Private equity is a key driver of economic growth, and Belgium is making moves to strengthen its role in this space. With reforms to the Private Privak and new tax proposals for carried interest, the country aims to boost its competitiveness. But how does Belgium’s framework compare to neighbouring markets? This overview highlights the current landscape, key advantages, and the challenges still ahead.
By Nancy De Beule, Bart Van de Bussche, Sarah Van Leynseele & Morgane Chatzopoulos
Overview
Private equity is a vital component of the economy, providing essential capital to businesses, fostering innovation, and generating employment. It supports companies in their growth and expansion efforts, enhancing productivity and competitiveness on a global scale.
Private equity funds in Europe generally benefit from a specific regulatory and tax framework aimed at fostering such structures in order to:
• Ensure a regulatory framework that offers legal certainty while having the necessary flexibility to be commensurate with the operational reality of private equity funds;
• Offer investors a stable tax environment that respects the tax neutrality that is expected of investment funds;
• Offer a stable tax framework for fund managers and their industry specific investment and work profile.
What does Belgium provide as a framework and how does it compare to its neighbours?
We’ve seen significant improvements of the regulatory and tax environment over the past 10 years and more promised by the new government. The most recent and significant improvement concerns the regulatory and tax framework of the Private Privak (‘Pricaf privée/Private Privak’) - the fund structure tailored to private equity.
Since the changes in 2018, there has been an explosion of such structures in the Belgian landscape. Most recently, on 11 April 2025, the Council of Ministers approved a draft program called the “Easter agreement”, in which a dedicated tax framework for carried interests received directly by individuals is foreseen, aiming to increase Belgium competitiveness in the private equity sector.
Belgian vehicles - regulatory and tax environment
Belgium's private equity landscape is characterized by a mix of unregulated funds and regulated fund structures like the Private Privak and to a much lesser extent the European Long-Term Investment Fund (ELTIF).
Overall in the private equity landscape active in Belgium, while some master funds are structured in Belgium, Luxembourg or non-Belgian structures are often used to cater to the international investors while dedicated so-called “feeder” Belgian vehicles are used to facilitate the entry of Belgian investors through vehicles that are adapted to the Belgian tax framework.
The most commonly used regulated vehicle for private equity is the Private Privak which provides for a light regulatory framework, especially for smaller funds, while benefiting from a comprehensive and beneficial tax framework. The new government has announced its intention to relax certain regulatory limitations such as the limitation on number of investors, its duration etc, but nothing has been agreed on so far.
Unregulated vehicles (with or without the EuVECA (European venture capital funds) label) are still popular vehicles which can be very effective for private equity investments, but their tax effectiveness highly depends on their investment profile and investor types. Typically such vehicles can be effective for (Belgian) corporate or fund investors but less so for individuals investing directly.
Regulatory framework in Belgium - regulated structures
The Private Privak benefits from a light regulatory framework with no prudential oversight by the Financial Services and Markets Authority (“FSMA”), but a registration with the Ministry of Finance. In this respect it has a regulatory framework that is less burdensome than for example a Luxembourg RAIF, which is also a vehicle often observed in the private equity market.
In theory, the ELTIF can be an appropriate vehicle to cater to private equity investments especially for those funds with a long term investment vision. The main advantage of a Belgian ELTIF is that it benefits from an EU passport to make public offerings and market its shares to retail investors. As a consequence, the Belgian ELTIF has a comprehensive, but burdensome regulatory framework which in practice makes it prohibitive to use for the private equity sector (which usually targets professional or qualified investors).
Regulatory framework - regulated and unregulated structures
Irrespective of the legal forms used, all investment funds including unregulated funds need to apply the Alternative Investment Fund Manager Directive which, depending on the value of the assets under management of the Manager, can create obligations for such Manager to have a more structured governance and the need to have a prior approval of the local Regulator with the administrative burden this may imply. As this is a European Directive, there are no material differences between Belgium and the neighbouring EU countries.
In Belgium, the FSMA has made significant investments in its competencies relevant for private equity which has partially helped but has also made certain procedures more burdensome in the recent past.
Belgian Tax environment - Investor perspective
For investors, tax neutrality of the fund vehicles is key - the investors seek the same tax treatment as if they were to invest directly. This is also recognised by the Parliamentary works preceding the law enhancing the Private Privak in 2018.
In that sense, the “natural form” of private equity funds should in principle be the tax transparent partnership. Due to some complexity in the Belgian tax rules for Belgian investors, tax transparent partnerships do not always manage to achieve this neutrality, while a regulated opaque vehicle (such as Private Privak) or even unregulated corporate vehicles do manage this with more legal certainty. This is why the Belgian private equity landscape is somewhat different from its neighbours and sees more opaque fund structures for private equity.
Belgium does not (yet) foresee a harmonised taxation of all investment income/returns compared to most European countries where a flat rate for all investment returns is foreseen for capital gains and dividends (eg 34 percent in France or 26 percent in Italy). The so-called “Cayman tax” has also added a layer of complexity for individual Belgian investors. The proposed changes by the new government to the taxation of investments will also likely impact investors in private equity.
