Corona Tax Shelter for new shares in SMEs: second edition

On 2 April 2021, Parliament approved a second edition of a corona tax shelter for new shares in SMEs. This (temporary) measure has already been (also temporarily) launched once. At the time, it concerned new shares issued between 12 March 2020 and 31 December 2020. The new measure applies to contributions from 1 January 2021 to 31 August 2021.

How does it work?

The natural person who invests in new shares can benefit from a tax reduction of 20% of the contributed capital. The maximum amount that you can contribute in this way is 100.000. In the event of a joint tax assessment, each spouse can separately claim the tax reduction.

You must make a contribution in cash. Contributions in kind do not qualify. The measure can be combined with the tax credit for the acquisition of shares in start-up companies or growth companies, but of course you cannot get a tax credit twice for the same contribution. The measure can also be combined with the previous temporary measure.

You can also benefit from the tax reduction if you are a director, but, and that is an important limitation, to the extent that you acquire more than 30% of the company's equity through the contribution, you do not benefit from the tax reduction.

Finally, you must also keep the shares during a five years period. The company will have to provide the necessary certificates for this.

For which companies?

The tax credit is only available to Belgian companies (or establishments of foreign companies):

that can demonstrate a decline in turnover of at least 30% during the period of 2 November 2020 to 31 December 2020, compared to the same period in 2019; and

that are considered a small company under the CAC. I.e. do not exceed more than 1 of the following criteria: a) annual average of the workforce: 50; b) annual turnover, excluding VAT: 9.000.000; c) balance sheet total: 4.500.000.

Numerous companies are also excluded:

investment, financing or treasury companies;

companies with a statutory goal of establishing, acquiring, managing,... real estate for their own account;

portfolio companies;

management companies;

listed companies;

companies linked with tax havens.

The sums received by the company cannot not be used for paying dividends, for a capital reduction/reduction of the contribution or purchase of shares, nor for granting loans.

And finally, the company cannot receive more than 250.000 in total through the application of this measure. This maximum amount is independent of the maximum amounts of the other tax shelters (such as the tax shelters for the acquisition of shares of start-up companies or growth companies as well as the previous corona tax shelter for new shares).

Reversal of the tax credit

As mentioned before, you must keep the shares for five years. If you dispose of them within this five years period, the tax credit is reversed as a tax increase for the number of “missing months”.

Also in case the company no longer meets the conditions, you can bear consequences since also in this case the tax reduction will be reversed.

31 August 2021

You have until August 31 to subscribe to new shares. Those shares must be fully paid up at that time.

The fact that a director can also benefit from the measure is good news, but the limitation that your participation cannot exceed 30% is an important limitation for family businesses.

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