Belgium: Draft law on anti-hybrid rule, exit tax payment

Draft legislation in Belgium

The government submitted to parliament a draft law containing tax provisions for:

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  • Implementing changes under the EU Parent-Subsidiary directive relating to the anti-hybrid and anti-abuse rules
  • Allowing the “exit tax” to be made either as a direct payment or over a period of years under a payment “spread”

These two measures were not included in a prior draft law earlier this year because the Council of State found no “urgent” need for introduction of these provisions.

The provisions, as drafted, are set to be effective as from assessment year 2017 and applicable to transactions made as from the date of publication of the law in the Belgian official gazette.

Parent-Subsidiary directive: Implementation of anti-hybrid and anti-abuse rule

  • Hybrid mismatches (situation of double non-taxation): No dividends-received deduction would be allowed for dividends paid by a company to the extent that such income has been deducted or can be deducted by the company from its profits.
  • Anti-abuse rule: The draft law would transpose text of the anti-abuse rule from the EU directive into Belgian tax law. No dividends-received deduction or exemption from withholding tax would be available for dividends related to a “legal act” (or series of legal acts) that are shown to be artificial and entered into primarily to obtain the dividends-received deduction, the exemption from withholding tax, or any advantage of the directive in another EU Member State. For these purposes, “legal acts” would be considered to be artificial if they are not entered into for valid business reasons that reflect economic reality.
  • Effective date: Regarding the dividends-received deduction, the measure would be effective for income paid or attributed as from 1 January 2016, but would not be applicable to amounts paid or attributed during a financial year ending before the first day of the month following date of publication of the law in the Belgian official gazette (e.g., if the law is published in November 2016, the provision would apply to income paid as from 1 January 2016 during financial years closing on or after 1 December 2016). Regarding the exemption from withholding tax, the measure would be effective for income paid or attributed as from the first day of the month following the publication of the law in the Belgian official gazette.

Exit tax

The second part of the draft law offers, in certain instances, an election to pay the exit tax choice either as a direct payment or a “spread payment” (with the spread being over a period of five years). The exit tax applies with respect to capital gains on Belgian assets following:


  • Contribution of a company division, branch or goods
  • Merger or demerger
  • Transfer of company “seat” (main establishment or seat of management)
  • Transfer of assets of Belgian establishment


The taxpayer would be allowed to opt for a spread payment of the exit tax provided that the assets are maintained within a company or a foreign establishment located in another EU or EEA Member State. For these purposes, the European Economic Area (EEA) would be EU plus Norway and Iceland, but not Liechtenstein because it is not yet a party to an agreement on the mutual assistance in the recovery of taxes.

In instances when a taxpayer makes an exit tax spread payment election, the tax authorities could require a guarantee if there is a risk of non-recovery, and each year, the taxpayer would be required to complete a form with information about the assets concerned. In certain circumstances (e.g., on a sale of the assets, assets leaving the EEA, among other situations), any remaining amount of the unpaid tax liability would be immediately due. Also, there would be no tax increase in instances of prepayment of the exit tax.


Read an October 2016 report prepared by the KPMG member firm in Belgium

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