Another factor that does not work in favour of Belgium is that the default Belgian withholding tax (WHT) rate – which can hence apply to both Belgian and non-Belgian investors – is high (30 percent). This is less competitive compared to countries where 0 percent tax is applied on share buybacks or interest. Nevertheless, with proper structuring, a lower or even 0 percent rate can be achieved especially for corporate/institutional investors.
Finally, the instability of the Belgian tax landscape poses challenges for investors seeking predictability.
Nevertheless, with proper structuring, tax neutrality for investors is achievable with the existing fund structures.
For Belgian investors
The tax environment of private equity funds for Belgian investors can be beneficial (i.e. neutral), but the complexity of the rules means that achieving a consistent tax treatment can be a challenge and is subject to limitations. The proposed changes by the government are expected to alleviate some of these complexities.
The ruling commission follows this neutrality principle and has developed administrative case law for Private Privaks with clear guidelines on what it considers non-abusive structures. The tax environment in Belgium of Private Privak is therefore generally effective for Belgian investors that invest through such a vehicle in European private equity.
For funds structured as unregulated vehicles, Belgian investors rely on the general tax framework of holdings which has always been beneficial in Belgium - sometimes even more so than other traditional holding jurisdictions. What’s more, Belgium has an extensive and effective tax treaty network which presents opportunities for international investments (regulated vehicles can also generally benefit from these).
Investing in a tax transparent vehicle can achieve neutrality for the investor but requires specific reporting performed by the Fund managers. While Belgian funds naturally meet these requirements, it is not always the same for foreign funds.
However these rules apply for all Belgian investors investing in not just Belgian, but also foreign (private equity) investment funds.
For non-Belgian investors
The Belgian Private Privak (as well as the ELTIF) generally provides for a consistent tax neutral treatment for non-Belgian investors. However, in the investors’ local jurisdictions, the Private Privak is not well known (as it is not a european vehicle) and is opaque for tax purposes, it can hence create tax complexity in home jurisdictions of investors. Due to the regulatory constraints, the ELTIF is not (yet) widely used but would offer more tax certainty.
The tax neutrality of unregulated vehicles highly depends on its investment structure and its investor structure - however the generally favourable holding tax regime and tax treaty network in Belgium offers many opportunities.
Belgian Tax environment - Fund manager perspective
In a recent draft bill, Belgium has taken a significant step in clarifying the tax treatment of carried interests, which would achieve certainty of the tax treatment:
• At 25 percent of the carried interest return for fund managers receiving the carried interest directly and,
• If carried interest are structured through stock options, legal certainty on the absence of taxation of the proceeds provided taxation has occurred at grant.
The draft bill explicitly excludes the possibility to requalify carried interests’ income as professional income, which offers much-needed clarity and certainty for private equity managers and investors in Belgium.
The new regime would apply to carried interests paid or attributed as from the date of enactment of the law.
Currently, for investment fund managers, Belgium does not have a specific legislative framework for carried interest, unlike other countries where specific regimes are in place. Instead, a practice has developed through case law and rulings by the tax authorities. Depending on the structure used, the tax rate can vary between 0 percent and approximately 35 percent. Moreover, the so-called Cayman tax (a look-through taxation) can add an additional tax burden for Belgian managers of non-Belgian funds if their participations are not properly structured.
Comparison with other countries
Several countries already had specific carried interest taxation regimes.
• Ireland: Ireland has a definition for carried interest and has a specific tax regime for Qualifying Venture Capital Funds (QVC Funds). Provided certain conditions are met the tax rate amounts to 12.5 percent or 15 percent.
• The Netherlands: Often carried interest investments are structured via a so-called box 2 system with a tax rate of up to 33 percent. Current discussions are going on to exclude carried interest from box 2 income and tax the income as box 1 income subject to a marginal rate of 49.5 percent. Little further information is known at this moment in time.
• United Kingdom: Carried interests are typically taxed at 18 percent or 28 percent depending on the tax status of the beneficiary. The UK tax reform will increase the 28 percent tax rate on carried interest to 32 percent as from April 2025. Furthermore, discussions are going on to change the carried interest tax regime as from April 2026. Income based carried interest is taxable at the normal progressive rates of up to 45 percent. A further reform is currently being reviewed in which carried interest would come in scope of the income tax rates, but the income would be multiplied by 72.5 percent meaning that for an individual being taxed at 45 percent, the highest tax rate would amount to approximately 34 percent including social security (NIC) contributions. Discussions are still going on, so nothing is final yet.
• France: Historically, qualifying carried interest could benefit from a flat taxation rate of 34 percent. A new finance bill has been adopted by the Senate on February 6th which would significantly change the taxation of management incentive packages. The impact of this finance bill is still being reviewed.
Conclusion
The private equity fund landscape in Belgium presents both opportunities and challenges for investors and fund managers. While Belgium offers certain advantages, particularly for regulated fund structures like Private Privaks and ELTIFs, its regulatory and tax frameworks are less flexible than other European jurisdictions.
The proposed reform by the Belgian government aims to increase the competitiveness of the country for private equity. Currently, the implementation details of the reform remain uncertain but some are promising . Stakeholders in the Belgian private equity sector must stay informed about these developments.
Authors:
Nancy De Beule
PwC | Partner
Bart Van de Bussche
PwC | Partner | Reward Services
Sarah Van Leynseele
PwC | Director
Morgane Chatzopoulos
PwC | Senior Associate
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