A Tax Optimization Mechanism Subject to Strict Conditions
The so called “VVPRbis” regime is a tax optimization mechanism that, under certain conditions, allows for a reduction of the withholding tax on dividends paid by an SME: starting from the third financial year after the capital contribution, the withholding tax rate drops from 30% to 15%.
However, this attractive regime is subject to strict conditions. For instance, the capital contribution must be made in cash. Contributions in kind, such as real estate, are excluded. It is precisely this exclusion—applied to the contribution of a shareholder’s current account claim (i.e., money advanced by the shareholders to their company)—that led to a dispute brought before the Constitutional Court.
The Disputed Case
The case that led to the Constitutional Court’s ruling on January 16th, 2025, concerns a private detective company established in 2013 by two shareholders, of which only one-third of the capital was initially paid in cash. In 2019, one of the shareholders fulfilled the remaining capital requirement by contributing a current account claim he held against the company.
Following a dividend distribution, the company applied a withholding tax rate of 15%. However, the tax authorities rejected this rate and applied 30% instead. They argued that the capital had been partially paid in kind through the conversion of the current account claim, and therefore the company was not eligible for the reduced 15% rate.
The company challenged this position before the Court of First Instance in Liège. It argued that the legislator’s intent was to bring liquidity into SMEs, and that excluding contributions in kind was justified by the risk of abuse through artificial overvaluation. However, current account claims involve cash, which cannot be overvalued (1 € = 1 €).
Moreover, the company argued that if the shareholder had first been repaid the current account and then reinvested the funds as a cash contribution, the company would have qualified for the reduced rate.
This split approach would have led to exactly the same economic result, yet with a completely different tax outcome.
The taxpayer asked the Constitutional Court whether the difference in treatment between a cash contribution and a contribution of a current account claim violated the constitutional principles of equality and non-discrimination.
The Constitutional Court’s Response
According to the Court, the issue is straightforward. The distinction between a cash contribution and a contribution in kind is clear: only the former qualifies for the tax benefit. It doesn’t matter that the claim is expressed in euros—it remains a contribution in kind, which is also vulnerable to manipulation through accounting practices.
As for the argument regarding the split transaction, the Court essentially stated: the rule is the rule, and the person involved should have split the transaction...
Therefore, the Court ruled that this difference in treatment is in line with the Constitution.
A Very Strict Stance That Clashes with Economic Reality… but Is Easily Solved
The Court’s overly formalistic stance has raised concerns among some legal practitioners, who point out a disconnect from the economic reality of SMEs.
A shareholder’s current account often serves as a flexible and essential tool to support a business in difficult times—a real safety net.
Excluding this form of contribution from the “VVPRbis” regime raises even more questions given that a simple double transaction—having the claim repaid and then reinvesting the money—would meet the legal requirements while achieving exactly the same economic result…
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