Stricter conditions for the DRD from 2026: what will change?
by Julie Vantomme and Lauren Van Hecke
The DRD deduction (dividend received deduction) is an important tax incentive for companies in Belgium. It allows dividends from subsidiaries to be received tax-free under certain conditions, thereby avoiding double taxation on the same profit. Under the De Wever I coalition agreement, it was decided that the conditions for this deduction will become stricter from assessment year 2026. In particular, there will be a key change for shareholdings below 10%.
What is the DRD deduction again?
The DRD deduction allows companies to exempt dividends received from their subsidiaries from corporate tax, provided three cumulative conditions are met:
1. Participation condition
On the date the dividends are allocated or made payable, the receiving company must:
Hold at least 10% of the capital of the distributing company, or
Have an acquisition value of at least €2.5 million in the participation.
2. Holding period condition
The participation must have been held in full ownership for at least one uninterrupted year.
3. Taxation condition
The distributing company must be subject to a tax regime comparable to Belgian corporate tax.
Link with the exemption of capital gains on shares
The same three conditions also apply to the exemption of realised or accrued capital gains on shares in corporate tax.
What will change under the draft Programme Law from assessment year 2026?
The tax measures of the draft Programme Law have now been approved by the federal government.
The participation condition of at least 10% remains unchanged. However, for companies that hold less than 10%, but meet the alternative condition of an acquisition value of at least €2.5 million, an additional requirement applies. If the company is not a small company, the participation must qualify as a financial fixed asset in order to be eligible for the DRD deduction.
Important: This qualification is assessed at the time the dividend is allocated or made payable.
In practice: If a large parent company holds less than 10% of the capital but its participation exceeds €2.5 million in acquisition value, it will need to demonstrate a lasting economic link with its subsidiary in order to continue benefiting from the DRD deduction.
Entry into force
The new rule applies from assessment year 2026 (for financial years starting on or after 1 January 2025). It may therefore be important to take this into account when planning corporate tax prepayments.
Need assistance with the DRD deduction or corporate tax?
Our tax experts closely monitor all legislative changes. We are happy to assist you with:
Reviewing your participation structure
Accounting qualification of participations
Corporate tax and prepayments
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Julie Vantomme
Manager Tax julie.vantomme@vdl.be
Lauren Van Hecke
Advisor Tax lauren.vanhecke@vdl.be
Disclaimer
In our opinions, we rely on current legislation, interpretations and legal doctrine. This does not prevent the administration from disputing them or from changing existing interpretations.
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