The Belgian 2025 tax reform includes several measures which impact the Belgian M&A market and practice. This article highlights the main changes, their relevance, and some suggested recommendations.
By Florian Jacobfeuerborn (partner M&A tax, PwC)
2025 was marked by tax reforms in which the Belgian government, on the one hand, aims to make working and entrepreneurship more attractive, but on the other hand, must also respond to the budgetary challenges facing our country.
This article aims (without claiming exhaustiveness) to describe the legal measures which are deemed to be most relevant for the Belgian M&A market and practice and to suggest certain recommendations to deal with such changes in law.
Dividend received deduction: additional financial fixed assets requirement for minority participations
Relevant for?
All Belgian investors investing in minorities via a Belgian vehicle subject to corporate tax: corporate groups, private equities, family offices, holdings, management companies, etc.
Entry into force?
The new condition applies as from assessment year 2026. For taxpayers where the financial year is equal to the calendar year, this means that dividends received from minority participations (< 10%) as from January, 1 2025 should meet the new requirement.
Summary of what has been changed
A Belgian company that receives dividends (or realizes capital gains on shares) can, under certain conditions, deduct these dividends from its profits (or, as the case may be, exempt these capital gains).
This system is called the 'dividend received deduction' ('DRD') regime and is based on the European Parent-Subsidiary Directive. The rationale is to avoid double taxation (or even multiple layers of double taxation if a dividend is redistributed). Indeed, the underlying company that pays out the dividend has itself already been taxed on the distributed profit.
To benefit from the DRD regime, several conditions must be met. Summarized and simplified, (i) the distributing company must be a normally taxed entity, (ii) a minimum holding period of 1 year must be respected with regard to the shares, and (iii) the company receiving the dividends (or realizing the capital gains on shares) must hold a participation of at least 10% or with an acquisition value of at least €2.5 million.
This last condition, the so-called ‘minimum participation requirement’, is intended to ensure that only substantial participations qualify for the regime.
The Program Law of 10 July 2025 has further tightened this minimum participation requirement: if a company wishes to apply the DRD regime—and this company is not a small company—this is now only possible if the investment has the nature of a ‘financial fixed asset’.
The concept of ‘financial fixed assets’ is not defined in tax legislation, which means we must rely on the accounting definition, which does not excel in practical clarity. To record an investment of less than 10% as a financial fixed asset, according to accounting law, it must concern investments “that are intended, by creating a lasting and specific relationship with those enterprises, to promote the company’s own business operations.”
In our view, investors and their shareholders/directors are best placed to make this call, which ultimately largely comes down to their intentions (who else could be able to judge those?), subject to the auditor reviewing the reasonableness of the qualification.
Nevertheless, there is a concern for a too restrictive interpretation by the tax authorities as there has been scrutiny around this condition when the ‘financial fixed assets’ requirement was a general condition for DRD before it was abolished since – as a general condition also imposed to majority participations – it infringed EU law.
25% taxation of carried interest
Relevant for?
Belgian private individual funds managers directly holding carried-interest investments in Alternative Investment Funds (AIFs) established in the EU or similar foreign non-EU vehicles.
Entry into force?
The below changes apply to income from carried-interest structures paid or allocated as of July 29, 2025.
Summary of what changed
Funds managers holding carried-interest investments have two hats: in one capacity their professional task is to manage the fund and generate value for the fund and its LPs, in another capacity they are investors putting capital at risk. Also, the carried-interest investments are often 'mixed' instruments whereby on the one hand an effective (equity) investment subject to investment risk is done, but where on the other hand the ultimate yield (to a certain extent) depends on financial performance ('hurdles').
In this context, the Belgian tax authorities analysed on a case-by-case basis whether the carried-interest investment can tax-wise be considered as a return on equity investment (be it, depending on the case a dividend (30%) or capital gain on shares (taxed at 0%, 16,5% + local taxes or 33% + local taxes, see below) or should be considered professional income (taxable at > 50% + local taxes).
An important element to counter a qualification as professional income is, in our view, the presence of a solid documented valuation report demonstrating that the managers subscribed the carried interest at fair market value. As the law was lacking a clear framework, funds managers were however facing uncertainty tempering the ability to reinvest the proceeds received.
In order to create legal certainty, a specific framework for carried-interest investments has been created where the fund manager invests directly in the fund. In that case, the law now explicitly confirms a qualification as movable income (subject to 25% taxation), eliminating the risk of a qualification as professional income, which was very often perceived as being unfair given the investment risks which were taken.
The key question will be how the taxable basis for this 25% taxation will be determined in practice. The idea is that the tax applies to the 'excess’ return which the manager receives compared to the 'normal' return of other investors/financial investors without carried interest arrangement. Although this might at first sight seem straightforward, practical difficulties and various interpretations are to be expected around the determination of what should be considered a 'normal’ return.
As indicated above, the new rules apply to carried interests directly held as a Belgian private individual tax resident. For investments via a corporate vehicle, the existing corporate income tax rules apply whereby the corporate income tax treatment of the carried-interest (dividend received deduction (partially) available?), the overall global financial and tax situation of the vehicle (e.g. interest expense on leverage which might be deductible) and withholding tax on dividends towards the private individual shareholder(s) are to be weighed against a lump sum 25% personal income tax.
