Geens eases transitional rules on liquidation bonus

Posted on 26-11-2013

Several months ago, the federal government increased the withholding tax on the liquidation bonus. The government foresaw a transitional measure, but this scheme has now been eased after several business organisations sounded the alarm bell.

Federal Minister of Finance Koen Geens is giving companies until 31 March 2014 to distribute the reserves as dividend and thus avoid the higher liquidation tax of 25 percent. Normally companies whose accounting year coincides with the calendar year had until 31 December 2013 to do so. But the relaxed rules also apply to companies that close their financial year between 1 October 2013 and 31 March 2014.

Since 1 July, it is possible to fully or partially distribute taxed reserves that existed on 31 March 2013 subject to withholding tax of only 10 percent.

However, an important condition is attached to this: these paid out net amounts must be immediately used to increase the company's capital. Moreover, this capital must remain in the company for at least 4 years (for SMEs) or 8 years (for large companies), on pain of a higher withholding tax rate.

After this period, this capital is distributed tax-free via a reduction in capital or liquidation, so that the final tax remains limited to 10 percent. Hence shareholders no longer have to wait until the company is liquidated.