Liquidation reserve: Introduction of a New Anti-Abuse Rule
Distributions made upon the liquidation of a company and funded from a so-called liquidation reserve are, in principle, exempt from personal income tax. The only tax burden arises when the liquidation reserve is created during the company's lifetime, at which point a separate 10% tax is due on the amounts allocated to the reserve. This regime is considerably more favourable than the standard 30% withholding tax applicable to dividend distributions.
As a result, many Belgian shareholders have increasingly relied on liquidation reserves as a tax-efficient way of extracting profits. In practice, this often involves allocating retained earnings to a liquidation reserve, paying the 10% liquidation reserve tax, and subsequently liquidating the company to receive the accumulated reserves free of further taxation.
In its ongoing search for additional tax revenues, the Belgian Government has introduced a new anti-abuse provision in the Program Law of 28 May 2026, aimed at curbing what it considers abusive uses of the liquidation reserve regime.
Scope of the New Anti-Abuse Rule
The new measure specifically targets situations in which shareholders or directors allocate substantial reserves to a liquidation reserve, pay the 10% tax, liquidate the company, and receive the liquidation proceeds tax-free, only to restart essentially the same business activities shortly thereafter through a newly incorporated company financed with paid-in capital.
Under the new rule, the tax-free treatment of liquidation dividends may be denied where the beneficiary of the liquidation reserve becomes a director — directly or indirectly — within three years following the liquidation distribution, in a company carrying out the same or similar activities as those of the liquidated company.
In such circumstances, the liquidation dividend will lose its tax-exempt status and will be reclassified as taxable movable income in the tax year during which the triggering event occurs, i.e. the commencement of the directorship in a company operating the same or similar activities (as the dissolved company).
What Constitutes “Same or Similar Activities”?
During the parliamentary discussions, the Minister of Finance provided several examples of what may be considered “same or similar activities”.
For instance, a CEO who liquidates his management company and subsequently takes up a management position in another company would generally be regarded as carrying out similar activities. By contrast, if that same individual were to open and operate a retail business, the new anti-abuse provision would not apply.
Similarly, an IT consultant who liquidates a company but continues providing substantially the same IT services through a newly incorporated entity would, in principle, fall within the scope of the rule. However, if that person were to start an entirely different business, such as a coffee shop, the previously received liquidation dividend should remain exempt from taxation.
A Rebuttable Presumption
Importantly, the anti-abuse rule does not operate as an absolute prohibition. The legislation establishes a rebuttable presumption, allowing taxpayers to demonstrate that the liquidation and subsequent activities were primarily motivated by legitimate non-tax reasons.
The parliamentary works provide the example of a person who liquidates a company in order to care for a seriously ill partner and only resumes professional activities after the partner’s death. In such circumstances, the interruption and later resumption of activities would clearly be driven by personal considerations rather than tax motives, allowing the taxpayer to rebut the presumption.
Some Observations
The concept of “same or similar activities” is not defined with great precision in the legislation and is likely to give rise to interpretational difficulties in practice.
This may be particularly relevant for professionals such as consultants, lawyers and financial advisers, whose activities often span multiple sectors and clients. Determining whether a later activity qualifies as the “same” or “similar” may prove challenging and could become a source of disputes with the tax authorities.
Furthermore, although the rebuttable presumption offers an important safeguard in theory, the practical burden of proof should not be underestimated. Real-life situations are often far less clear-cut than the examples provided in the parliamentary works. It remains to be seen how the tax authorities and the courts will assess cases in which both legitimate business considerations and tax motives coexist.
Consequently, while the new rule is intended to combat perceived abuses of the liquidation reserve regime, its broad wording and the uncertainties surrounding its application are likely to generate considerable discussion and litigation in the years ahead.
