Until recently, capital gains on shares were fully exempt from corporate income tax, provided that certain conditions are fulfilled. The most essential condition is the "subject to tax condition" as applicable in the dividend deduction rules, meaning that the distributing company has to be a legal entity subject to a normal corporate income tax regime. Other specific rules apply as well and need to be verified on a case-by-case basis (for instance, dividends distributed by offshore companies, as a general rule, do not qualify for the exemption).
However, the capital gains exemption rules did not provide a minimum detention period for the shares. As a result, Belgium has been a popular tax haven for international transactions seeking a short term tax free realization of capital gains on shares.
The new rules on the capital gains exemption on shares still include the same conditions, but provide as a new and additional condition that the shares of the subsidiary must be held by the selling company for an uninterrupted period of at least one year, in order to benefit from the tax exemption.
In case the one year period is not fulfilled, and provided that the concerned shares in principle do qualify for the exemption, the capital gain will be taxable at a special rate of 25% (to be increased by the "crisis" tax, bringing the effective rate to 25.75%).
If the "subject to tax condition" is not met, the capital gain will be taxable at the normal Belgian corporate income tax rate (standard rate is 33.99%).
A special capital gains tax regime is introduced for professional trading companies.
