A preliminary draft bill implements certain tax measures of the new governmental agreement (arizona), amongst others several changes to the Belgian participation exemption regime. The preliminary draft bill has just been submitted to the Council of State.

Key takeaway: medium and large Belgian (holding) companies investing in participations <10%, but with an acquisition value >2,5 mio €, could lose the benefit of the participation exemption regime in the event that the shares held do not qualify as “fixed financial asset”.

1️. No increase of the alternative threshold of 2,5 mio€

– No increase of the alternative threshold of 2,5mio € to 4mio € (contrary to the governmental agreement). The budgetary impact of such increase would in any case not have been significant.

2️. New condition of fixed financial asset

– Far more important is the introduction of a new condition of “fixed financial asset”.
– This new condition does not apply to small companies (i.e., companies which exceed one of the following thresholds: at least 50 persons (FTE);€11,250 m of turnover; and €6m of total assets). These criteria must be assessed on a consolidated basis.
⚠️ Large and medium-sized Belgian (holding) companies are caught by this new measure, irrespective of the size of the company held.
In other words, this new condition of fixed financial asset does not only apply “for and between” large companies.
– This new restriction would only apply for participations <10%, but with an acquisition value >2,5 mio €. It should hence be compatible with the Parent Subsidiary Directive.

3️. Impact and timing issues

– This measure could lead to medium and large companies being subject to corporate income tax (at the rate of 25%) on dividends and capital gains derived from shares classified under Belgian GAAP as short term investments.

– For instance, if a large company (e.g., a financial institution, an insurance company,…) or a medium-sized company (e.g., a holding belonging to a wealth Belgian family) holds shares with an acquisition value of 5mio € (<10%), the dividends received / capital gains realised could be fully subject to CIT if the shares are not classified as fixed financial asset.

– This new restriction would already apply as from assessment year 2026 (accounting year 2025).

Denis-Emmanuel Philippe