"VVPRbis" without minimum share capital requirement: clarifications from the Ruling Commission

Belgian Companies and Associations Code

On 28 February 2019, the Parliament adopted the new Belgian Companies and Associations Code, a major reform of Belgian corporate law. The Code entered into force on 1 May 2019 for companies incorporated as from that date, and on 1 January 2020 for existing companies (unless they decided to opt-in sooner). One of the key features of this reform is the abolishment of the required minimum share capital for private limited companies ("SRL"/"BV"; previously named "SPRL"/"BVBA").

Under previous Belgian corporate law, to incorporate a "SPRL"/"BVBA" it was required to have a minimum share capital of 18,550 EUR (whereby 6,200 EUR had to be immediately paid-up). The new Belgian Companies and Associations Code abolished this requirement.

"VVPRbis"

As a rule, dividend distributions are subject to 30% withholding tax. Under Belgian tax law, various reliefs are available. One of these reliefs has particularly attracted attention the last years: the so-called "VVPRbis" withholding tax reduction.

Introduced in 2013, it allows SMEs to benefit from a reduced 15% withholding tax rate for dividends they distribute when strict conditions are complied with. It was notably required that the minimum required share capital was fully paid-up when the shareholders meeting decides to distribute the dividend. For private limited companies, it meant that the required minimum share capital of 18,550 EUR had to be fully paid-up at that moment.   

Due to the entry into force of the Companies and Associations Code, and the abolishment of the minimum share capital requirement for specific companies, this condition has been removed.

Many tax practitioners raised concerns in this regard, especially for private limited companies that had not fully paid-up their minimum share capital before their conversion into a "SRL"/"BV". Indeed, upon incorporation, founders of private limited companies generally paid-up a portion 6,200 EUR out of the 18,550 EUR minimum required share capital (and postponed the payment of the remainder). If the paid-in capital of a "SPRL"/"BVBA" has never been equal to 18,550 EUR before being converted into a "SRL"/"BV", it was unclear whether it would still be entitled to the "VVPRbis" reduction after being converted into a "BV"/"SRL" (upon 1 January 2020 at the latest).

Clarifications from the Ruling Commission

In two recent rulings (n°2020.0114 and n°2020.0178, not published yet) which Fieldfisher has obtained, the Ruling Commission confirmed a.o. that a "SPRL"/"BVBA" with a paid-up capital of 6,200 EUR may be entitled to the reduced withholding tax rate in application of the "VVPRbis" regime on all dividend distributions performed after its conversion into a "SRL"/"BV" (reserves built-up before or after the conversion) even though the paid-up capital of the company has never been equal to 18,550 EUR (required minimum share capital) when the company was a "SPRL"/"BVBA".

Furthermore, as these companies would not be subject to any minimum paid-up share capital requirement after their conversion into "SRL"/"BV", the Ruling Commission confirmed that these companies could reduce their net equity down to 1 EUR, without losing the benefit of the "VVPRbis" reduction.

Hence, the Ruling Commission confirms that the benefit from this regime may not be automatically barred for reserves built-up before a conversion of a "SPRL"/"BVBA" into a "SRL"/"BV" on the sole reason that the "required minimum paid-up capital condition" was not met upon such conversion. This clarification is welcome. Under specific circumstances, it is however recommended to carefully assess the possibility to benefit from the "VVPRbis" regime.    

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