Dividends are in principle subject to 30% withholding tax. However, SMEs can distribute their profits at lower rates by applying the reduced withholding tax rate for dividends (VVPRbis) regime or by forming liquidation reserves (subject to payment of a 10% tax advance by the company). Different rates and waiting periods currently apply to the two systems. The coalition agreement aims to simplify this and will harmonise the two systems by bringing the liquidation reserve scheme into line with the VVPRbis regime.

-           Increase in the withholding tax rate

The withholding tax rate will rise from 5% to 6.5%.

This will increase the total effective tax burden on distributions of a liquidation reserve from 13.64% (i.e. (10% + 5%) / 1.1) to 15% (i.e. (10% + 6.5%) / 1.1), bringing the scheme into line with the effective tax rate of dividend distributions that fall within the VVPRbis regime.

This increase will apply exclusively to reserves that are created after the introduction of the measure and will not affect existing liquidation reserves

-           Distributions within the first three years

If a company distributes a liquidation reserve within the first three years after the reserve’s creation, this distribution will still be subject to the standard withholding tax rate of 30% (instead of the current 20%).

-           Conclusion

Companies will therefore be able to distribute their liquidation reserves sooner, but this will be accompanied by a slight increase in the tax cost. On the other hand, failure to comply with the waiting period will become considerably more costly.

-           Entry into force

According to the current bill, the new rules will apply to liquidation reserves created from 1 January 2026 onwards. However, taxpayers with liquidation reserves created before 1 January 2026 will also be given the opportunity to apply the new rules from 1 July 2025 (and can therefore opt for an accelerated distribution after three years at 6.5%).

VVPRbis regime

The 20% withholding tax for dividends allocated from the profit distribution for the second financial year after the capital contribution that qualifies for the VVPRbis regime will now only apply if the contribution was made no later than 31 December 2025. For capital contributions after this date, dividends allocated from the profit distribution for the first or second financial year after the capital contribution will be subject to a withholding tax of 30%.

Currently, capital gains on shares that are realised as part of the normal management of private assets are exempt from personal income tax. However, the introduction of a solidarity contribution means that these capital gains will be subject to taxation. 

This tax will apply to realised capital gains on financial assets, including crypto assets, accumulated from the time of the law’s introduction. Historical capital gains will therefore be exempt. 

Any losses within the same year can be deducted, but it will not be possible to carry losses forward to subsequent years.

There will also be an annual allowance of EUR 10,000 per person.

There will be special rules for shareholders with a substantial interest of at least 20%, who will have an allowance of up to EUR 1,000,000. Progressive tax will apply to amounts above this threshold:

• 1.25% on capital gains between EUR 1,000,000 and EUR 2,500,000;
• 2.50% on capital gains between EUR 2,500,000 and EUR 5,000,000;
• 5% on capital gains between EUR 5,000,000 and EUR 10,000,000;
• 10% on capital gains above EUR 10,000,000.

This is definitely one of the measures about which there is still a great deal of uncertainty. One important question is how the historical capital gain will be determined. Furthermore, it remains unclear whether and to what extent the introduction of this new capital gains tax will affect the way in which some capital gains on shares can already be taxed as miscellaneous income today. 

Amended rules on the tax treatment of copyright have applied since 1 January 2023. These changes were also accompanied by a narrowing of the definition for tax purposes of copyright, which had the effect of excluding the IT sector. 

This narrower definition met with a great deal of opposition and disputes in practice and case law. Ultimately, on 16 May 2024, the Constitutional Court confirmed that computers and software are excluded from the copyright scheme.

The coalition agreement plans for the tax regime for copyright to be extended once again to cover the digital professions, in relation to work on computer programs (i.e. the works protected in Book XI, Title 6 of the Code of Economic Law).

Not so long ago, a thorough reform of the old ‘expat regime’ was implemented. A new tax regime was introduced on 1 January 2022 for so-called ‘incoming taxpayers and researchers’, with the focus still on using various tax incentives to attract qualified foreign employees.

