EXTENSION LIQUIDATION RESERVE
08 April 2015
In the framework of the budgetary control at the end of March, new tax measures were announced by the Belgian government. We already informed you on the Cayman tax. However, the final word on the liquidation reserve has not yet been spoken... .
The government also decided on new tax incentives for SME’s and new companies. The following measures were announced:
- An extension of the liquidation reserve;
- An investment reserve for digital investments;
- A partial exemption of withholding tax on wages for start-up companies;
- A tax reduction for investments in new companies;
- Fiscal support for crowd-funding.
Precise technical details of these measures are not yet known.
Widening scope of the liquidation reserve
Since the extension of the regime of the liquidation reserve is to be taken into account for the allocation of the results of accounting year 2014, we would like to already inform you on this point.
The regime of the liquidation reserve implies that you can allocate the profit of the accounting year as a liquidation reserve. A 10% liquidation tax is to be paid at this stage. The liquidation reserve will not give rise to any taxes upon a subsequent liquidation. Other profits than the liquidation reserves will be taxed at 25% in case of liquidation. According to the current (initial) regime, only the profits of accounting year 2014 – fiscal year 2015 can be allocated as a liquidation reserve. The government now announces that this would be extended to the profits of accounting year 2012 and 2013.
Presumably you will be able to add the profit after taxes of accounting years 2012 and/or 2013 to the liquidation reserve in the profit allocation of accounting year 2014. At this stage 10% liquidation tax will have to be paid. Obviously, the profit of accounting year 2012 and/or 2013 may not be distributed yet.
We expect additional technical enlightenment relating to the possibility to add the profits of accounting year 2012 and/or 2013 to the liquidation reserve in the upcoming weeks. The following issues should be clarified:
- Which procedure you should follow to reallocate the result of accounting year 2012 and 2013?
- On which result the 10% liquidation tax is to be accounted on?
- How you should calculate the waiting period for a distribution out of the liquidation reserve at the reduced rate of withholding taxes?
In our opinion, the reduced tax rate of 10% instead of 25% makes it already worth to take this announced extension of the liquidation reserve into account in the profit allocation of accounting year 2014. We keep you posted on the further details of this extension, so that you will be able to make your final decision well informed.
For further information, please do not hesitate to contact your regular BDO contact person, or send an e-mail to [email protected].