As of 1 July 2025, Belgium will implement a new exit tax regime that will significantly alter the tax treatment of cross-border corporate mobility. This measure is part of the coalition agreement of the Arizona government and is currently pending before parliament.
The measure extends the concept of a deemed liquidation to shareholders of companies that transfer their seat or are involved in certain cross-border reorganisations. As a result of the new tax, such transactions become taxable at the level of the shareholders. According to the government, this new tax is necessary to protect the Belgian tax base. However, it is an uncommon measure that raises concerns of legal certainty, administrative complexity, and compatibility with European law.
No changes at company level
For corporate income tax purposes, the emigration of a Belgian company is regarded as a liquidation. This implies that all assets are deemed to be realised, and that corporate tax is due on any capital gains in excess of the amount of capital for tax purposes. This principle does not apply to the extent that the assets remain in a Belgian permanent establishment after the emigration.
Such rule is quite common. Since the introduction of the ATAD directive, it is even a mandatory rule for all member countries of the EU.
Consequences at shareholder level
What is much less common is the extension of tax consequences to the shareholders. Currently, the emigration of a company should not give rise to a taxable deemed dividend . That is exactly what the announced new regime would change: by introducing a deemed liquidation dividend at the shareholder level, this deemed dividend would be become taxable at the level of the shareholders as well. The scope of the new tax is not limited to just emigrations. It also covers cross-border mergers, demergers, and similar reorganisations, provided that they result in assets no longer being used or retained in Belgium.
As a result, shareholders will be considered having received a deemed dividend when the company is involved in such cross-border transaction, even if no actual distribution takes place. This deemed dividend will be taxed as an ordinary dividend (the standard rate for individuals is 30%). The measure applies broadly to individuals, corporate entities, legal persons, and non-residents alike. Exception or exemptions are applicable, such as the participation exemption for corporate entities or the distribution of liquidation reserves for individuals.
The proposal includes a deferred payment option, allowing shareholders to spread the tax liability over five years. While this may alleviate immediate liquidity concerns, the final burden remains, and the deferral option does not address the underlying legal uncertainties.
Problematic issues
It is the intention that the tax should only be applicable to the increase in value realised when the company was a resident of Belgium. However, this limitation is not clearly reflected in the currently proposed wording of the law. This raises concerns about legal certainty and possible legislative overreach.
One of the most contentious aspects of the reform is the potential for double taxation. For example, if the emigrated company subsequently distributes actual dividends derived from the same retained earnings that have been deemed to be distributed at the occasion of the emigration, shareholders may be subject to taxation on both the deemed dividend and the actual dividend. The law provides for a limited exemption to mitigate this risk, but its practical application is complex.
To benefit from this exemption, shareholders must be able to demonstrate that the subsequent dividend is derived from the same assets that triggered the initial exit tax. This will be a challenge in practice, especially given the lack of guidance on what would constitute a sufficient level of proof. Furthermore, this exemption applies only if the shareholder has not changed in the meantime.. This creates a substantial risk of economic double taxation.
An increase of the administrative burden
In addition to the above-mentioned problematic aspects of the new tax, companies would become subject to a significant amount of additional administrative obligations. In order to assist shareholders in fulfilling their tax declaration obligations, the company is required to distribute individual tax forms that specify the amount of the deemed dividend. Failure to do so could result is considerable sanctions. The government chose to apply of the so-called secret commissions tax regime in this case. This is a punitive and heavily criticised measure typically reserved for undeclared benefits. Despite the government’s stated objective of reducing red tape for businesses, this proposed rule change seems to have the opposite effect.
A broader view: EU and international perspective
The measure does also raise concerns in an EU and international context, as recognised by the Council of State.
From an EU perspective, there is an obvious fiction with the freedom of establishment. If a Belgian resident shareholder remains in Belgium, the emigration of the company does not deprive the state of its taxing rights. In such cases, the exit tax appears to serve no legitimate purpose and may constitute an unjustified restriction on cross-border mobility. The government’s argument that the measure ensures internal consistency and prevents tax avoidance. This argument is not so convincing from a legal standpoint, particularly given the absence of differentiation between resident and non-resident shareholders.
It is worth noting that the European Court of Justice has consistently ruled that exit taxes on unrealised gains must be proportionate and justified by legitimate public interest objectives. In cases where the shareholder remains taxable in Belgium, the justification for immediate taxation becomes tenuous. Furthermore, is it doubtful that the deferred payment option alleviates the problem of creating restrictions to the freedom under EU law.
Another layer of complexity arises in the international context. The unilateral nature of the deemed dividend may conflict with Belgium’s double tax treaties, which generally do not recognise such deemed dividend. This could lead to scenarios in which the other country does not grant relief for the Belgian tax, resulting in unrelieved double taxation. The risk is particularly acute for non-resident shareholders, who may be taxed in Belgium on income that their home jurisdiction does not acknowledge as having been received.
Conclusion
While the government’s desire to safeguard or increase its tax base is understandable in the current budgetary context, a tax on deemed distributions is particularly heavy and unfair, and raises serious legal, practical and economic concerns. The measure’s broad scope, together with its potential for double taxation and its incompatibility with EU law and international tax treaties, suggests that it may not necessarily withstand judicial scrutiny.
For now, companies are well advised to carefully assess the implications of this new tax for any cross-border transactions. The introduction of the new exit tax may not represent the final development in this area, on which we will keep you informed.
If you have any questions or require assistance, feel free to contact the author Thomas Gernay.
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This newsletter is not a legal advice or a legal opinion. You should seek advice from a legal counsel of your choice before acting upon any of the information in this newsletter.