As regards withholding tax, a new anti-abuse rule rules out the application of the liquidation reserve (10%) but the option to apply VVPRbis (15%, to be increased to 18%) can still be analysed.
Suggested actions
• Consider impact on existing carried interest arrangements and document the ‘normal’ return
• Duly structure future carried interest arrangements and compare pros and cons of investing as a private individual or via management company/holding/pooling vehicle
10% taxation of capital gains on financial assets realized by private individuals (expected as from 2026)
Relevant for?
This new tax will affect any private individual who is (or will be) an owner of shares and financial instruments, including current owners of family businesses, future NextGen owners, majority and minority shareholders, management participating in private equity-owned businesses, start-up founders and investors, stakeholders who own shares through a transparent entity (e.g., STAK or maatschap), etc.
Summary of the expected changes
Until now, Belgian private individuals are only taxed if they realize capital gains on financial assets (e.g. shares) in specific circumstances.
Indeed, under current law, capital gains on shares are only taxed if:
• The capital gain is realized beyond the normal management of a private estate (so-called 'speculative gains' which are taxable at 33% + local taxes);
• (Part of) a material stake is sold to an entity outside the European Economic Area ('EEA') (taxation at 16.5% + local taxes)
• The capital gain is realized as a result of professional activities (taxation as professional income at > 50% + local taxes)
In all other cases, the capital gain remains in principle untaxed. Under the new law a general capital gains tax regime would be introduced, whereby three situations can be distinguished:
• A divestment of shares (within the normal management of a private estate and beyond the scope of a professional activity) by an individual who holds 20% of the shares of the company would be exempt up to €1m and then taxed at graduated rates (to be increased with local taxes) as follows:
o €0 - €1m: 0%
o €1m - €2.5m: 1.25%
o €2.5m - €5m: 2.5%
o €5m - €10m: 5%
o > €10m: 10%
• Any other divestment (within the normal management of a private estate and beyond the scope of a professional activity) would be taxed at 10% as from exceeding an exemption amount of €10k at 10% + local taxes.
• A sale of shares to an entity controlled by the seller and/or family members would be subject to 33% + local taxes (so-called “internal gain”).
Important to note is that the 10% taxation would only apply on value accrued as from 2026 as the base cost of the tax would be the value per end of 2025 (“photo-moment”).
For the listed financial assets, the base cost will be its last closing price in 2025, whereas for the unlisted assets:
• the value at which the financial asset has been disposed of for a valuable consideration in 2025 between independent parties, or, where it comes to shares, their subscription price at the occasion of a capital increase or the incorporation of the company where they occurred in 2025;
• the value arising from a valuation formula included in a contract or put option in force on January 1, 2026;
• the equity value of the company increased by 4 x EBITDA as per the last financial statements prior to January 1, 2026 ;
• the value of the instruments on December 31, 2025 as determined by an auditor or a chartered accountant, who is not the usual professional auditing/advising the company, by December 31, 2027, at the latest;
• For disposals occurring up to December 31, 2030 the taxpayer may request that the base cost of the financial asset is its actual acquisition cost (as documented by the taxpayer).
Please note that, unfortunately, payment of the 10% capital gains tax does not exclude that the tax authorities argue that higher rates should apply. Indeed, capital gains realized beyond the normal management of private estate remain taxable at 33% + local taxes, a 16.5% taxation applies in case the seller holds an important stake and sells outside the EER, and taxation as professional income (>50% + local taxes) may still be withheld in certain cases. On top, in such cases, the taxable basis would be calculated with reference to the historical acquisition costs instead of the value per end of 2025.
Hence, capital gains on shares will remain under scrutiny of the Belgian tax authorities, even after the entry into force of the general capital gains tax regime.
Recommended actions
• Review the impact in concreto on your existing structure as well as any potential future (deal) structure.
• Review and document the valuation of your business per end of 2025 in view of safeguarding future rights.
• Review potential risks that the exceptional higher rates (16.5% + local taxes, 33% + local taxes, taxation as professional income) could apply and consider risk management tools (tax advice/opinion, tax ruling, defence file, etc.) in due course.
Group contribution regime
Relevant for?
All structures (group structures, BidCo structures, upper-tier structures, financing structures, etc.) with multiple Belgian entities.
Which changes have been discussed?
Until 2019, Belgium was one of the last countries in Europe without any form of fiscal unity for corporate income tax purposes.
Starting from assessment year 2020, a group contribution regime was introduced, allowing a loss-making entity to offset its loss for the year with a profit contribution from another Belgian entity. However, the stringent conditions (including a minimum five-year holding period and a direct participation requirement) make it difficult to effectively use the regime in an M&A context.
At the beginning of discussions around the current Belgian tax reform, there were rumours about simplifying or extending the regime (the Government agreement mentioned the intention to make the regime more attractive). However, to date, no specific initiatives have been communicated. Further extending the regime would foster entrepreneurship as well as Belgian investments and M&A activity.
Potential areas for improvement could include allowing group contributions with indirect subsidiaries and/or abolishing the minimum five-year holding period or accepting that it could be fulfilled subsequently.
Recommended actions
• Review your existing structure to verify that, once entitled, the group contribution regime is effectively utilized.
• Follow up on any future developments.
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