Although the UK parliament ruled against the possibility of a No-deal Brexit and voted for an extension of the Brexit deadline, the outcome of the current UK political controversy remains far from certain. Both businesses and governments in the UK and the EU are preparing for every possibility, including the worst-case scenario of a 'Hard Brexit'.
In case of a so-called Hard Brexit, the UK will not only leave the EU, but will also cease to be part of the European Economic Area (EEA), which could have an impact on the sales of shares of Belgian companies to UK resident buyers.
Capital gains on shares in a Belgian company
Capital gains by Belgian tax residents (realised outside a professional activity) on the shares of Belgian companies will be taxable only if:
- the capital gains resulted from speculation or outside the normal management of an individual’s private estate (taxable at the flat rate of 33%), or
- a significant shareholding (25% or more) is sold to a company established outside the EEA (taxable at the flat rate of 16.50%).
Sale to UK buyer after Brexit
Since the UK will no longer be part of the EEA after a Hard Brexit, if at that time a Belgian individual sells his shares in a Belgian company to a UK company, the capital gains will be taxable at a flat rate of 16.50%. However, the sales of shares in Belgian companies made by holding companies will remain unaffected.
Deal structures for overseas equity investments in Belgian companies (e.g. venture capital investments) should be carefully considered when involving Belgian individuals.
Possible alternatives might be to have another EEA-based company in the purchaser’s group acquire the shares in the Belgian target, have the seller make the sale through a holding company or include specific pricing mechanisms, undertakings and warranties in the transaction documents. Whether such an alternative structure would be possible would depend on the facts and, in particular, the relevant anti-avoidance rules would need to be considered carefully.