

Tax deductibility of gifts

At present, the donation of goods (e.g. foodstuffs) by a company is disadvantaged, compared to waste disposal or destruction. Therefore it is envisaged that donated goods will be considered to have lost all economic value and be fully deductible for CIT purposes when donated to a recognised charity organisation.

Cash for tax

The "cash for tax" rule prevents corporate taxpayers from applying their tax deductions on the portion of their CIT basis that has been subject to adjustment (or to an ex officio assessment), if a tax increase of at least 10% is applied by the tax official. The government have committed to no longer enforcing this rule when the tax adjustment is the result of a good-faith error or of an administrative oversight from the taxpayer.

Carried interest

The government wants to introduce a special tax of maximum 30% on (part of) the income derived from “carried interest”. This is a profit share in a private equity or investment fund's profits, usually allocated as compensation to fund managers, and typically without requiring an initial investment by those managers.

This new tax regime will be competitive in comparision to existing regimes in neighbouring countries in order to stimulate fund activity in Belgium.

Liquidation reserve

The government intends to align the tax treatment of the liquidation reserve with that of the reduced withholding tax dividends (VVPRbis), to the extent possible.

The waiting period for distributing the liquidation reserve with a favourable withholding tax rate will be reduced from 5 to 3 years. The rate of withholding tax will be increased from 5% to 6.5%, raising the effective rate from 13.65% to 15%.

Distributions made during the 3-year waiting period will be subject to withholding tax at the ordinary rate of 30%.

Reduced CIT rate

To benefit from the reduced CIT rate (20%), the minimum amount of remuneration that SMEs must pay their directors will increase from EUR 45,000 to EUR 50,000. This amount will be indexed annually.