Pay yourself a tax-free dividend of €640

From income year 2018, individuals can exempt €640 of dividend income from withholding tax and thus save (up to) €192.

The recipient of the dividend will first still pay the 30% withholding tax on the dividends received. It is only via the personal income tax return (to be filed in June 2019) that the 30% withheld tax can be reclaimed.

From income year 2019, the exempt amount will increase to €800.

Withholding tax

If a dividend is distributed, a 30% withholding tax is in principle deducted. Since January 2017, 30% has been the standard withholding tax rate. This rate applies to all dividends for which no alternative rate is available.

Reduced rates of 17%, 20% or 5% apply to dividends originating from a liquidation reserve. For distributions of liquidation reserves after a period of five years, only 5% withholding tax is due.

For dividends from shares issued in exchange for a cash contribution since 01.07.2013 (VVPR-bis), a reduced withholding tax rate of 20% or 15% may apply.

Exemption

The new measure (Program Act 25.12.2017, Belgian Official Gazette 29.12.2017) provides for an exemption basket of €640 (income year 2018) for dividends granted since 1 January 2018. The exemption applies to all dividends from shares, regardless of whether they are of domestic or foreign origin. All dividends qualify, except for dividends from funds (SICAV, BEVEK, etc.) or dividends granted by legal constructions subject to the Cayman tax.

The taxpayer chooses for which dividends the exemption is applied.

As mentioned above, the exemption is not applied at source via withholding tax, but must be requested through the personal income tax return or the non-resident tax return. The withholding tax retained on the exempt portion will be credited against the personal income tax due and, if applicable, refunded.

The exemption applies per taxpayer. The limit is therefore assessed per shareholder when shares are held jointly with a partner.

Interest that is reclassified as dividends does not qualify for the exemption.

The taxpayer must be able to substantiate the request for offset or refund of the withholding tax with supporting documents (to be made available to the tax authorities). The practical implementation is yet to be determined by Royal Decree.

Tips

Apply the exemption to dividends with the highest withholding tax rate.

If you do not receive dividends from private investments, you may still benefit from this exemption by allocating a dividend at the next general meeting of your company.