Adjustments to the reduced withholding (VVPR-bis) regime from 1 January 2022

Under the VVPR-bis system, the withholding tax and personal income tax are reduced under certain conditions with regard to the dividends paid by small companies on new registered shares issued following new contributions in cash made from 1 July 2013. In a first phase, the tax is reduced to 20% for the dividends granted or allocated from the profit distribution of the second financial year after that of the contribution. Then the tax is reduced to 15% for the dividends granted or allocated from the profit distribution from the third financial year after that of the contribution (Art. 269, §2 Belgian Income Tax Code 1992).

For dividends paid or allocated from 1 January 2022, ‘the initial engagement’ must be fully paid up. Thus the government opposes the technique of exemption from the obligation to pay in full. Therefore from 2022, VVPR-bis shares for which the exemption from the payment obligation has been applied can no longer benefit from the reduced withholding tax. However, a regularisation option is provided for companies that applied the exemption from the payment obligation in the period between 1 May 2019 and 15 December 2021. Companies that apply an exemption from the payment obligation after this date irrevocably and definitively lose the possibility to benefit from the reduced VVPR-bis rates for dividends on the shares concerned allocated from 1 January 2022. 

Last-minute payments before 1 January 2022 (before the new scheme comes into effect) via interim dividends to quickly benefit from the 15% rate are no longer necessary in most cases. Due to the intervention of the Belgian Council of State, the waiting period in current amendment No. 18 of 15 September 2021 will no longer be changed.

1. Companies that have implemented the exemption from the payment obligation in the period between 15 May 2019 and 15 December 2021 can still benefit from the reduced VVPR-bis rates until the end of December 2021 (if the other conditions are met). They can no longer benefit from the reduced VVPR-bis rates for dividends allocated or made payable from 1 January 2022 as long as they have not regularised the exemption from the payment obligation by increasing the cash contribution without issuing new shares. It may therefore be useful for urgent dividend policy to grant an interim dividend before 1 January 2022 (at a reduced withholding tax rate) because the conditions under the old scheme have been met).
   
   As well as to implement a capital increase in cash without issuing new shares as quickly as possible, so that the contribution again reaches the initial level for the exemption from paying up in full. In any case, this capital increase will have to be implemented before 31 December 2022, if granting dividends or making them payable at a reduced withholding tax rate is to be possible in the future. As soon as this increase in the contribution has been made, the original waiting period will be restored, so that payments at reduced VVPR-bis rates will be possible again.
    
2. For companies whose contribution has only been partially paid up, as in the past, it is recommended to proceed to full payment before the dividend distribution. So nothing changes for companies that worked with uncalled capital and where the exemption from the obligation to pay up in full has not been applied. It is definitely recommended to make this payment (if possible) as soon as possible to avoid problems and disputes.

If you declare or make payable an interim dividend, do not forget to file the withholding tax return 273 A and pay the withholding tax within fifteen calendar days after the date of awarding/availability for distribution.