Adjustments to the VVPR-bis regulation

Adjustments to the VVPR-bis regulation

Marc Verbeek
Adjustments to the VVPR-bis regulation

The Law of January 21, 2022 regarding tax provisions (Belgian Official Gazette, January 28, 2022) has made a number of changes to the existing VVPR-bis regime.  This regime means that if certain conditions are met, dividends distributed by SME companies can benefit from a reduced withholding tax of 20% if they are distributed from the profit of the second financial year after that of the contribution and 15% if they are distributed from the profit of the third financial year. The amended regulation applies to dividends that are attributed or made payable as of 1 January 2022.  


Pay-up obligation 

One of the conditions for the VVPR-bis regime is that the dividends must originate from new shares issued as from 1 July 2013 as compensation for a capital contribution paid up in cash. This pay-up must have been done at the time of the dividend payment.

Following the entry into force of the new Company Code on May 1, 2019, the concept of 'capital' was abolished for a number of company forms. This has led to many private limited companies reducing their 'capital' to EUR 1 by, for example, an exemption from the obligation to pay up in full.

The question then arose as to whether the capital of EUR 1 could continue to be classified as VVPR-bis capital and whether all dividends, including those from reserves prior to the capital reduction, could continue to benefit from the reduced withholding tax.

A ruling dated April 21, 2020 confirmed that the capital must be paid up at the time the dividend is attributed of paid “whereby the benefit of the reduced withholding tax cannot be denied due to the fact that the capital was not fully paid up at the time of conversion to a private limited company”. This meant that all future dividends could be paid out at the reduced rate and that the original contribution of EUR 18.550 did not have to be fully paid up.

However, this was beyond the reckoning of the government, which was of the opinion that the initially subscribed contribution must be fully paid up in order to be able to benefit from the VVPR-bis regime.

The problem with this is that a company that has reduced its capital in the past, can never pay up its initial capital as it now only has EUR 1 capital.

That is why a temporary transitional regulation has now been introduced, which provides that companies that have reduced their contribution in good faith by means of an exemption from the pay up obligation between 1 May 2019 and 15 December 2021 , can still benefit from the VVPR-bis benefits, provided that they bring back their contribution to the initially subscribed amount by means of a cash contribution and this before 31 December 2022. This means that these companies will first have to carry out a new capital increase before being able to pay out dividends with application of the VVPR-bis benefits. Note that a later capital reduction does not constitute an obstacle to the VVPR-bis regime. 


Waiting period 

The reduced withholding tax only applies after the expiry of a so-called waiting period.  Following the above, it has been determined that the waiting period to do a dividend payment is applicable on an ongoing basis as of the date of the initial contribution and not as of the date of the capital increase as previously envisaged. 


Non-preferential shares 

Another condition of the VVPR-bis regime is that the shares issued as a result of the contribution may not be preferential. In this regard, it is now stipulated that the shares may only be non-preferential with regard to the participation in the profits or the capital or the distribution of the equity.  Shares with multiple voting rights, on the other hand, are considered not to be preferential for the application of the VVPR-bis scheme.



In addition to the existing exclusions (for amounts contributed that originate from reserves 'locked up' in the past and amounts originating from a capital decrease in an affiliated or associated company), a new exclusion applies to amounts contributed that arise from a distribution of a liquidation reserve by an affiliated or associated company on which a reduced withholding tax of 5% was levied.



After a period of legal uncertainty in connection with a number of conditions for the application of the VVPR-bis regime, the Law of January 21, 2022 did introduce a number of clarifications.  Keeping the waiting period from the moment of the initial contribution is certainly one of them.  And also VVPR-bis companies that proceeded to an exemption from the obligation to pay up in full also know what to do before the end of the year.



Marc Verbeek
Marc Verbeek
Partner Tax
Crowe Spark