Belgium: Reconstruction reserve, rebuilding corporate equity (COVID-19)

Belgium: Reconstruction reserve

The equity and solvability of many companies have been affected by economic situations resulting from the coronavirus (COVID-19) pandemic. In its coalition agreement, the new federal government announced the introduction of a “reconstruction reserve” to let companies rebuild their equity in a tax advantageous manner.


The proposal builds on an earlier legislative proposal which is pending in Parliament. Read TaxNewsFlash

According to the new regime, companies would be able to exempt part of their profit for the tax periods 2021, 2022, and 2023 (that are related to assessment years 2022, 2023, and 2024) by recording that profit on an exempt “reconstruction reserve.” In the pending proposal, the amount would be limited by a “double ceiling”—the accounting loss of income year 2020 and an absolute maximum of €20 million.

The reconstruction reserve thus would allow companies to keep future profits within the company in a tax advantageous way and to rebuild their equity to pre-pandemic levels.

However, equity and employment must be maintained:

  • The reconstruction reserve would be taxable when there is a capital reduction, dividend distribution or liquidation.
  • There is an employment condition—if the personnel cost of the company drops below a certain level, the tax advantage would be reduced proportionally. According to the pending proposal, the personnel cost for income year 2020 and the three following years must equal at least 85% of the personnel cost paid in 2019. If not, a pro rata part of the reconstruction reserve would become taxable.

Finally and similar to the loss carry-back regime, for example, companies that have a direct participation in companies located in tax haven jurisdictions or that make payments to entitles located in such tax havens that cannot be economically or financially justified, would be excluded from the regime.

Read an October 2020 report prepared by the KPMG member firm in Belgium

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