Emigration of a Belgian company: no taxable dividend

In a recently published judgement, the Court of First Instance of Walloon Brabant has ruled that the emigration of a Belgian company to France does not lead to a taxable dividend which would be subject to withholding tax (judgement of 3 February 2023).

This is the first judgement which clearly addresses the “hot” topic of emigration, on which various viewpoints exist (even within the Ministry of Finance).

Facts and administrative procedure

A married couple, both resident in Belgium, were shareholders of a Belgian limited liability company (BVBA) active in the IT sector. An extraordinary shareholders’ meeting on 28 March 2017 decided to transfer the registered office of the company to France. The company’s articles of association were modified in order to focus on the acquisition and management of real estate. The company was also converted into a “société civile immobilière (SCI)”, a specific type of French real estate company.

On 23 March 2017, the couple had established another company with the same statutory purpose as their previous company, the BVBA.

The tax authorities sent a notification of ex officio taxation to the SCI in which they claimed payment of withholding tax as a result of the emigration. The taxation was based on the following elements:

  • Article 210, § 1, 4° of the Belgian Tax Code (BITC) considers the transfer of the corporate residence of a company as a “liquidation”;
  • The dividend deemed to be paid out at the moment of such liquidation (consisting of the reserves at the moment of the transfer of corporate residence) is taxable on the basis of article 18, al. 1, 2°ter BITC, an article that refers to article 210 BITC.

The tax authorities also based their tax claim on the general anti-abuse provision, albeit in a rather general manner.

The tax authorities dismissed the administrative claim of the taxpayers who appealed to the tax court.

The tax court’s decision

 The court considers the following elements:

  • The transfer of corporate residence did not interrupt the legal personality of the company, which implies that, from a corporate law perspective, there has been no dissolution or liquidation;
  • The legal fiction in tax law which considers the transfer of corporate residence as a liquidation only applies to corporate income taxes, and not corporate law;
  • No withholding taxes should apply, since the transfer of residence does not give rise to any payment of (dividend) income.

The tax court furthermore refers to various tax rulings of the Belgian Ruling Committee. A key consideration in these rulings is that a taxable dividend would require an impoverishment of the distributing company and an enrichment for the shareholders, both elements not being present in the case of the emigration concerned.

The application of the general anti-abuse provision is also rejected by the tax court. The court considers that its application was too vague and not sufficiently motivated. The court’s conclusion does therefore leave the door open for future applications of the anti-abuse provision which indeed would be considered justified provided enough circumstances or facts would be present. Therefore, the emigration of a Belgian company which is only organised for tax purposes may remain within the scope of the tax authorities’ claims.

To be continued…

Geert De Neef

Anja Van de Velde