• Taxation of cash flows generated by LBO/MBO

Taxation of cash flows generated by LBO/MBO

09 mei 2019

The taxation of cash flows generated by LBO/MBO is a complex matter. BDO was invited to attend an interesting presentation by Tetra Law explaining the different aspects that have to be taken into account when applying this structure.  A short introduction of the different aspects in this matter is given below, the entire presentation can be found (here).

First of all, deduction of interest payments on loans received is discussed. Basic principles that need to be met in order to use this instrument (art. 49 CIR 92) and tariffs (art. 54 CIR92) are discussed together with some exceptions like payments towards nonresidents (exotic payments) and payments towards physical persons.

Furthermore, principles and limitations that come with financial assistance are considered, and more specifically the use of assets of the target to finance the  operations. This is discussed in view of the different company forms.

The financing of a super dividend from OpCo towards HoldCo is a way to reduce the equity of the OpCo and facilitate the sale of the entity. The bank issues an investment credit towards the OpCo, where the OpCo afterwards issues a super dividend towards the HoldCo. There cannot be an interdependence between the loan and the continuity of the OpCo. Another important instrument is the distribution of management fees and ‘Tantièmes’ when the board is active in the company. At last, fiscal consolidation and post (pre) deal structuring is brought to the attention.