Belgium

Federal Government Agreement 2025

On 31 January 2025, Belgium presented a new federal government agreement announcing major tax policy changes that will affect entrepreneurship and competitiveness. Some key highlights: 

• Competitiveness: labour costs for low and middle incomes will be reduced, but the impact might be mitigated due to updated compensation practices related to certain tax shift measures that could affect employee net pay. The phased implementation requires careful analysis regarding overall cost & competitiveness. 

• Investor Attractiveness: changes to taxes on capital gains and carried interest as well as incentives for eco-friendly investments and measures to encourage people to invest their savings in the economy may prompt a review of investment strategies. 

• International Talent & innovation: an improved expat regime aims to attract global talent, crucial for fostering innovation. The R&D sector may benefit from announced reduced administrative burdens and an intention for a more stable legal framework. 

The announced reforms aim to balance the budget through structural changes and contributions from various stakeholders. 

Several of these measures have been enacted via the Program Law of 18 July 2025. In addition, further provisions are included in the ‘Law containing various provisions’ dated 18 December 2025. The draft legislation to introduce a capital gains tax on financial assets is scheduled for parliamentary debate in early 2026, alongside the proposed personal income tax reform. The remaining tax measures of the federal government agreement will be enacted through separate legislation at a later stage.

Program Law of 18 July 2025 (Official Gazette of 29 July 2025)

In July 2025, a Program Law has been adopted by Belgian Parliament aiming to implement a first wave of tax measures as foreseen in the federal budget agreement 2025, such as: 

• Participation exemption regime (so called ‘dividends received deduction’ or ‘DRD’): for companies claiming the participation exemption on the basis of an investment of EUR 2.5 million (because the participation does not reach 10%), the Program Law introduced an additional requirement from tax year 2026: the participation needs to qualify as a financial fixed asset for the investor, unless the investor is a small company. 

• Exit tax: this new tax introduces the concept of a ‘deemed dividend’ (representing the latent capital gains) for shareholders when a company emigrates or restructures in a way that transfers assets abroad. Shareholders will be taxed on this deemed dividend as if they received an actual dividend, subject to applicable personal or corporate income tax rates. A tax credit mechanism is available to prevent double taxation when these gains are eventually realised and distributed. 

• Liquidation reserves and VVPRbis regime: alignment of both regimes with, for the liquidation reserve, a reduced waiting period from 5 to 3 years and a new rate at 6.5%. The Program Law provides for a regime depending on the date of creation of the reserve and the date of distribution. For the VVPRbis regime, the rate of 20% applicable to dividends allocated or distributed during the second financial year after the cash contribution would gradually phase out. 

• Carried Interest: the Program Law introduced a new regime for individuals or related persons receiving carried interest from Belgian/foreign AIFs (alternative investment funds). The income is treated as investment income, taxed at a flat 25% rate (via withholding & income tax). This measure applies to carried interests paid or attributed as from 29 July 2025. 

• Tax on securities accounts: a new anti-abuse measure aiming to prevent taxpayers from circumventing the tax on securities accounts through artificial conversions or transfers of financial instruments has been introduced (with a rebuttable presumption of abuse for conversion or transfer that surpasses a certain threshold). 

• The reduced VAT rate on demolition-reconstruction projects of residential houses has been reinstated and extended. Real estate developers will be able to apply the 6% VAT rate for demolition-reconstruction projects on the sale of residential houses. This applies to sales to private individuals who will live in the residential house (as their only residential house) and to investors who rent the residential house to private individuals who will live in it, provided the surface does not exceed 175m². This would be a significant improvement compared to the old rules. 

• VAT on the installation of fossil fuel boilers has increased to 21%. 

• The airplane tax has increased from EUR 2 to 5 for flights of more than 500 km in the EEA. 

• Tax procedure: The 10% tax increase for a first-time offense committed in good faith has been waived. The good faith is presumed, except in case of an ex officio assessment. 
• A federal tax amnesty regime has been reintroduced. 

2026 Budget agreement

On 24 November 2025, the Belgian government reached a budget agreement, setting a multi-year path to meet the European expenditure rule by 2029. This plan involves 60% spending cuts and 40% new revenue streams. A projected EUR 9.2 billion is earmarked for 2029, increasing to EUR 10 billion by 2030. The funding will come from salary indexation adjustments, targeted VAT hikes, eco-taxation, and contributions from those with “the broadest shoulders”, alongside social initiatives.

