The Belgian corporate income tax reform decreasing the corporate income tax rate to 25% by 2020 (29.58% in 2018 and 2019), also amended a number of measures to increase the attractiveness of Belgium as a holding jurisdiction. Specifically, the dividends received deduction has been increased from 95% to 100% and a full exemption also has been introduced for qualifying capital gains on shares.

DRD increased to 100%

The Belgian Dividends received deduction (DRD) has been increased from 95% to 100% of the received dividend for financial years starting as of 1 January 2018. To be entitled, following 3 conditions must be met:

• 12 months minimum holding period
• a minimum holding of 10% in the subsidiary’s capital or an acquisition value of €2.5 million; and
• the subject-to-tax test.

100% exemption of capital gains

Capital gains on shares are fully exempt from tax for financial years starting as of 1 January 2018. The exemption is subject to the following 3 conditions:

• 12 months minimum holding period
• a minimum holding of 10% in the subsidiary’s capital or an acquisition value of €2.5 million; and
• the subject-to-tax test. Hence, the conditions to benefit from the capital gain exemption are now fully aligned with the conditions to apply the DRD.

Group reporting

From 1 January 2020, Belgium will introduce a tax consolidation regime. Accordingly, companies that are in a tax-paying position can make a group contribution to group companies that are in a loss position, subject to conditions and limitations. The receiving company can offset the group contribution with available tax attributes.

CFC rules

The introduction of the EU ATAD, Belgium has been required to introduce Controlled foreign company (CFC) rules. The new CFC rules will enter into force for financial years starting as from 1 January 2019.

WHT exemptions

Withholding tax (WHT) is not imposed on Belgian-sourced dividends distributed to a qualifying parent located in a treaty jurisdiction with at least 10% shareholding for an uninterrupted period of 12 months.

A full exemption is also available for dividends paid or attributed of shareholdings with an acquisition value of at least €2.5 million but holding less than 10% of the subsidiary’s capital, effective as of 1 January 2018.