The new Belgian government Arizona has agreed to introduce a new exit tax upon an outbound transfer of seat of a Belgian company. An entry into force in 2025 may not be excluded…
I had the honor to share my views on this new measure in the Belgian financial newspaper l’Echo.
1.Who will be caught by the new exit tax?
- The relocation of a Belgian company abroad will be considered as a “liquidation” from a tax perspective.-
- The shareholders of the company will be deemed to receive a so-called “liquidation bonus”, which is treated/qualified taxwise as a taxable “dividend”.-
- This dividend is as a rule subject to withholding tax (at a rate of 30%), unless an exemption (or a reduction under a DTT) applies.
- The last version of the federal government agreement no longer refers to the application of withholding tax upon relocation (as opposed to a previous version), which could give rise to a certain degree of uncertainty about the exact scope of the new exit tax.
2. Reorganisations caught by the exit tax
Belgian companies and their shareholders should therefore always carefully consider the potential tax consequences of an outbound transfer of seat or any other cross-border reorganisations having the same effect.
↪️ A cross-border merger, whereby a Belgian holding company is merged into a Luxembourg company, should be targeted.
↪️ The same applies for a transfer of the seat of management of a Belgian company abroad.
3. Individual vs. corporate shareholders
- This withholding tax can turn out to be quite painful, especially for individual shareholders who are generally not entitled to benefit from a WHT exemption.
⚠️ Let us not forget that they do not receive any cash distributions upon relocation (tax without cash…). - In the case of corporate shareholders, withholding tax exemptions could apply (e.g. if they hold a participation of at least 10% for at least one year).
- Pre-migration restructuring (e.g. contribution of shares to a holding company) should be carefully considered in the light of the applicable anti-abuse rules.
4.Compatibility with EU law?
The question arises whether this new exit tax is not contrary to EU fundamental freedoms…
Read also the article in L’ Echo