For example, inpats are eligible for a tax-free allowance of up to 30% of their gross salary (with an absolute maximum of EUR 90,000 per year). This tax-free allowance may increase to 35% in the future, and will not be subject to any limit. 

Of course, the inpat regime can only be applied if a number of conditions are met, one of which is that the employee’s gross salary is at least EUR 75,000. The new coalition agreement includes a reduction of this amount to EUR 70,000.

With these changes, the government hopes to attract foreign talent and make Belgium more attractive for new investment.

In order to provide tax incentives for self-employed activity and to counteract the practice of individuals working through their own one-person company (see also the measures described above regarding the level of company directors’ remuneration), self-employed persons/sole proprietorships will receive a number of tax benefits.

For example, the surcharge for insufficient advance payments (6.75% for income year 2025) will be scrapped for entrepreneurs who make profits or gains, and the tax credit for the growth of assets (currently 10%) will be doubled. 

Entrepreneurs will also be given the opportunity to make a fifth advance payment (no later than 20 February of the tax year) that qualifies for tax reduction. For income year 2025, a fifth advance payment will entitle the holder to a tax reduction of 1.5%.

In addition, self-employed persons will be entitled to an ‘entrepreneurs’ deduction’ on the basis of which they can exempt a – yet to be determined – first tranche of their profits or gains (after deduction of costs, losses carried forward, etc.) from personal income tax.  

Occasional profits or gains are income obtained outside the context of a business activity (e.g. income from second-hand sales). An occasional activity is an activity that is carried on irregularly and over a short period without repetition (regularity). The term does not refer to a set of transactions that either occur regularly or are linked and that constitute a professional activity. Income from occasional activities is taxed at 33% unless they relate to the normal activities associated with managing private assets. 

This income from various activities will now be tax-free up to an amount of EUR 2,000.

As there is no precise definition of occasional activity, caution is advised: eligibility will need to be examined on a case-by-case basis. 

The coalition agreement also includes measures to encourage student work.

The number of hours a student may work per year will increase from 475 to 650 and the minimum age for entering into a contract will be lowered to 15 years. 

To prevent this from meaning that students are no longer dependent for tax purposes, the tax threshold for permitted income from student work will be increased. Children are dependent on their parents for tax purposes as long as they live at home and have only limited income. Certain types of income are excluded – in whole or in part – from the calculation of the permitted income. For example, income from student work is excluded up to an amount of EUR 3,420 (tax year 2026). This will now be doubled to EUR 6,840.

The above rules have now been approved by the Parliamentary Committee on Social Affairs. In addition, the permitted maximum net means of subsistence will increase to EUR 12,000 for all dependants. 

-          Employer’s costs 

A framework will be created with the aim of limiting disputes about these tax-free allowances. Hopefully this will also include harmonisation between the rules on income tax and social security 

-          Collective bonus systems (CLA 90, profit-related bonuses, etc.)          

These systems will be harmonised.

In addition, flexible remuneration may amount to a maximum of 20% of the annual gross salary.

-          The tax reduction for gifts will be reduced from 45% to 30%. 

-          Scrapping of the federal interest deduction for property 

It has been possible to deduct the interest on debts specifically incurred to acquire or retain property (other than one’s home) from property income.

This ‘federal interest deduction’ will be scrapped, including for existing contracts.               

-          Deductibility of maintenance payments                                                                           

The deductibility of these payments will be reduced from 80% to 50%.

Payments to countries outside the European Economic Area will no longer be deductible. 

-          Restriction of the marriage quotient

The joint tax burden of married and legally cohabiting couples can be reduced by transferring part of one partner’s income to the other partner. The transferable amount will be halved to prevent the scheme from encouraging one of the partners not to work. 

-          Adjustments to the tax-free amount

In order to increase net pay, the tax-free amount for everyone who works will be increased. In addition, the allowance for dependent children will now be the same for each child (rather than varying according to the number of children). 

-          Adjustments to the voluntary supplementary pension for the self-employed (VAPZ)

The coalition agreement provides for an increase in the maximum contributions, and also allows self-employed people in a secondary occupation to make contributions to a VAPZ.