It often happens that, for tax reasons, an individual purchases a property with or transfers it to his company. In time, however, the wish may arise to transfer the property (back) to the private capital of the individual and thus to remove it from the company. As a general rule, the acquisition of immovable property in Flanders from a (capital as personal) company is in principle taxed at the sale price. In certain cases, however, the legislator provides for a number of exceptions as a result of which the right of sale is not or not immediately due. With the introduction of the new company law and more specifically with the abolition of the capital concept in the BV, the question arose whether one of the foreseen exceptions could still be applied. In its recent position Vlabel has finally nipped the uncertainty in the bud.
Given that a transfer of real estate in Flanders always entails the levying of registration tax, the question arises as to how the transfer from the company to the private estate is taxed.
Basically, the civil nature of the transaction should be considered. For example, a sale (10%) is taxed differently than a distribution (2.5%) and a capital decrease in kind is yet another transaction. In this regard, however, the Flemish Codex Taxation (the VCF) provides an exemption provision. Thus, any acquisition of a real estate property by partners of an SA, regardless of the nature of the transaction, is taxed at the right of sale.
For the BV the same rule applies in principle, but with the following three exceptions:
- The property is acquired by a partner who contributed the property himself;
- The property is acquired by a partner who was already a partner when the partnership acquired the property under payment of a registration tax; and
- The property is allocated to all partners according to their shareholding and without any compensation.
Especially with regard to the third exception, quite a lot of ink has been spilled recently. This exception is also called the "waiting scheme" and specifically refers to the situation where a property is taken out of the company by means of a capital reduction in kind. At the time of the capital reduction, only the general fixed duty is payable. Upon subsequent distribution among the partners, it will be liable for the applicable registration tax, but as long as the partners remain in undivided ownership, they will pay only the general fixed duty.
Now this transaction was literally described in the VCF as a "real capitalreduction". Because the concept of capital in the BV was abolished with the introduction of the Companies and Associations Code and was replaced by the concept of "contributed capital", the question therefore arose as to the fate of the waiting rule as a result of this legislative amendment.
The Flemish legislator wanted to remedy this situation by adapting the text of the relevant article in the VCF to the new legislation. Henceforth, the allocation of immovable property as a result of a real reduction in capital is no longer referred to, but rather as a result of a real reduction in the value of the property. "a total or partial liquidation".
Unfortunately, this legislative amendment once again caused a stir in the legal landscape. Based on an (overly) literal interpretation of the legal text, some claimed that the legislative amendment had resulted in a situation whereby, as of January 1, 2020 no use of the waiting scheme could be increased. A partial liquidation is, after all, a concept not found in company law, so that some argued that the possibility of taking a property out of the company at the general fixed law was a thing of the past, unless in the context of a complete dissolution and liquidation.
Vlabel recently published position paper 19078 which nips the aforementioned uncertainty in the bud. A distribution of a property in kind from a BV is still possible at the general fixed law, provided that (i) all partners (ii) become owners in proportion to their shareholding (iii) without paying any compensation.