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Do I pay less dividend tax under the VVPRbis regime ? 

Belgian companies currently pay a 25% corporate tax on their earnings (or 20% on the first  €100,000 of taxable profit if they qualify as an SME) and an additional 30% withholding tax if they  decide to distribute those after-tax profits as a dividend. Aiming to reduce this heavy tax burden  on dividends, the so-called ‘VVPRbis regime(“Vermindering Voorafbetalingen/Réduction  Précomptes Revenus”) was introduced in 2013. It allows SMEs to distribute their after-tax profits at a more favourable tax treatment, instead of paying a hefty 30% tax rate. 

Profit distributions can benefit, under certain conditions, from a reduced withholding tax rate:

20% for the dividend distribution of the second financial year after incorporation or contribution. 

15% for the dividend distribution of the third and following financial years. 

After this 3-year waiting period, the reserved profits of previous years can be distributed in one  lump sum amount. From then onwards, every year the profits can continuously be distributed  at 15%. The 30% withholding tax rate or the 3-year period would not apply anymore. 

The VVPRbis regime only applies if the company meets the following criteria

• The distributing company must qualify as an SME, which is determined at the moment of  incorporation. Even if the company no longer qualifies as an SME afterwards, it will retain  the benefit of the reduced tax rate. 

• The dividends must be distributed through newly issued shares (issued after 1 July 2013), either through an incorporation or a capital increase

• The shareholders need to maintain full ownership of the shares from the moment of  incorporation or cash contribution.  

• The shares must be fully paid up. Payment is required ultimately before the general  meeting that decides on the dividend distribution. There is no minimum share capital anymore for the standard BV/SRL established under the 2019 Company Code. For  companies established before, some specific transitional measures apply. 

Example: if your company was established in October 2019 and the first (extended) financial year  ended on 31 December 2020, you could make a ‘normal’ dividend distribution taxed at 30% for in  spring 2021 and 2022. The dividend payment in 2023 (profit distribution of the 2022 financial year)  would be subject to a 20% withholding tax. The dividend payment in spring 2024 (profit  distribution for the 2023 financial year) or later, would be taxed at only 15%. 

In case your company does not meet the above conditions, setting up a Liquidation Reserve may be a good alternative. Especially, if you plan to close the company within the next few years. 

TAXPATRIA® can assist you with your business accounting and various compliance formalities.


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