BELGIUM Law and Practice Contributed by: Thomas Lenné, Mathias Hendrickx, Valentijn de Boe and Bram Devlies, Loyens & Loeff
such subsequent sale into the business of the com- pany in the EEA. For real estate rich companies (eg, BESS and infra- structure), a (partial) demerger can be carried out with- out application of real estate transfer taxes (ranging between 12% and 12.5% depending on the loca- tion) if either (i) no debts are transferred as part of the spin-off or (ii) the spin-off qualifies as a transfer of a branch of activity, allowing the recipient company to perform the business independently and on a stand- alone basis – the latter is typically not accepted in the case of passive real estate companies, but can be accepted in the case of active infrastructure compa- nies where the management of the infrastructure is part of the spin-off. For VAT purposes, a spin-off is not subject to Belgian VAT if the transferred assets and liabilities together constitute an undertaking or a part of an undertak- ing capable of carrying on an independent economic activity (a “transfer of a going concern” or TOGC). The transferee must be a VAT taxable person and must have the intention to continue the activity being spun off. In that case, the transferee is deemed to continue the VAT position of the transferor with respect to the transferred activity (eg, with respect to VAT adjust- ments). If the above conditions are not met, the VAT treatment should be assessed for each asset or liabil- ity being spun off. 3.3 Spin-Off Followed by a Business Combination Belgian law strictly regulates the procedures for both a spin-off (demerger) and business combination (merger) in the Belgian Companies and Associations Code (BCAC). A spin-off may be followed by a busi- ness combination in Belgium, although such opera- tion requires careful planning if the intention is for one step to immediately follow the other. In such case, parallel preparations will need to be made and condi- tionality will need to be built into the documentation to ensure a seamless transition from one transaction to the other. In a nutshell, the following key steps are required for a (de)merger in accordance with the BCAC.
• Careful identification of assets and liabilities to be transferred as part of the demerger. • (De)merger proposal to be drafted by the board of each company involved. • Filing and publication of the (de)merger proposal – ultimately six weeks prior to the extraordinary general meeting of shareholders resolving on the (de)merger. • Board report of the (de)merging companies justify- ing and explaining the (de)merger from an econom- ic and legal perspective. • Audit report by the statutory auditor or certified account of the (de)merging companies on the (de) merger proposal. • Extraordinary general meeting of shareholders to be held in front of a Belgian notary of the compa- nies involved in the (de)merger. 3.4 Timing and Tax Authority Ruling The procedure for a (partial) demerger provided in the BCAC typically takes between 2–4 months to final- ise. The timing for a spin-off in a domestic setting in Belgium is largely dependent on the identification of assets and liabilities to be spun off and mandatory waiting periods prescribed by Belgian law. In a cross- border setting, the demerger process typically takes additional time as formalities across jurisdictions need to be aligned. Obtaining a tax ruling is not a legal/tax precondition to apply the tax neutral roll-over regime for income tax purposes, or the tax neutrality regime for real estate transfer taxes or VAT. Nevertheless, the appreciation of the business purpose test (income tax), the branch of activity qualification (real estate transfer tax) or the TOGC qualification (VAT) is very fact-driven. Hence, it is common practice to request for an advance tax rul- ing prior to implementing the spin-off to gain upfront legal certainty on the application of the respective tax- neutral regimes. The lead time for obtaining a formal tax ruling in recent practice has been between 4–7 months, depending on the complexity of the file. Typi- cally, an informal position of the ruling commission can be obtained within approximately four months, and for public M&A transactions the timeline for obtaining a ruling can typically be expedited.
15 CHAMBERS.COM
Powered by FlippingBook