A Program Law containing a first wave of the Arizona coalition’s tax measures has been adopted by Parliament on 18 July 2025. Most of the measures discussed below will enter into force immediately as from publication of the Program Law in the Belgian Official Gazette.
Here's a breakdown of the key tax changes that impact business and investment strategies going forward:
Specific tax regime for carried interest received by fund managers
Carried interest is a share of the profits earned by investment fund managers—typically in private equity, hedge funds, or venture capital—that serves as a performance-based compensation. Historically, carried interest lacked a clear tax framework in Belgium, leading to significant legal uncertainty and frequent disputes between taxpayers and the tax authorities.
Under this new regime, the “disproportionate return” comprised in carried interest is taxed at a flat personal income tax rate of 25% (subject to withholding tax), irrespective of its form (i.e. regular dividend distribution, capital gain on carried interest rights, share buy-back or liquidation proceeds). The “proportionate” return remains subject to the regular income tax regime depending on its form (dividends, capital gains…).
The new regime is rather limited in scope as it only applies when a fund manager (physical person) receives carried interest directly from an investment fund qualifying as AIF. It does not apply if carried is received by a personal service company or a management pooling vehicle. It also does not apply to carried interest structured via stock options under the Belgian “Stock Option Law” (which remain subject to upfront taxation).
Funds setting up carried interest arrangements and fund managers participating therein should therefore carefully consider the available structuring options.
For a more elaborate analysis and key takeaways of the new carried interest regime, see our detailed briefing on the new carried interest regime.
A new exit tax on cross-border migrations and reorganizations may confront shareholders with a “dry tax charge”
A new exit tax will apply if a Belgian company transfers its place of effective management abroad or is involved in an outbound cross-border reorganization (e.g. a cross-border merger). In such case, the shareholders will be deemed to have received a “liquidation dividend” resulting from the latent gains on the company’s assets.
The exit tax does not apply if and to the extent that the assets of the Belgian company are retained within a Belgian permanent establishment. This could, however, lead to a deferred application of the exit tax if those assets are later transferred out of the Belgian establishment.
The exit tax is rather complex, difficult to apply in practice and risks creating double taxation issues for shareholders. Also, the companies involved in such transactions may face severe penalties if they do not properly inform their shareholders of the taxable amount.
The exit tax is a “dry tax charge” as it applies to transactions that do not generate cash for the shareholders, who may therefore be faced with liquidity concerns. This and other elements cause us to believe that the exit tax is not compatible with EU law in its current form.
For a more in-depth review, see our detailed briefing on the new exit tax.
The dividend and capital gains tax exemption for corporate shareholders holding a stake of less than 10% will require that the shares qualify as ‘fixed financial assets’
The Program Law tightens the requirements for the application of the participation exemption by Belgian companies. Under this exemption, qualifying dividends and capital gains on shares can be exempt from corporate income tax. To benefit from this exemption, companies generally need to hold at least 10% of the share capital of the subsidiary, or meet the minimum acquisition value threshold of EUR 2,500,000.
Companies that do not meet this 10% capital participation threshold but invoke the participation exemption based on the minimum acquisition value of at least EUR 2,500,000 must now also prove that their participation qualifies as a ‘fixed financial asset’. This requirement will not apply to “small companies”.
The concept of ‘fixed financial assets’ is factual and somewhat subjective as it requires a “durable and specific relationship” with the company in which the shares are held. The ‘fixed financial asset’ condition will therefore undoubtedly give rise to discussions with the tax authorities in some cases.
The new ‘fixed financial asset’ condition will also apply for purposes of the (partial) withholding tax exemption for dividends distributed by Belgian companies to foreign shareholders holding shares with an acquisition value of less than 10% but with an acquisition value of at least EUR 2,500,000 (the ‘Tate & Lyle’-exemption).
Companies that rely on the EUR 2,500,000 investment threshold may need to take action to preserve the dividend and capital gains tax exemption.
For more information, see our detailed briefing on the ‘fixed financial asset’ condition.
The reduced withholding tax regimes for distributions by “small companies” have been aligned
Two specific Belgian withholding tax regimes allow that dividends distributed by “small companies” may benefit from a reduced withholding tax rate (compared to the standard 30% rate), provided that the dividend is paid out of reserves that have been retained by the company during a minimum waiting period. These are the so-called “VVPRbis” regime and the withholding tax regime applicable to dividends distributed out of the “liquidation reserve”. The Program Law aligns the waiting periods for dividends to benefit from the 15% reduced rate under both regimes.
A cap on employer social security contributions reduces labour cost for top salaries
Employer social security contributions due on salaries of employees amount to approximately 27%. Such employer social security contributions are currently calculated on uncapped remuneration.
The Program Law introduces a cap on employer social security contributions for base salaries above a certain quarterly threshold. No employer social security contributions would be due on remuneration exceeding this threshold.
