Are additional taxes incurred if any income generated from a real estate investment is transferred to the shareholders or partners in the relevant vehicle and can these be reduced or offset in any way?
As a general rule, dividends paid by Belgian companies to corporate entities are subject to a 30% withholding tax.
Under the EU Parent-Subsidiary Directive, as implemented in Belgium, no withholding tax is payable on dividends paid by a Belgian company to another EU company, provided that:
This regime also applies to dividends paid by a Belgian company to a parent company resident in a country with which Belgium has signed a bilateral tax treaty or any other agreement which provides for the exchange of information between the two countries.
Where the minimum holding period of 12 months has not yet expired, the distributor of the dividends must provisionally retain the withholding tax theoretically due on the dividends and the beneficiary must sign a declaration that the participation will be held for at least 12 months. If the beneficiary does not comply with this declaration, the withholding tax must be paid to the tax authorities. If the declaration is complied with, the amount withheld can be paid to the shareholder.
The withholding tax rate may also be reduced under an applicable double-taxation treaty if the dividends are paid to foreign companies that are resident of a treaty state, or also under domestic legal provisions in some cases. Domestic law also provides for reduced rates in specific circumstances (eg 15% on dividends distributed by regulated real estate companies (B-REITs) and specialized real estate investment funds (B-REIFs) that invest at least 80% of their real estate directly or indirectly in immovable property located in the EEA that is exclusively or mainly used or destined for residential care units adapted to healthcare).
Domestic law provides for reduced withholding tax rates which may apply to the distribution to individuals of dividends (other than share buybacks or liquidation dividends) related to newly registered shares that were issued after 1 July 2013. These rates apply provided that the following conditions are satisfied:
The reduced withholding tax rates will only apply to dividends paid out at the time of the profit distribution related to the second financial year following that of the contribution. Any such dividend distributions will be subject to a 20% withholding tax. Dividend distributions paid out at the time of the profit distribution related to the third or subsequent financial years following the financial year of the contribution, will be subject to a 15% withholding tax.
A company is ‘small’, if it stays below at least two of the following three thresholds during two consecutive financial years:
In the case of a group of affiliated companies (eg a holding company with operating subsidiaries), the above criteria must be applied to the group as a whole. A parent company may opt to apply the 'simplified method', whereby the totals of annual turnover and balance sheet of all the related companies for assessment purposes are added up. The thresholds of annual turnover and total balance sheet are then increased by 20%.
Small companies may set up a liquidation reserve in order to be able to distribute dividends at a reduced rate. Such a reserve can be formed through the attribution of (part of) the profits after tax to a liquidation reserve. This attribution is subject to a separately assessed tax of 10% at company level. If the liquidation reserve is distributed before the company is liquidated and within five years of the creation of the reserve, a withholding tax of 20% will be due (effectively bringing the total tax to 30%). If the distribution takes place after more than five years from the creation of the reserve, a withholding tax of 5% will be due (effectively bringing the total tax to 15%). No withholding tax is due if the liquidation reserve is distributed upon liquidation of the company.
