BELGIUM Law and Practice Contributed by: Alain Van Geel and Emilie Van Goidsenhoven, Tiberghien
Another vehicle frequently used for planning purposes in Belgium, and which is useful for managing family assets transferred to the next generation, is the so- called société simple (see 2.6 Transfer of Assets: Vehi- cle and Planning Mechanisms ). This entity is totally tax transparent and therefore has no tax impact. It is used in order to assure maintenance of the man - agement of the transferred assets by the donors or trusted managers (for as long as the beneficiary of the gift is still too young to manage these assets solely). 3.2 Recognition of Trusts Trusts do not exist under Belgian civil law. Never - theless, Belgian conflict-of-law rules recognise and respect foreign trusts. 3.3 Tax Considerations: Fiduciary or Beneficiary Designation The “Cayman tax” was introduced on 1 January 2015, and has been amended substantially as of 1 January 2018 and 1 January 2024. This is a look-through taxa - tion on private individuals and legal entities (subject to the legal entities tax). Income received by a non- or low-taxed legal construct is taxable income for the founder. Trusts automatically qualify as a legal con - struct for the purposes of the Cayman tax. The look-through approach entails the underlying income retaining its original qualification, and no effec - tive distribution is required for taxation to occur. Inter - est received by the legal construct remains interest, dividends remain dividends, and capital gains remain capital gains. The first two categories of income are generally taxed at a flat rate of 30% in Belgium. Capi - tal gains on movable assets realised by individuals are generally tax-exempt to the extent that they are real - ised within the normal management of one’s private assets. However, those capital gains will be taxed at 10% from 1 January 2026. The look-through approach is combined with the taxa - tion of income received (or deemed to be received) from legal constructs. Complex rules aim to prevent double taxation through this combined approach, but due to the complexity, this aim is not always reached. As of 1 January 2024, exemption of taxation upon distribution by the legal construct will no longer apply if the income received by the legal construct was not
effectively taxed under the look-through taxation (ie, capital gains on shares). In addition, interposing an intermediary company (which is not a legal construct) will no longer prevent the application of the Cayman tax. Furthermore, an exit tax was introduced if the founder of the legal construct migrates to another country. The scope of application of other taxable events (seat transfer of the legal construct, etc) is enlarged. The founder can avoid pass-through treatment by showing that the legal construct (other than a trust) meets a substance test in the case of (among other requirements) the exercise of actual economic activi - ties, which may not involve the management of the private assets of (one of) the founder(s). The sub - stance requirements were further restricted as of 1 January 2024. The Cayman tax applies not only to offshore legal constructs, but also to companies and legal entities established within the EEA if such entities are not suf - ficiently taxed. Measures can be taken to anticipate the application of the Cayman tax. For this reason, it is important to seek advice before making investments or setting up foreign structures. 3.4 Exercising Control Over Irrevocable Planning Vehicles See 3.3 Tax Considerations: Fiduciary or Beneficiary Designation .
4. Family Business Planning 4.1 Asset Protection
In Belgium, the most popular method for asset protec - tion planning involves using family foundations, along with the strategic use of legal structures such as com - panies, life insurance (under certain circumstances) and holding companies. Each of these methods can provide varying levels of asset protection, but the key focus is on shielding assets from creditors, minimising inheritance taxes and ensuring smooth wealth transfer across generations.
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