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The federal government has approved a draft program law which contains a first series of tax measures included in the government agreement. Other measures will be incorporated in thematic laws later. The draft law will be sent to the Council of State for legal vetting and subsequently submitted to Parliament for adoption. It is expected that the program law will be adopted and published in the Belgian Official Gazette before 1 July 2025.

This news item focuses on the income tax measures. Separate news items cover indirect tax measures and the changes to tax procedures.

While the federal government already announced the conversion of the deduction into an exemption (see: Coalition agreement of new Belgian Federal Government - ÀÖÓ㣨Leyu£©ÌåÓý¹ÙÍø Belgium ), this will be covered in later legislation. The current draft program law already changes the terms of the regime. The minimum participation requirement of 10% remains, as well as the alternative acquisition value threshold of EUR 2,5mio. However, in the latter case, the participation must also be recorded as a financial fixed asset in compliance with accounting law, if the dividends-receiving company is not a small company. The same changes apply for the exemption from withholding tax for qualifying non-residents. The changes will apply as from assessment year 2026 (in respect of withholding tax as from 1 July 2025). Any change to the closing date of the financial year as from 3 February which is not justified by other motives than avoidance remains without effect.

The dividends-received deduction will also be applicable to the received group contribution. Recently, the Court of Justice of the EU has ruled in the case of John Cockerill that the current prohibition violates the parent-subsidiary directive (see: Euro Tax Flash from ÀÖÓ㣨Leyu£©ÌåÓý¹ÙÍø's EU Tax Centre. This change will already apply as the 10^th day following the publication of the program law in the Belgian Official Gazette.

In respect of DBI-beveks/RDT-sicavs, a separate tax of 5% will be due on the exempt part of capital gains realized on shares in such investment companies (excluding the private privak). The credit of withholding tax on dividends will also only be allowed if a minimum salary is paid to the business leader (cfr. condition for reduced corporate tax rate of 20% on first EUR 100.000 of income). The changes will apply as from assessment year 2026. Any change to the closing date of the financial year as from 3 February which is not justified by other motives than avoidance remains without effect.

Existing limitations on the use of the carry-forward and on the carry-forward in time will be abolished. The prohibition to combine the investment deduction with regional aid will also be abolished. These changes will enter into force as from 1 January 2025.The increased thematic deduction of 40% for investments in energy efficiency, renewable energy, carbon emission-free transport, environment-friendly investments and supporting digital investments will also be available for large companies (previously 30%) as from assessment year 2027.

Plug-in hybrid vehicles costs will be deductible for a longer period.

Fossil fuel costs can be deducted at 50% until 31 December 2027.

The fake plug-in hybrid regime will also apply to vehicles with a CO2 emission of more than 75 g/km if the emission is calculated according to the Euro 6e-bis norm or a later norm.

For individual income tax, the current minimum deduction of 75% for vehicles purchased before 1 January 2018, will decrease by 5% annually starting in assessment year 2027, reaching 50% by assessment year 2031.

A specific individual income tax regime will be introduced in order to provide legal certainty on the nature of the income. Carried interest will be taxable as movable income at a (withholding tax) rate of 25%.

Carried interest will be generally defined as the part in the profits of a Belgian or foreign alternative institution for collective investment (AICB/OPCA) received by an individual who exercises activities, directly or indirectly, for the AICB or its manager (regardless of whether the profit is distributed via dividends, interest, capital gains or redemption or liquidation boni), in excess of the return on investment for a non-carried interest beneficiary.

The new regime will enter into force as from the date of publication of the program law in the Belgian Official Gazette and will be applicable on income attributed as from that day. Exceptions include income from shares acquired through exercised stock options already taxed at grant (cfr. stock option law) and income from an AICB/OPCA already in liquidation.

The liquidation fiction (deemed dividend) will also apply to shareholders, following transactions such as the transfer of seat and reorganizations resulting in the transfer of assets abroad. The deemed dividend, after deduction of corporate tax, is taxable at a rate of 30%. In the case of a corporate shareholder, the dividends-received deduction can apply. Double taxation (in case of a later effective dividend) will be avoided. Since withholding tax cannot be levied, the deemed dividend must be declared in the tax return. Shareholders must receive individual statements; otherwise, the company will face the secret commissions tax. For transfers within the EEA, payment can be immediate or spread. The new exit tax enters into force on 1 July 2025.

For the liquidation reserve, a distribution at a reduced withholding rate will be possible after 3 years at 6,5%, while a distribution after 5 years remains taxed at 5%. However, for liquidation reserves created after 31 December 2025, an early distribution within 3 years will be subject to a 30% withholding tax rate, instead of the current 20% within 5 years, in addition to the taxation at 10% at the time of creation.

For the VVPRbis, the reduced withholding tax rate of 20% on dividends from profit distributions of the second financial year following contribution will be phased out. It will only apply to dividends from contributions made until 31 December 2025.

The changes will be applicable to dividends distributed as from 1 July 2025.

The expat regime will be made more attractive. The part of the expenses proper to the employer will be limited to 35% instead of 30% and its absolute ceiling of EUR 90.000 will be abolished. The minimum salary will also be decreased from EUR 75.000 to EUR 70.000. These changes will enter into force as from income year 2025 (AY 2026).

• Mortgages: Abolition of deduction of interest on debt for other than own dwelling â€� as from AY 2026, also for current debt;
• Tax benefits: Abolition of several tax benefits, such as the exemption of capital gains on business vehicles and the exemption for social liabilities and reduction of the tax reduction for donations from 45% to 30%;
• Flexijobs: increase of the exemption from EUR 12.000 to EUR 18.000 (and to be indexed) â€� as from income year 2025;
• Alimony payments: gradual reduction of the deduction and corresponding taxation from 80% to 50%, starting as from 2025 - no deduction and corresponding taxation if paid outside EEA, also as from 2025;
• Allowable means of existence for tax dependent children: the exclusion for income from student labour will be doubled to EUR 6.840 (amount for AY 2026);
• Indexation: freezing of indexation of tax expenses at level of AY 2025 up until AY 2030 (with some deviations, e.g. for pension savings);
• Tax credits: Doubling of tax credit for own means (self-employed) â€� as from AY 2026.

If you have any questions on the above measures and how these impact your tax position and compliance obligations, do not hesitate to contact your trusted ÀÖÓ㣨Leyu£©ÌåÓý¹ÙÍø tax advisor.