Belgium Launches Attractive Carried Interest Tax Regime to Boost Fund Activity

Belgium has taken a major step towards strengthening its position as a fund-friendly jurisdiction by introducing a dedicated tax regime for carried interest—bringing long-awaited clarity and competitive rates to private equity and M&A professionals.

With the publication of the Program Law on 29 July 2025, Belgium now offers a 25% flat tax on qualifying carried interest income, positioning itself attractively alongside other leading European markets.

Until now, Belgium lacked a specific tax framework for carried interest, leaving fund managers and M&A professionals exposed to inconsistent and often aggressive interpretations, ranging from tax-exempt capital gains to professional income taxed at progressive tax rates of up to 50% (+ local taxes). This uncertainty was a clear deterrent to developing more fund activities in Belgium.

The new regime addresses these concerns head-on, offering legal certainty, tax efficiency, and alignment with international standards, making Belgium more attractive for fund structuring, talent recruitment, and capital deployment.

Scope of the new tax rules

• Applies exclusively to "carried interest" distributed by a "carried interest vehicle" – defined as an Alternative Investment Fund (AIF) established in Belgium, the EU, or comparable non-EU jurisdictions
• Income must reflect disproportionate returns received by fund managers in comparison to passive investors.
• Applies regardless of how income is distributed (e.g. dividends, capital gains, repurchase of shares).

Excluded: Non-AIF fund structures (e.g. sweet equity in portfolio companies) and management incentive plans (e.g. qualifying stock options schemes) fall outside this regime and remain taxed as before.

Tax Treatment

• Carried interest is now qualified as movable income (non-professional income), taxed at a flat rate of 25%.
• For Belgian resident individuals, the carried interest tax will be levied through a final withholding tax—meaning no social security contributions or local taxes.
• Legal entities remain taxed under existing corporate tax rules (with additional limitations on establishing a so-called “liquidation reserve”).

Eligible Taxpayers

• The regime only applies to individuals, not to companies holding carried interest rights.

Timing

• Effective immediately for any carried interest income paid or allocated from 29 July 2025 onward.
• Importantly, existing carried interest schemes are not grandfathered – unless the relevant fund is already in liquidation.

For Private Equity investors, fund managers, and M&A professionals considering (re)structuring their fund platforms or management packages in Belgium, this new carried interest regime offers:

• Clarity where ambiguity once reigned,
• Tax competitiveness versus neighboring markets,
• Opportunity to enhance fund performance and team retention.

Want to explore how this can benefit your structure? Reach out to our M&A tax team to assess tailored planning opportunities under the new framework.