Belgium’s participation exemption framework — commonly referred to as the DRD (Dividends Received Deduction) — is entering a new phase. Following recent federal reforms, eligibility conditions will become more restrictive from the 2026 tax year onward.
For multinational groups, investment funds, and holding structures, these adjustments are more than a technical refinement: they may directly affect dividend taxation, capital gains treatment, and overall investment structuring.
This article outlines the upcoming changes, explains their operational consequences, and highlights key considerations for cross-border investors navigating increasingly complex tax environments.
Belgium’s DRD system is designed to prevent economic double taxation on distributed profits. In practice, it allows qualifying companies to exclude certain dividends received from subsidiaries from their taxable base.
The regime is central to Belgium’s attractiveness as a holding location. Without it, corporate groups could face taxation multiple times on the same income stream as profits move up the ownership chain.
Beyond dividends, the same core conditions generally influence the tax treatment of capital gains on shares, making the DRD framework a cornerstone of corporate tax planning.
To qualify for the DRD deduction under the existing framework, three main criteria must be met:
A company must either:
Shares must be held continuously for a minimum of one year in full ownership.
The distributing entity must be subject to a tax regime comparable to Belgian corporate taxation standards.
These conditions also shape eligibility for exemptions on capital gains realized on qualifying shares.
The reform keeps the 10% ownership threshold unchanged, but introduces an additional requirement for certain large corporate shareholders relying on the €2.5 million alternative threshold.
Companies that:
will now face an extra qualification test — unless they qualify as small enterprises.
Specifically, the participation must be recognized as a financial fixed asset at the time dividends are paid or made available. This classification effectively requires evidence of a long-term strategic investment, rather than a purely financial or short-term portfolio holding.
The new rule introduces a more substance-based evaluation of minority participations in large groups. In practical terms, taxpayers may need to demonstrate:
Accounting classification will therefore become more than a technical exercise — it may determine whether dividends remain exempt.
The new rules apply starting with the 2026 assessment year, meaning they affect financial years beginning on or after January 1, 2025.
Companies should anticipate potential impacts when:
Early analysis is particularly important for multinational groups managing minority holdings across multiple jurisdictions.
Although the reform targets corporate taxation, it intersects with broader themes shaping the European tax landscape:
For asset managers, funds, and holding companies, the new requirement may trigger a reassessment of:
As national regimes tighten eligibility rules and tax authorities increase scrutiny, optimizing post-tax returns becomes increasingly complex. Dividend exemptions, withholding taxes, reclaim procedures, and treaty relief mechanisms are now deeply interconnected.
Specialized partners — such as Globe Refund
— help institutional investors, funds, and financial institutions identify reclaim opportunities and mitigate unnecessary tax leakage through fully outsourced recovery solutions and continuous monitoring processes.
In a context where legislative adjustments can quickly alter eligibility criteria or cash-flow assumptions, proactive tax management becomes a core component of investment performance.
Our work focuses on providing outsourced withholding tax recovery services to safeguard your investments from over-taxation and save your time from burdensome processes.