The 2026 budget agreement contains, amongst others, the following tax measures (still to be implemented in Belgian law):

• Personal income tax reform: a reduction in taxation initially set for 2029 will partially take effect in 2028.
• VAT and indirect taxes: instead of a general VAT increase, targeted adjustments will apply.
  • Rates remain at 6%, 12%, and 21%, but some goods and services will move from 6% to 12%, including hotel stays, sports subscriptions, entertainment (excluding culture), and takeaway services. Pesticides will face a 21% rate.
  • Excises: increases on residential gas, heating oil, gasoline, and diesel will indirectly raise VAT, while electricity excises will see a smaller reduction
  • VAT rate on non-alcoholic beverages in the horeca sector decreases from 21% to 12%.
• Stricter rules for management companies:
  • The withholding tax rate in the VVPRbis and liquidation regimes will rise from 15% to 18%.
  • Expanded income definition: movable income will now factor into eligibility for social premiums/allocations.
• The securities account tax will double from 0.15% to 0.30%.
• A (new) bank tax.
• An insurance tax.
• Increased tax on short flights from EUR 5 to EUR 10 in 2027, with further increments in 2028 and 2029.
• A EUR 2 levy on small parcels from non-EU countries.
• Anti-fraud measures: establishment of a national financial prosecutor’s office.

Law of 18 December 2025 containing various provisions (Official Gazette of 30 December 2025)

From a corporate income tax perspective, this law contains the following key measures:

• The DRD SICAV (“SICAV RDT” / “DBI-bevek”) regime remains applicable, but a 5% tax will be levied on the full amount of exempt capital gains, realized from selling shares of these funds to third parties. In addition, in order to offset the withholding tax on dividends from such an investment, a company investing in a DRD SICAV needs to comply with the minimum remuneration to be allocated to at least one company director. This regime will be applicable as of tax year 2026.
• The law removes the discrimination of applying the group contribution regime in combination with the DRD regime.
• The investment deduction regime is updated as follows for assets acquired on or after 1 January 2025 (except for the final point):
• unlimited carry-forward of investment deductions;
• removal of the restriction on the annual maximum amount of carried-forward investment deduction that can be offset;
• removal of the prohibition on combining state aid for regional purposes;
• harmonization of increased thematic investment deduction rates (energy, mobility, environment) at 40%, applicable to both small and large companies (as from tax year 2027).
• Hybrid company cars: the definition of “false hybrid cars” is broadened by including cars with CO₂ emissions over 75 gr/km (based on the new Euro 6e-bis standard). This rule is effective as of 1 January 2025 and applicable as from tax year 2026 relating to a taxable period beginning on or after 1 January 2025.
• Tax simplification (for companies and individuals): certain exemptions and advantages will be abolished, including exemptions on capital gains from company vehicles post-31 August 2025 and social liabilities exemptions for remunerations paid or attributed after 30 September 2025.
• This law also provides for some tax procedure changes, effective from tax year 2023. These changes aim to reverse and simplify the procedural reforms adopted in 2022. As a result, investigation and assessment periods are currently as follows:
• 3 years for standard tax returns (no changes).
• 4 years for late or unsubmitted tax returns, or for complex tax returns as defined in the law.
• 7 years in cases of fraud, applicable to both income tax and VAT (situation as it was before the reform of 2022).

Direct simplified side stream mergers

On 16 June 2023, the “simplified side stream merger” was introduced into both the Belgian Code of Companies and Associations and the Belgian Income Tax Code. However, even when all conditions were fulfilled, the transaction could not entirely take place tax neutrally due to ‘imperfections’ in the corporate income tax regime. Despite the fact that no new shares are issued, the law of 30 October 2025 (Official Gazette of 24 November 2025) clears the hurdles for ‘real’ tax neutrality for income tax and registration duty purposes, at least for direct simplified side stream mergers.

