Private equity – Carried interest
Currently, there is no specific tax regime for carried interest, generating uncertainty with respect to the tax qualification of such income. A new tax regime bringing clarity to this matter is therefore more than welcome.
A specific competitive tax regime (compared to Belgium’s neighbouring countries) is now introduced for carried interest held by private individuals. The objective is to stimulate the activity of investment funds in Belgium.
The new tax regime foresees the taxation of carried interest as moveable income, subject to a flat rate of 25%. This tax rate will only apply on the disproportionate return compared with other investors, regardless of the way carried interest will be allocated from a legal perspective (i.e. under the form of a capital gain, a dividend distribution or a redemption/liquidation gain). As carried interest will qualify as moveable income, it will not be subject to employer and employee social security contributions.
For this specific regime to apply, carried interest should be attributed or paid by a so-called “carried interest vehicle”, being any Belgian or foreign undertaking for collective investment which does not qualify as a UCITS according to the European Directive 2009/65/EG or similar regulation for non-EU vehicles.
Fund managers holding their carried interest through their personal management company are not targeted by this regime. In such case, the existing rules remain applicable, be it that such management company will – as of assessment year 2026 - not be allowed anymore to allocate profits to a so-called liquidation reserve as long as it holds a participation in a carried interest vehicle (the possibility to benefit from the VVPRbis regime is however maintained). Carried interest granted through a stock option plan qualifying under the Belgian law of 26 March 1999 is also excluded from this new tax regime.
The federal government aims to have the new tax regime adopted by the parliament by the end of July 2025. It will be applicable to all carried interest attributed or paid as from the moment the law will be published in the Belgian Gazette.
For an overview of the main provisions currently under parliamentary review, we refer to First phase of Belgian tax reform submitted to Parliament
Please feel free to contact one of our colleagues below for more information.
