Programme law finally approved: what are the tax implications?

6% VAT reintroduced for property developers

Sales (after demolition and reconstruction) were, until recently, only eligible for the reduced 6% VAT rate under a transitional regime until 30 June 2025, and only for projects for which the environmental permit was applied for before 1 July 2023.

As of 1 July 2025, the 6% VAT rate will once again apply to all projects, regardless of when the environmental permit was requested. This applies specifically to VAT that becomes due from that date onwards, in the following cases:

• The buyer uses the home as their sole and own residence, and the habitable surface does not exceed 175 m²;

• Or the buyer rents out the property for social rental;

• Or the buyer rents out the property long-term to a natural person, and the habitable surface does not exceed 175 m².

Since retroactive application of this rate is legally not possible (and the programme law only enters into force upon publication in the Belgian Official Gazette), the Minister of Finance has provided for a tolerance. Invoices issued from 1 July 2025 onwards may already apply the 6% VAT rate.

Note: The mandatory 111/3 declaration cannot currently be submitted. To benefit from the tolerance (which applies between 1 July 2025 and the date of publication in the Official Gazette), the following mandatory statements must be included in the sales agreement and/or deed:

"Application of the 6% VAT rate for the demolition and reconstruction of a dwelling in accordance with item XXXVII, § 3, second paragraph, 1°, (a), (b), or (c) of Table A of the Annex to Royal Decree No. 20 of 20.07.1970 on VAT, as included in Article 53 of the Programme Law (Chamber Document No. 56 0909/001).”

"The declaration referred to in the aforementioned item XXXVII, § 3 will be submitted without delay via MyMinfin as soon as the option becomes available.”

21% VAT on fossil fuel heating systems

The planned increase from 6% to 21% VAT for the installation of a heating system in a property older than 10 years will only come into effect after the law is published in the Belgian Official Gazette (and not as of 1 July 2025).

Furthermore, a tolerance will apply for those who have signed a contract for the supply and installation of a heating system before the law is published. In such cases, the reduced VAT rate of 6% can still be applied.

Dividends from ‘small’ companies

Dividends are generally subject to the standard withholding tax rate of 30%. However, this rate can be reduced in two specific situations:

VVPRbis

These are dividends paid by small companies whose shares were acquired through cash contributions since 01/07/2013. Dividends granted or allocated from the profit distribution of the third financial year or later after the year of the contribution may benefit from a reduced withholding tax rate of 15%. This regime remains unchanged.

Liquidation reserve

Small companies that set up a liquidation reserve pay a 10% anticipatory levy when the reserve is established. After five years, the reserve can be distributed with a 5% withholding tax, resulting in a total tax burden of 13.64%.

This regime will be modified as follows:

• The waiting period is shortened from 5 to 3 years.

• The withholding tax increases from 5% to 6.5%.

• Result: a total tax of 15%, equal to the VVPRbis regime.

• For existing liquidation reserves, companies can choose: either 6.5% after 3 years, or 5% after 5 years.
  This change takes effect upon publication of the Programme Law in the Official Gazette.

Note: The FIFO principle must be respected. For example, if you want to distribute liquidation reserves from financial year 2021, but still have reserves from 2020, you must distribute the 2020 reserves first.

Tightened DRD conditions

The DRD (Dividend Received Deduction) regime ensures that dividends paid by a subsidiary to its parent company are not taxed a second time. This deduction applies when the parent company holds at least 10% of the shares in the subsidiary, or when the participation has a nominal acquisition value of at least €2.5 million. The same condition applies for the exemption of capital gains on shares for companies.

Contrary to what was stated in the coalition agreement, the nominal threshold of €2.5 million will be maintained. However, large companies may now only benefit from the DRD deduction if the participation qualifies as a financial fixed asset. This additional requirement does not apply to small companies, defined as companies that do not exceed more than one of the following thresholds:

• 50 employees

• €11,250,000 turnover

• €6,000,000 balance sheet total

This change will apply as of assessment year 2026.

Other tax measures

• Introduction of Carried Interest qualification: This compensation for fund managers who achieve certain results will now be classified as investment income and taxed at 30%.

• Exit tax: When a company emigrates from Belgium, this will now be treated fiscally as a liquidation — both for the company itself and for the shareholders, who will be taxed on a deemed dividend.

• Tax audit: Companies and individuals undergoing a tax audit will no longer face a 10% tax increase for a first-time, good-faith error.

• Tax regularisation: Tax regularisation of income has not been possible since 1 January 2024.
  A new (fifth) permanent regularisation procedure (EBA quinquies) is now being introduced. The applicable rates are the standard tax rate increased by 30%, or 45% for tax-evaded capital that is legally time-barred.