Belgian Tax Reform – Draft Program Law Implements First Wave of Measures

This newsflash outlines the main tax measures included in the draft (infra 1. to 8.), identifies key items that were ultimately excluded despite initial announcements (infra 9.), and provides legal and practical commentary on some of the more sensitive or technically complex provisions.

1. Carried interest – new competitive regime for private equity and venture capital

The draft Program Law introduces a specific tax regime applicable to individuals (or related persons) receiving carried interest from alternative investment funds. Under this regime, carried interest would be treated as investment income and taxed at a flat rate of 25%, instead of being subject to progressive personal income tax rates. This provision aims to enhance Belgium’s attractiveness and competitiveness in the private equity and venture capital sectors, by providing a clear and predictable tax treatment.

The new rules apply to income derived from the disposal or redemption of financial instruments or from distributions, provided the recipient is required to invest capital in the fund and the return is linked to the performance of the fund as a whole. The measure notably removes the existing exception for income derived from shares acquired through stock options already taxed at grant.

The Council of State has raised critical observations on both the qualification and the tax rate. First, it questioned whether carried interest can be legally qualified as investment income given its close link to the professional activity of fund managers. Second, it requested justification for the reduced 25% rate, which is below the standard 30% withholding tax rate applicable to dividends and interest.

In its response, the government argued that legal certainty justifies the qualification as investment income. Although earned in a professional context, carried interest is contingent upon a capital commitment and exposure to financial risk. As such, the return is more comparable to that of a subordinated shareholder than to remuneration for services.

The government also justified the reduced rate on the basis of the irregular, performance-based and residual nature of carried interest. The return is typically granted only after priority returns to investors have been achieved. Lastly, the draft refers to international benchmarking, noting that similar or more favourable regimes exist in other jurisdictions, which Belgium must consider to remain competitive.

2. Exit tax – or "Stay tax" in disguise

As detailed in our dedicated newsflash, the draft Program Law introduces a new "exit tax" regime applicable to shareholders of Belgian companies relocating their statutory seat abroad.

The core mechanism remains controversial: shareholders are deemed to receive a liquidation dividend—even if they do not emigrate and receive no actual payment. The measure applies to Belgian-resident individuals, legal entities and non-residents alike.

In most cases, Belgian-resident shareholders would be taxed at 30% on this fictitious dividend, unless exemptions apply. A five-year deferral option is available when the relocation is to an EU/EEA Member State with a tax recovery agreement with Belgium, with 1/5th due upfront and the remainder spread over four years. However, the deferral does not equal an exemption and must be claimed within two months of assessment.

The draft also introduces a partial relief mechanism to avoid double taxation: if the company later distributes dividends originating from the transferred assets, the shareholder may claim an exemption—though in practice, tracing the origin of those assets can be extremely complex.

The Council of State acknowledged the constitutional and EU law concerns, particularly regarding the potential restrictions on the freedom of establishment. The government attempts to justify the measure by referencing case law, such as the Panayi case; however, the comparison is questionable.

Despite recent amendments, the tax may still face legal challenges. As it stands, it places a real burden on shareholders who "stay" while their company moves—hence the label: a "stay tax" rather than an exit tax.

3. Participation Exemption Regime - new condition for 2.5M threshold

Companies claiming the participation exemption based on a minimum investment of EUR 2.5 million—when the 10% ownership threshold is not met—will now be required to demonstrate that the participation qualifies as a “financial fixed asset” within the meaning of Belgian accounting law. This condition is factual and based on the permanence and specificity of the relationship between the entities involved. The assessment takes place when the dividends are paid or allocated.

The new requirement does not apply to “small” companies within the meaning of accounting law, raising potential questions as to whether the distinction is objectively justified, particularly where balance sheet structure alone may be comparable.

4. Alignment of the liquidation reserve and VVPRbis regimes

The draft Program Law confirms the alignment of the liquidation reserve and VVPRbis regimes. For reserves created from 1 January 2026, the liquidation reserve regime would be amended to reduce the minimum holding period from five to three years, after which the applicable withholding tax would be 6.5%. Considering the separate 10% levy, the effective tax burden would amount to 15%. In the absence of the required holding period, a 30% withholding tax would remain applicable.

Under the VVPRbis regime, the 20% withholding tax applicable to dividends distributed during the second financial year following contribution would be phased out and limited to capital contributions made before 31 December 2025. Going forward, only the reduced 15% rate subject to a three-year holding period would remain in place.

5. Audit adjustments – the new concept of "good faith"

Under current law, a 10% tax increase may be waived in the absence of bad faith. The draft reverses this logic by introducing a rebuttable presumption of good faith for first-time infringements, automatically waiving the increase in such cases. This presumption does not apply in cases of ex officio assessment.

The waiver is limited to one every four years. In case of a second infringement during this period, a 20% increase will be imposed, even if the taxpayer acted in good faith.

