On 1 October 2014, the former Belgian government increased the withholding tax on liquidation proceeds from 10% to 25%. Under certain conditions companies were allowed to benefit from a transitional regime resulting in a 10% withholding tax rate. The current Belgium government decided to make this transitional regime permanent as of 1 January 2015, by introducing the regime of the 'liquidation reserve'.
This new regime solely applies to SME’s, and allows those companies to record their annual profit, in whole or in part, in such a liquidation reserve. The amounts placed into the reserve are subject to a distinct contribution of 10%. During the liquidation of the company, the distribution of the liquidation reserve to the different shareholders will be tax-free. It should be noted that for this purpose, certain formalities must be met.
If a dividend is paid out of the liquidation reserve, a withholding tax of 15% is due if the distribution occurs within five years after creating the liquidation reserve, and 5% if the dividend is distributed after five years.