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New Tax Regime Impacts Capital Gains on Shares
As a result, previously exempted capital gains on shares will now be subject to a separate corporate tax rate of 0.412% (including an additional crisis surcharge). Taxand Belgium investigates this new tax regime and its potential impact on multinationals.
The new capital gains tax only applies to shares that qualify for the capital gains tax exemption on shares.
Capital gains on shares are, as a general rule, still fully exempt provided the following two main conditions are respected:
- the so-called "subject-to-tax" condition of the subsidiary company
- The 1 year holding period requirement
The latter condition means that the shares have to be held in full ownership during an uninterrupted period of 1 year.
The new legislation introduces a tax of 0.412% on capital gains on shares realised by 'large' companies that satisfy the aforementioned conditions. As such, the 0.412% tax does not apply to SMEs (small and medium sized enterprises). SMEs are companies with legal personality that do not exceed more than one of the following thresholds:
- Annual average number of employees: 50
- Annual turn-over, excluding VAT: EUR 7,300,000
- Balance sheet total: EUR 3,650,000
It should be noted that a company can no longer be considered as SME when it disposes of more than 100 employees.
The tax regime of capital gains on shares, as already amended by the Program Law of 29 March 2012, can be summarised as follows:
- Full exemption for capital gains on shares realised by SMEs whereby both the holding period requirement and the subject-to-tax condition of the subsidiary company are met
- Taxation at 0.412% for capital gains on shares realised by companies other than SMEs provided that the holding period and the subject-to-tax requirement are met
- Taxation at 25.75% for capital gains on shares when the subject-to-tax condition is complied with, but not the one-year holding period requirement
- Taxation at the standard corporate income tax rate of 33.99% for capital gains on shares, whereby the subject-to-tax condition is not complied with (and regardless of the one-year holding requirement).
This new measure will enter into force as of the tax year in 2014.
When realising capital gains on shares, Belgian companies, as well as Belgian PEs of foreign companies should from now on even more carefully assess the applicable tax regime. To ensure compliance, companies operating within this jurisdiction should review the new legislation.
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