The mechanism is therefore intended to function more as a “joker” or one-time safeguard, rather than a general exemption for good-faith taxpayers. This marks a clear departure from the previous practice, where the absence of bad faith could lead to the offence being disregarded entirely.

While the introduction of a presumption of good faith is a welcome development, the overall reform remains cautious in its protection of taxpayers.

6. New permanent tax amnesty regime

The draft introduces a new permanent procedure for tax amnesties. It is open to all taxpayers, including individuals, legal entities not subject to corporate income tax, and partnerships or associations without legal personality, even if they have previously benefited from an amnesty.

Amnestied income is subject to a tax equal to the normal rate applicable for the relevant tax year, increased by 30 percentage points. This rate includes municipal and agglomeration surcharges. Prescribed capital is subject to a flat-rate levy of 45%.

Declarations must be submitted to the Contact Point for Amnesties and include information on the origin, scope and timing of the income or capital, the fraud mechanism involved, and the accounts concerned. Once the levy is paid in full, the amnesty results in immunity from both tax and criminal prosecution, except in cases involving money laundering or other serious offences.

7. VAT amendments – eco-friendly measures and a permanent 6% rate regime for real estate developers

The first VAT provisions reflect the government’s intention to align tax incentives with environmental goals. As of 1 July 2025, the reduced 6% VAT rate for the renovation of dwellings older than 10 years will no longer apply to the supply and installation of fossil fuel-based heating systems, which will henceforth be taxed at 21%. Likewise, the reduced 12% VAT rate for coal and derivatives will be abolished. Conversely, the reduced 6% VAT rate will continue to apply to the supply and installation of heat pumps and related components.

Additionally, the reduced 6% VAT rate for demolition and reconstruction will become permanent for real estate developers, subject to strict conditions:

• The property must become the main residence of the purchaser or owner for at least five years, or the landlord must lease the property for at least 15 years to one or more successive tenants who use it as their main residence
• The habitable surface area is limited to 175 m² for sales (200 m² for self-builders).
• A formal declaration must be submitted to the tax authorities before VAT becomes due, including ownership details, cadastral data, and proof of intended use.

A pro rata clawback mechanism will apply if the conditions are no longer met.

All VAT-related changes take effect on 1 July 2025, aligning with the start of a new VAT reporting period, to ensure administrative simplicity for businesses.

8. Securities account tax – anti-abuse provision

The draft law introduces an anti-abuse provision aimed at preventing the circumvention of the tax on securities accounts. Transactions involving the conversion or transfer of financial instruments into or out of a securities account will be deemed unenforceable against the tax authorities if the value of the securities prior to the transaction exceeds the taxable threshold. The burden of proof shifts to the taxpayer, who may demonstrate legitimate motives such as donation, divorce or succession ("Acceptable justifications" include donations to children, divorce, or death; "Unacceptable justifications" include splitting an account to invest in financial products with different terms, or registering shares in nominative form to save on bank fees).

An obligation to report such transactions is introduced. Belgian intermediaries must notify the tax administration, while foreign account holders must do so themselves if no Belgian representative is appointed.

9. Unimplemented measures from the Easter Agreement

Several measures initially included in earlier versions or mentioned in the Easter Agreement have not been retained in the final draft of the Program Law. These include:

• A technical amendment to clarify the deductibility of dividends-received deduction (DRD) in the context of group contributions;
• A proposed 5% taxation on capital gains derived from DRD Sicav/Bevek structures;
• Revisions to the investment deduction rules;
• Streamlining of tax investigation and assessment limitation periods;
• Adjustments to the special tax regime applicable to inpatriates;
• A temporary increase in the deductibility of costs related to certain hybrid company cars;
• Interest deduction limitation related to real investments;
• A broader simplification of personal income tax, including the elimination of various deductions and exemptions.

These omissions suggest a deliberate narrowing of scope for this first wave of reform, likely due to political or technical complexity. Items excluded from the first draft law will presumably be added during a second legislative round.

10. Final thoughts and legal outlook

While the Program Law delivers on several of the government’s promises and introduces a wide array of reforms, the overall coherence of the tax system remains largely unchanged. The Council of State’s opinion highlights several unresolved issues, particularly regarding the legal classification of carried interest, the robustness of the new "exit tax" regime, and the reliance on accounting concepts for the DRD regime. Moreover, important questions remain on the proportionality and enforceability of several new rules, raising concerns about legal certainty and administrative complexity.

From a practical perspective, taxpayers and advisors alike will need to closely monitor how these measures are implemented and interpreted. Several provisions will likely require further clarification through administrative commentary or case law.

At Fieldfisher, we believe that these developments merit more than a simple overview. That is why we are launching a new initiative: Fieldfisher Tax Talk—a live webinar series in the format of a "talk-show". During the first edition, our tax team will take a closer look at the Program Law and share insights on both the legal underpinnings and the expected practical implications.

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Stay tuned for more updates and detailed legal commentary. In the meantime, do not hesitate to reach out to your usual Fieldfisher contact should you have any questions about the new rules or their application in your specific context.