I have provided some insights in L’Echo (article of Philippe Galloy [1]) into (i) the impact of the strenghtening of the Belgian participation exemption regime and (ii) the advisory opinion issued by the Council of State on the draft bill.

1️. New condition of financial fixed asset

🔸 The Belgian participation exemption regime is currently subject to a minimal participation condition: a participation of 10% or a participation with an acquisition value of 2,5 mio €.

🔸 According to the draft bill, a new condition will be added to the alternative threshold of 2,5mio€ : the participation concerned (in the subsidiary) must be classified in the books of the holding company as a “financial fixed asset”.

2️. Small vs. large holding companies

🔸 This strengthening of the participation exemption regime does not apply to small companies, i.e. companies which do not exceed one of the following thresholds:
– at least 50 persons (FTE);
– €11,250 m of turnover;
– €6m of total assets.
These criteria must be assessed on a consolidated basis.

⚠️ Large and medium-sized Belgian companies are caught by this new measure. Financial institutions (banks), insurance companies, large (listed and/or familial) holding companies will be impacted.

3️. Why does the classification of financial products as “turnover” matter?

🔸 Let us assume that the total assets of a holding exceed €6mio, but that the threshold of 50 persons (TFE) is not met (on a consolidated basis). In this case, the question will often arise whether financial products may be classifed as “turnover”.

🔸 If a (passive) holding company receives almost exclusively financial products (dividends, capital gains on shares,…), such products could be classified as turnover (see e.g. the opinion of the accounting standards commission 2022/03, 19 January 2022)
↪️ such holding could lose the benefit of the participation exemption regime if the dividends are derived from shares classified under Belgian GAAP as short term investments (>< financial fixed assets).

4️. Opinion of the Council of State

🔸 The Council of State has expressed doubts about the compatibility of this new condition of financial fixed asset with the EU Parent-Subsdiary Directive.

🔸 As I wrote in a previous blog [2], the directive sets only the minimum requirement. The Member States are entitled to grant tax benefits similar to the benefits of the EU PSD in situations in which the holding is less than 10% (e.g. participations of more than 2,5mio €). As the threshold of 10% remains unchanged (no need there for the participation to be classified as a financial fixed asset), I do not believe that this new condition is contrary to the EU PSD.

Denis-Emmanuel Philippe 

[1] Régime RDT: une nouvelle condition affectera des holdings, des banques et des assureurs | Mon Argent

[2] Nieuwe voorwaarde van financieel vast actief : strijdig met de moeder-dochter richtlijn? Advies van de Raad van State – Denis-Emmanuel Philippe