Pillar 2 developments

Law of 19 December 2025 (Belgian Official Gazette of 31 December 2025)

The law of 19 December 2025 introduces some technical amendments to the Pillar 2 Law of 19 December 2023, without changing the calculations:

• Technical Clarifications: the law does not alter the calculation of the minimum tax but clarifies certain definitions such as “group” and “joint venture”. In addition, the law explicitly states that joint ventures and joint venture affiliates are in scope of the Belgian QDMTT.
• Appointment of a Group representative:
• If the group has multiple Belgian entities, one of them should be appointed as the representative, responsible for the compliance requirements for the Belgian QDMTT and Belgian UTPR, including the actual payment.
• When no notification is done, the general representative will be, by default, the entity filing the QDMTT return or GloBE Information Return. If no return is filed, the representative is considered (in this order): 1) the Belgian Ultimate Parent (“UPE”) Company, 2) if there is no Belgian UPE, the Belgian holding company having an ownership interest in all Belgian companies, 3), in case the first and the second situations do not apply, the Belgian entity with the highest total balance (based on the statutory financial accounts).
• The appointment should be communicated on the respective e-platform.
• Reduction of assessment period: the period for tax audits and assessments is reduced from 10 to 6 years, except in cases of fraud.
• Tax returns vs. information return: the proposed changes distinguish the Belgian QDMTT return and the Belgian IIR/UTPR return which qualify as tax returns and for which assessment notice(s) will be issued (jointly in case of multiple Belgian entities for the QDMTT and UTPR), from the GloBE Information Return (GIR) which does not qualify as a tax return but an information return.

QDMTT return: extended filing deadline

On 17 November 2025, Belgium announced an extension of the deadline to file the Qualified Domestic Minimum Top-up Tax (“QDMTT”) return to 30 June 2026 for taxpayers with a financial year which:

• started at the earliest on 31 December 2023, and

• ended at the earliest on 1 January 2024 and at the latest on 30 June 2025.

Pillar 2 Circular Letter

On 22 October 2025, the Belgian tax authorities issued the Circular Letter 2025/C/68 providing extensive administrative guidance on the Belgian minimum tax regime for multinational enterprise groups and large domestic groups. It provides detailed administrative interpretations, calculation methods, examples, and operational clarifications.

Recovery of withholding tax on investment income and wage withholding tax

The law of 19 December 2025 clarifies the procedure for reclaiming withholding tax on investment income and wage withholding tax, aiming to end the legal controversy surrounding this procedure. The law explicitly states that a reclaim must be initiated by filing a formal administrative claim, within the existing deadlines of five or three years, depending on the case (see Articles 368 and 368/1 BITC). A transitional provision ensures that court actions filed before this law’s entry into force remain admissible. This measure enters into force on 30 December 2025.

Flemish fiscal regularization

The program decree for the Flemish budget 2026 provides a new scheme for the fiscal regularization of evaded Flemish inheritance and registration taxes.

The Flemish government has opted for a temporary regularization possibility from 1 January 2026, to 31 December 2029. Only offenses committed before 1 July 2025 are eligible for regularization.

The amounts not barred by the statute of limitations for tax purposes that have not been subjected to inheritance tax and are subject to a regularization declaration for inheritance tax are subject to a flat-rate regularization levy of 40% for an acquisition in the direct line or between partners or 75% for an acquisition other than in the direct line or between partners.

The amounts not barred by the statute of limitations for tax purposes that have not been subjected to registration tax and are the subject of a regularization declaration for registration tax are subject to a flat-rate regularization levy of 25%.

The amounts barred by the statute of limitations for tax purposes that have been subjected to either inheritance tax or registration tax and are the subject of a regularization declaration, a flat-rate regularization levy of 40% applies if the declaration is submitted in 2026, and a rate of 42%, 44%, or 45% if the declaration is submitted in 2027, 2028, or 2029, respectively.

The new scheme provides for a deduction option when declarants, in addition to submitting a regularization declaration for unpaid regional taxes, have already paid federal regularization levies.

Draft law containing various tax provisions

This draft law, which is currently pending in Parliament, aligns the Belgian Income Tax Code with the revised provisions in the Civil Code regarding the qualification of immovable goods.

Additional changes include, among others, technical corrections to various indirect tax codes.

New capital gain tax on financial assets

Capital gains on financial assets accrued as of 1 January 2026, will become taxable from that date, if they fall in the scope of the normal management of private estate:

• capital gains realized on financial assets (financial instruments, some insurance contracts, crypto assets and liquidities) will be taxed at 10% where they exceed EUR 10,000 (possible carry forward of maximum of 1,000 EUR/annum for maximum 5 years).
• capital gains realized upon a sale of shares by an individual who alone or together with his close relatives controls the acquiring company would be taxed at 33% (so-called “internal capital gains”).
• capital gains realized upon a sale of shares by an individual who holds 20% of the shares of the company would be exempt up to EUR 1 million and then taxed at graduated rates from 1.25% up to 10% (“substantial shareholding”). Where it comes to the disposal of a substantial shareholding in a Belgian tax resident company to a non-EEA company, the rate is 16.5%.

