Distribution of immovable property as dividends in kind or advances on liquidation balances: amended position 19078 offers new opportunities

Much has already been written about the taxation of the withdrawal of immovable property from a company, and in particular about the application of registration fees. Without wishing to give yet another interview on this particularly complex matter, we would like to share the impact of amended position 19078 of the Vlaamse Belastingdienst (Flemish tax authorities) with you. After all, the amended view in the context of the distribution of dividends in kind or the distribution of immovable property as an advance on the liquidation balance may also offer a (new) opportunity for your dossier.

Just to refresh your memory

When one or more partners acquire immovable property from their company, the sales tax will in principle be levied on that acquisition. This fictitious provision in the registration fees therefore leads to an additional levy of 12% (at least insofar as the immovable property is located in Flanders). For public limited companies, there is no escaping this tax in principle.

However, for non-capital companies (private limited companies, general partnerships, cooperative societies or limited partnerships), there are exceptions:

• If one has contributed the property oneself or if one was already a partner at the time of purchase, the registration fee will be levied according to the actual nature of the acquisition. In practical terms, this means that the distribution duty (2.5%) or even the fixed duty (EUR 50) may also be applied. In practice, this exception is also referred to as the ‘historical partner’ scheme.
• If the immovable property is allocated to all partners on the occasion of a (partial) liquidation, in proportion to their shareholding, the levy of the registration fees will be ‘deferred’ and the immovable property will be withdrawn with the application of the fixed duty. This is the so-called ‘waiting scheme’.

What has changed now?

A. The payment of an advance on the liquidation balance can now benefit from the waiting scheme.

Previously, it was uncertain whether the apportioning of immovable property, in the process of liquidation, by way of an advance on the liquidation balance could qualify for the ‘waiting scheme’.

In its position 19078, the Vlaamse Belastingdienst (Flemish tax authorities) has now clarified that the transfer of immovable property – of a dissolved and liquidated company – to all partners, in proportion to their shareholding, by way of an advance on the liquidation balance is to be considered as an acquisition eligible for the waiting scheme.

You might think ‘Surely you could just wait until the closure of the liquidation’?

This is of course correct, but the distribution of the immovable property as an advance on the liquidation balance does offer the possibility of creating an additional liquidation reserve prior to liquidation. After all, at the time of the payment of the advance, the capital gain on the immovable property must be expressed. This capital gain can then be used to create an additional liquidation reserve. In this way, when the remaining liquidation balance is distributed, the withholding tax can be limited to the 10% already paid (instead of 30%).

B. The distribution of an immovable property as a dividend in kind is no longer automatically subject to the right of sale

When the distribution of immovable property is attributed to the available reserves, the application of the waiting scheme is excluded. Although one could still fall back on the historical partner scheme, Vlabel (Vlaamse Belastingdienst (Flemish tax authorities)) previously always assumed that such a distribution should be equated with a transfer for valuable consideration so that the right of sale was still applicable for the time being.

As a result of the amended position, however, that equivalency will no longer be assumed, meaning that the right of sale will not apply.

Our PKF BOFIDI experts are happy to help you

The new view of the Vlaamse Belastingdienst (Flemish tax authorities) offers new opportunities for withdrawing immovable property from your company in a tax-efficient manner. It is certainly worthwhile taking a closer look at your dossier (again).

Do you have any questions about your dossier? Then please do not hesitate to contact Larissa Cobbaert, estate planning expert at PKF BOFIDI. She will be happy to help you.

This article was written by Larissa Cobbaert.