Liquidation: which annual accounts/tax returns must be drawn up?

The voluntary dissolution of a company always takes place following a decision of the general meeting. In the case of a BV, a CV and an NV, this general meeting must take place at the premises of the public notary. In the case of a VOF and a CommV, this can take place privately.

The Belgian Company Code (WVV) also provides for a procedure to be followed in the event of dissolution and liquidation (preparation of a report by the board and an audit report by a company auditor or external accountant WVV 2:71).

This procedure is mandatory for a BV, a CV or an NV. VOF and CommV, companies with imperfect legal personality, are only subject to this procedure if they make use of so-called turbo liquidation (dissolution with immediate closure of liquidation at the same general meeting).

Dissolution is followed by the actual liquidation of the company by the liquidator, followed by the closure of liquidation.

1. Closing date of the financial year = additional annual accounts

With the introduction of the new WVV, the legislator explicitly included the provision that the dissolution of the company results in the closing of the financial year. (WVV 2:70).

Annual accounts must therefore be drawn up with the date of the general meeting which decided on dissolution as the closing date, covering the period from the first day after the previous closing date until the date of dissolution.

The Accounting Standards Commission has also recommended drawing up annual accounts with the date of dissolution as the closing date since 1989.

The annual accounts up to the date of dissolution must be drawn up by the incumbent directors (notwithstanding their mandate is terminated by the decision on dissolution).

These annual accounts must be submitted to the general meeting for approval and, depending on the legal form, must also be filed. It is the liquidator who will convene this general meeting.

In this way, the responsibility of the directors, on the one hand, for the "normal period of operation" of the company until the date of dissolution, and of the liquidator, on the other hand, from the date of dissolution, is clearly defined.

Incidentally, these annual accounts should not be confused with the statement of assets and liabilities that must be drawn up in response to the proposal for dissolution and which is included with the report from the board. This statement, which may be no more than 3 months old on the date of this general meeting, is only drawn up for information purposes for the general meeting which has to decide on the dissolution and will no longer be up to date on the date of dissolution.

2. Closing date of the financial year = additional corporate tax return

An additional closure also entails a closure of a taxable period and thus the obligation to submit a corporate tax return for this period. In the jargon, a “special tax return”, i.e. not on the statutory closing date.

This is confirmed in the circular of 29 May 2020 from the FPS Finance: “Taking into account the new art. 2:70, 2nd al. WVV, companies which have their registered office in Belgium and are dissolved on a date other than their statutory closing date must from now on file a tax return for the taxable period that runs from the first day after the last taxable period until the date of dissolution.”

This tax return therefore did not have to be submitted before the introduction of the new WVV.

Tax consequences

An additional taxable period can have unpleasant consequences. For example, a company that only has costs during liquidation and does not realise any capital gains will not be able to offset these costs against taxable profit.

On the other hand, the additional closure offers the opportunity to create a further liquidation reserve. For payment, the final tax is limited to 10% withholding tax, even if the payment is made following liquidation before the end of the 5-year waiting period.

3. Liquidation and closure before the statutory closing date

If the closing of liquidation takes place before the statutory closing date (only rarely will the closing date coincide with the statutory closing date), then the liquidator will prepare the 'settlement accounts' for the period from the first day after the date of dissolution or the first day after the previous closing date until the date of closing of liquidation. 

The Accounting Standards Commission is of the opinion that the term 'settlement accounts' also includes the annual accounts for this period. In any case, these annual accounts do not have to be filed.

However, the liquidator will have to submit a corporate tax return, again being a ‘special’ tax return.

Example

A company is being dissolved and liquidated in 2021

Statutory closing date = 31 December

Statement of assets and liabilities = 31 March 2021

Date of the general meeting pronouncing the dissolution = 10 May 2021

Closure of liquidation = 6 July

Closing date	annual accounts	who	tax return
31 December 2020	yes	board	ordinary tax return 2021 assessment year
31 March 2021	no	board	no tax return
10 May 2021	yes	board	special tax return 2021 assessment year
06 July 2021	yes, but not to file	liquidator	special tax return 2021 assessment year

As a result, three tax returns will be filed for the 2021 assessment year.

In the course of 2021, three sets of annual accounts will be drawn up, of which two sets will be filed. 

4. Liquidation not closed before the statutory closing date

If the company was dissolved but liquidation could not be closed before the statutory closing date, the liquidator will prepare annual accounts for the period from the first day after the date of dissolution until the statutory closing date or, in the following years, for a full fiscal year.

Note that these annual accounts are not approved by the general meeting which is only notified of them for information purposes. Depending on the legal form, the annual accounts must be filed by the liquidator.

Of course, a corporate tax return must also be filed for this period.

5. Turbo liquidation

So-called turbo liquidation or liquidation in a single day is provided in the Belgian Civil Code (WVV) and is very popular in practice. Liquidation is concluded at the same time as the dissolution of the company, i.e. at the same general meeting. It concerns companies that have de facto already been liquidated and no longer have any debts to third parties, other than shareholders or affiliated companies.

Here too, the date of dissolution is an additional closing date.

The directors must therefore also draw up annual accounts with the date of the general meeting which approved the proposal for dissolution as the closing date.

In the case of ordinary liquidation, these annual accounts can be further processed after the dissolution.

With liquidation in one day, however, this is not possible. These annual accounts are approved by the general meeting on the day of dissolution and must therefore be available in their final form at that time. Therefore, do not forget to provide the approval of the annual accounts on the date of dissolution in the agenda.

Example

A company is dissolved in 2021 with immediate closure of liquidation, 

Statutory closing date = 31 December

Statement of assets and liabilities = 31 March 2021

Date of dissolution with immediate closure of liquidation = 10 May 2021

Closing date	annual accounts	who	tax return
31 December 2020	yes	board	ordinary tax return 2021 assessment year
31 March 2021	no	board	no tax return
10 May 2021	yes	board	special tax return 2021 assessment year

For the 2021 assessment year, two corporate tax returns are therefore filed.

Two sets of annual accounts will be filed in the course of 2021. 

Profit appropriation – withholding tax on the liquidation bonus

Annual accounts are always drawn up after the appropriation of profits (proposed by the board). This is no different for liquidation. This means that the withholding tax due on the liquidation bonus must also be included in the annual accounts.

Note that the withholding tax due should not be recorded in the statement of assets and liabilities to be included with the report from the board.

The withholding tax must not yet have been paid on the day of the closure of liquidation. The tax return and the payment of the withholding tax take place after closure.