Although the new capital gain tax legislation is expected to be approved by Parliament in early 2026, it will take effect on 1 January 2026 (except for the withholding tax). A transitional provision has also been foreseen.

Proposed personal income tax reform

A draft bill has been introduced in Parliament in January 2026, bundling key measures from the government agreement into a package aimed at making work pay more. It also includes provisions to simplify tax rules and eliminate ambiguities.

As part of these measures, the government aims to reduce the pressure on gross wages for employees and company directors by limiting the conversion of gross wages into benefits in kind to a maximum of 20% of the annual gross salary, effective from tax year 2027 (income year 2026):

• 20% limit – what is it about? The draft legislation aims to limit the use of lump-sum benefits in kind as part of employees’ remuneration to a maximum of 20% of the annual gross wage. If this 20% threshold is exceeded, companies will be subject to a specific contribution of 7.5% calculated on the portion of lump-sum benefits in kind exceeding the limit. This specific contribution will be treated as a disallowed expense for the company.
• Calculating the excessive lump-sum benefits. Excessive lump-sum benefits will be assessed at the company level, not on an individual basis. Companies must determine whether the total amount of lump-sum benefits in kind provided to all employees exceeds 20% of their combined gross remuneration. Only the excess benefits – that is, the amount exceeding the 20% threshold – will be subject to the 7.5% specific contribution.
• Impacted remuneration components. Benefits in kind taxed based on their actual value, as well as social benefits covered by Article 38 of the Belgian Income Tax Code (BITC), are excluded from the scope of the new rules. Conversely, benefits in kind taxed on a lump-sum basis under Article 36 BITC and Article 43, §3 of the stock option legislation of 26 March 1999 fall within the scope. The following benefits in kind, among others, will be subject to the 20% limit:
• company cars;
• stock options taxable at grant under the stock option legislation;
• a home made available free of charge to an employee;
• free heating and electricity;
• private use of laptops, phones, internet, or tablets;
• Company directors. It is important to note that a similar rule applies to company directors. However, the penalty differs: the 7.5% specific contribution does not apply to companies; instead, they face the loss of the reduced corporate tax rate of 20%.

Other measures include:

• A gradual increase in the tax-free amount. The supplement to the tax-free amount for the first two dependent children will also be increased, while an indexation freeze will be applied to other supplements. Furthermore, the supplement to the tax-free amount for a single parent will henceforth only be granted to the actual single parent and no longer to parents who are cohabiting in practice.
• From tax year 2030 onwards, the calculation of the tax on the tax-free amount will no longer be based on a separate scale: it will instead be recalculated using the same rate as that of the basic tax, which represents a significant simplification.
• An increase of the minimum remuneration for company directors to EUR 50,000.
• The social integration income (“leefloon” / “revenue d’intégration”) will be included in the tax return as replacement income to better account for all sources of income.
• The benefit of the marital quotient for non-pensioners will be halved by 2029, while for pensioners, it will be gradually phased out over a 20-year period.
• A 33% tax will be introduced for pensioners who continue to work after retirement.
• An irrebuttable presumption of normal management for transactions that yield no more than EUR 2,000.
• The introduction of a specific entrepreneurial deduction for self-employed individuals without a company (in a primary or secondary capacity).
• The abolition of the tax surcharge for insufficient advance tax payments for self-employed individuals without a company.
• The tax regime for copyrights will be re-extended to include IT developers.
• A reduction of the special social security contribution to make it “single-proof”. For a single person, this would result in a maximum net gain of EUR 350 per year.
• An increase in the work bonus in 2026 to support the lowest wages.
• PhD students who are not subject to income tax will be excluded from the tax credit for dependent children, as is also the case for taxpayers who benefit from treaty-exempt income that is exempt without progression clause.
• Abolition of the tax reduction for unemployment benefits.
• Reduction of the tax reduction for pensions.
• An increase in the number of voluntary overtime hours that can be performed tax-free.
• A lowering of the age limit for young athletes to benefit from a favorable tax regime.