The quarterly threshold will need to be fixed by Royal Decree. In this respect, the Minister of Social Affairs and Public Health indicated that the cap will be set at EUR 85,000 per quarter for 2025-2026, and will decrease to EUR 67,500 per quarter from 2027. These amounts will be subject to indexation.
Even if the cap will be set at a high level, companies may need to review their remuneration policy in order to make optimal use of the cap for their most senior executives. This may include an opportunistic reassessment of the pay package such as a shift of variable pay elements to “base salary”.
Taxpayers committing a first violation will be presumed to act in good faith
Currently, the standard 10% tax increase in case of a first violation committed in good faith (i.e. in case of failure to file a tax return, late filing, or an incomplete/inaccurate filing) can be waived at the discretion of the Belgian tax authorities.
The Program Law provides that, as a rule, no tax increase will apply in case of a first violation made in good faith. Additionally, a (rebuttable) presumption of good faith is established for taxpayers committing such first violation.
The importance of this change goes beyond the 10% tax increase as such. If a tax increase of at least 10% has been applied in case of a tax reassessment, the reassessed amount will constitute a minimum tax base against which (almost) no deductions or losses can be offset. The new presumption of good faith is therefore also likely to reduce the situations in which such minimum tax base may be imposed.
Introduction of a permanent regularization system for tax and social security irregularities
The Program Law introduces a permanent system for tax and social security regularizations, offering both criminal and tax immunity to taxpayers who decide to declare previous fiscal irregularities to the ‘Contact Point for Regularizations’ of the Belgian tax authorities.
For regularized taxes within the statute of limitations, the applicable regularization rate will be the standard rate plus an additional 30% points. Outside the statute of limitations, the regularization rate on the capital will be 45%. For social security contributions within the statute of limitations, an additional social security levy of 20% of the regularized professional income will be due.
Not all income can be subject to this fiscal regularization, particularly income linked to specific investigations or stemming from illegal activities.
Abusive circumvention of the annual tax on securities accounts is tackled with two new rebuttable presumptions of abuse
The Program Law introduces a new specific anti-abuse rule with respect to the annual tax on securities accounts (a tax of 0.15% on taxable financial instruments held on a securities account with an average value of EUR 1,000,000 or more).
In particular, the conversion of demat securities into registered securities (which are not taxable) and the “splitting” of accounts (i.e., transferring securities to other accounts to drop below EUR 1,000,000) will be presumed abusive and will automatically be reported by the financial intermediary to the Belgian tax authorities.
Such conversions and splitting will furthermore not be opposable to the Belgian tax authorities (i.e., the annual tax will be calculated as if the conversion or transfer did not take place), unless the taxpayer is able to prove that the steps were not taken to reduce the tax liability.
The favourable VAT framework for demolition-reconstruction is broadened and made permanent
The reduced 6% VAT rate regime for the demolition-reconstruction of private dwellings is reintroduced permanently and broadened. Supplies as from the publication date of the Program Law in the Belgian Official Gazette will be eligible for the reduced rate of 6%, regardless of the date of the building permit, subject to certain conditions. Supplies between 1 July and the publication date of the Program Law would also be eligible for the reduced VAT rate, based on an administrative tolerance announced by the Minister of Finance.
In addition, certain VAT rates will be aligned with environmental priorities, eliminating reduced rates on non-eco-friendly products and incentivising investments in green energy (such as the increase of the VAT rate on coal from 12% to 21% and on fossil fuel boilers for dwellings over ten years old from 6% to 21%).
The aircraft embarkation tax is increased and simplified
The “aircraft embarkation tax” will be simplified and increased. The lowest rates of EUR 2 and EUR 4 (for longer distance flights) are harmonized and increased to EUR 5 for flights longer than 500 km. For flights shorter than 500 km, the rate remains at EUR 10.
Stay up to date: further tax measures in the works
While the Program Law already contains an important part of the Arizona coalition’s tax reform measures, several other tax measures were announced in the Federal Government Agreement of 31 January 2025 and are expected to be enacted before the end of the year. These include:
- the widely debated new 10% capital gains tax on financial assets, the final details of which are still being determined at government level;
- abolition of the prohibition for holding companies to combine the receipt of an exempt dividend with the receipt of a taxable profit allocation under the Belgian tax consolidation regime (change required due to incompatibility with EU Parent/Subsidiary Directive [cf. CJEU, 13 March 2025, C-135/24, John Cockerill SA v. Belgian State]);
- changes to the Belgian tax consolidation regime to make it more flexible (the regime would e.g. become applicable to indirect subsidiaries);
- the planned conversion of the dividend received deduction regime (the Belgian implementation of the EU Parent/Subsidiary Directive “participation exemption”) from a tax “deduction” into an actual tax “exemption”;
- two measures affecting companies that invest in shares of tax exempt investment company structures: (i) a new 5% tax on the exempt part of capital gains realized upon selling such shares, and (ii) a limitation of the right to credit dividend withholding tax (see our detailed briefing on the impact of this measure, based on the legislative proposal approved by the government);
- changes to the investment deduction regime;
- changes to the expat tax regime.
