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 and 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 and innovation: An improved expat regime aims to attract global talent, crucial for fostering innovation. The research and development (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 (PIT) 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 2.5 million euros (EUR) (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 five to three 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 draft law would introduce a new regime for individuals or related persons receiving carried interest from Belgian/foreign alternative investment funds (AIFs). The income would be treated as investment income, taxed at a flat 25% rate (via withholding and 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 value-added tax (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 175 m². 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 EUR 5 for flights of more than 500 km in the European Economic Area (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):

• PIT 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 (WHT) 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 (CIT) 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, realised from selling shares of these funds to third parties. In addition, in order to offset the WHT 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.
• Harmonisation of increased thematic investment deduction rates (energy, mobility, environment) at 40%, applicable to both small and large companies (as of 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 of 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:
• Three years for standard tax returns (no changes).
• Four years for late or unsubmitted tax returns, or for complex tax returns as defined in the law.
• Seven 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 (BITC). However, even when all conditions were fulfilled, the transaction could not entirely take place tax neutrally due to ‘imperfections’ in the CIT 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 Qualified Domestic Minimum Top-up Tax (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 Undertaxed Profits Rule (UTPR), including the actual payment.
• When no notification is given, the general representative will be, by default, the entity filing the QDMTT return or Global Anti-Base Erosion (GloBE) Information Return. If no return is filed, the representative is considered (in this order): (i) the Belgian Ultimate Parent Entity (UPE), (ii) if there is no Belgian UPE, the Belgian holding company having an ownership interest in all Belgian companies, or (iii) 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 ten to six years, except in cases of fraud.
• Tax returns vs. information return: The proposed changes distinguish the Belgian QDMTT return and the Belgian Income Inclusion Rule (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 as an information return.

QDMTT return: Extended filing deadline

On 17 November 2025, Belgium announced an extension of the deadline to file the QDMTT return to 30 June 2026 for taxpayers with a financial year that:

• 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 WHT on investment income and wage WHT

The law of 19 December 2025 clarifies the procedure for reclaiming WHT on investment income and wage WHT, 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 entered into force on 30 December 2025.

Proposed PIT reform impacting corporate taxpayers

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: 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 (i.e. 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 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 CIT rate of 20%.