When the Belgian Code on Companies and Associations (BCCA) was introduced, attempts were made to restrict the corporate tax implications as much as possible. This ‘tax neutrality’ has in general been achieved.
In most companies, the term ‘capital’ has been replaced by ‘non-capital contribution’. However, if the old capital qualified as so-called ‘tax-paid capital’ (and could therefore be reimbursed free of tax), in principle it will also remain ‘tax-paid capital’. This equity capital is now no longer even required to be ‘unavailable’. It must, however, continue to be booked in a separate liabilities account.
Nevertheless, in the following situations, among others, the introduction of the BCCA does appear to have tax implications:
In the event of a capital reduction, a taxable dividend may arise if the company also has available taxed reserves into addition to its paid-up capital, or has untaxed reserves incorporated into the capital.
Under the old Companies Code, certain types of company were obliged to establish a legal reserve which was not available for distribution. So if a company that only had a legal reserve, in addition to its paid-up capital, undertook a capital reduction, no dividend could arise.
Now that the obligation to establish or maintain a legal reserve has been removed for private limited companies (BV/SRL) and cooperative companies (CV/SC), with these types of company a capital reduction could, in the same circumstances, give rise to a (pro rata) taxable dividend.
The VVPRbis (dividend coupon) system offers the possibility of paying dividends at a reduced withholding tax rate of 15% (instead of 30%).
Companies without a minimum capital (such as general partnerships (VOF/SNC) or limited partnerships CommV/SComm)) were only eligible for this if their capital was equal to at least €18,550. The introduction of a company without capital was accompanied by the abolition of the required minimum capital for tax purposes.
But what does this mean in practice, for example for a VOF/SNC established prior to 1 May 2019 (date on which the BCCA came into force) with a capital of €5,000? Initially it seemed as if these were still excluded from the reduced withholding tax. However, following an amendment to the law, as of 1 January 2022 dividend payments can benefit from the favourable tax regime after all.
It is still important to note, however, that the initial contribution must be paid up in full when the dividend is paid. The VOF/SNC referred to above may therefore still have to pay up capital in full before being able to apply the reduced rate when paying a dividend.
The liquidation of a company often involves just one deed. As a result, the last taxable period ends on the day of the notarial deed of liquidation and just one further corporate tax return has to be submitted, the so-called ‘special tax return’.
If a one-day liquidation is not possible, the company is first ‘put into liquidation’ and the liquidation itself is concluded at a later date. Contrary to the previous situation, putting a company into liquidation automatically leads to the closure of a financial period. As a result, at the moment there may be an additional taxable period (and therefore an additional corporate tax return) when the company is put into liquidation.
For example, if a decision is taken to liquidate a company on 30 June 2023 (the statutory closing date being 31 December 2022) and the liquidation is concluded on 30 September 2023, then there will be one financial period running from 1 January to 30 June (date on which the company is put into liquidation) and one financial period running from 1 July to 30 September (date on which the liquidation is concluded). Three corporate tax returns will therefore have to be submitted for the 2023 tax year, that is the ordinary tax return for the 2022 financial year and two ‘special tax returns’.