A new tax regime for carried interest is set to be introduced in Belgium!

The carried interest mechanism generally only grants a share of the profits when the fund's performance exceeds a certain threshold (the “hurdle”). The share of the profit that exceeds this threshold will be higher for the fund managers than for passive investors (the “limited partners”). The carried interest mechanism is thus a form of riskier investment, but it offers fund managers the opportunity to participate in the positive performance of the fund and to achieve a higher return on their investment than passive investors.

To date, there was no specific tax regime applicable to the carried interest mechanism.
The Law of July 18, 2025 introduced a new tax regime for carried interest, aimed at clarifying the tax treatment of these earnings within the investment fund sector. 

Key features of this regime are outlined as follows:

1. Objective: The overarching goal of the new regime is to eliminate legal uncertainties surrounding the tax qualification of carried interest (movable income versus professional income) and to provide a competitive tax rate that aligns with neighboring countries, thereby stimulating investment fund activities in Belgium.
2. Taxpayers: The new tax regime for carried interest will only apply to individuals.
3. Tax Qualification: Carried interest received by individuals (including foreign tax residents, subject to the double taxation treaties concluded by Belgium) will be classified as movable property income, subject to a flat tax rate of 25% (without possibility of requalification as professional income).
4. Tax Base: Given that carried interest can be structured in many different ways, its definition has been deliberately kept general. Essentially, it refers to the share of the profits of a carried interest vehicle received by a taxpayer who directly or indirectly engages in activities for that carried interest vehicle or for its manager. It is not relevant whether this share is distributed in the form of interest, dividends, capital gains, etc. But the share of profit from a carried interest vehicle does not constitute carried interest for the application of the new regime when the return (of the investment made by the beneficiary of carried interest) does not exceed proportionally what an ordinary investor receives as a return on his / her investment.
5. Withholding Tax: A withholding tax of 25% will have to be levied on carried interest. The taxpayer liable for the withholding tax is in principle the debtor of that income. The legal form taken by the income debtor is irrelevant: individual, company, non-profit entity, etc., resident or not in Belgium (except for certain mutual funds).
6. Exclusion of stock options: The new regime does not apply to income (of any nature) from shares or units obtained through stock options, when the allocation of these stock options has already been taxed as a benefit in kind, in accordance with the law of March 26, 1999. This provision aims to leave existing option plans and their tax consequences unchanged. This is in line with the government agreement.
7. Entry into force: The new tax regime for carried interest will come into force on the day of its publication in the Belgian Official Gazette (i.e., July 29, 2025) and will be applicable to income paid or attributed from that date (subject to certain transitional measures).

This new regime represents a significant shift in the taxation of carried interest, aiming to foster a more predictable and equitable tax environment for fund managers. This is clearly a step forward, but there remains a challenge in calculating the taxable base.

It is essential for actors in the Financial Services Industry to understand these changes and how they may impact their investments and tax obligations moving forward. Of course, BDO can assist you in this area.

Do you need more information, concrete advice or support? Contact Bruno Orban or Nicolas Thémelin