The Brussels' Court of Appeal (No. B 14/0672) recently held that the cross-charge of expenses resulting from an international employee stock option plan (e.g. management and administration costs, loss on shares) are not deductible by the Belgian subsidiaries as far as it concerns the loss on shares (i.e. the negative result between the sales price at exercise by the employee and the price at which those shares were initially acquired).
As it seemed a general accepted practice that cross-charged expenses related to an international stock option plan were tax deductible in the hands of the Belgian subsidiary, current case law seems to draw a parallel with the non-deductibility of losses on shares if the Belgian employing company had to sell the shares held in portfolio below book value to its employees.
According to Belgian tax law, losses on shares are indeed not deductible for tax purposes, unless they relate to trading losses incurred by financial institutions or to the paid-up capital upon a liquidation of the company. However, the main question was to know whether this provision requires that the taxpayer (i.e. the Belgian company) is the legal or beneficial owner of the shares and whether the losses on shares as incurred by the (foreign) parent company retain their legal nature when these losses are cross-charged to the Belgian subsidiary. The Court now ruled that the taxpayer does not have to be the owner of the shares and that the legal nature of the cross-charged losses is retain, so that the cross-charged losses are indeed not deductible.
An open question is how this would translate to a situation in which all expenses are amalgamated (contrary to the case at hand where losses on shares had been invoiced separately) and the Belgian subsidiary would not be able to identify which part (if any) relates to losses on shares.