Dividends: a tax-efficient way to distribute company profits

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Distributing company profits in the form of dividends is becoming increasingly popular. Why? Dividends fall under the category of ‘investment income’, which is generally taxed at fixed rates, unlike professional income.

This makes the tax burden on dividends more predictable and generally significantly lower than on a traditional salary.

On this page, we explain what dividends are and how you can pay them out as a company director.

What is a dividend?

Dividends constitute ‘moveable’ income. In principle, in Belgium, they’re subject to a fixed rate of 30% withholding tax. However, this is not always the case.

Thanks to various political agreements, there are several reduced and therefore more attractive tax rates, including through the VVPR-bis regime and liquidation reserves (we’ll come back to those).

Dividends are always paid to a company's shareholders. If you have a management company, for example, the sole shareholder is usually the company's director. With this type of company, the director pays their own salary directly from their company.

It's therefore more advantageous to limit remuneration in the form of salary, because this income is heavily taxed: taking into account personal income tax, social security contributions and municipal tax, taxes on salary can be up to 60%.

This is why many entrepreneurs choose to limit their salary and use dividends as an alternative way to take money out of their company.

VVPR-bis and liquidation reserves: smart ways to distribute dividends

The VVPR-bis regime

Under the VVPR-bis regime, a shareholder can pay out dividends at only 15% withholding tax. This is half the 'normal' withholding tax of 30%.

To benefit from VVPR-bis dividends, you must meet the following strict conditions:

• The company must be a small company (i.e. with a turnover of less than €11,259 million and a total balance sheet of less than €6 million).
• The shares must be registered.
• The capital of the company must have been contributed in cash and kept for at least three years.

The VVPR-bis regime is particularly interesting for newly created companies or for injections of capital after 1 July 2013.

Liquidation reserves

Small companies can set aside all or part of their profits each year in a ‘liquidation reserve’ (‘réserve de liquidation’ / ‘liquidatiereserve’). They then pay an advance 10% withholding tax on these amounts. If the company is later liquidated, these reserves can be distributed in a tax-efficient way.

Note, however, that there’s a waiting period before these liquidation reserves can be distributed at a reduced rate.

Update July 2025 – New rules on liquidation reserves

Before 1 July 2025, a liquidation reserve could only be distributed after a period of 5 years, subject to a 5% withholding tax. As of now, this reserve can already be distributed after 3 years, subject to a 6.5% withholding tax. The total tax burden, therefore, amounts to:

• 15% in the event of early distribution (10% when the profits are added to the reserve + 6.5% after 3 years)
• 13.64% in the case of classic distribution (10% when added + 5% after 5 years)

The new measures are of interest to entrepreneurs who need their capital more quickly for private investments (e.g. securities portfolios, real estate, repayment of a bullet loan).

For those who are about to retire or who want to liquidate their company in the near future, the best option is to wait: in the event of liquidation, you only pay the initial 10% and nothing more.

Dividend distributions: when?

Ordinary dividends

An ordinary dividend (‘dividende ordinaire’ / ‘gewoon dividend’) is a share of profits paid out to shareholders, usually at the annual general meeting. This kind of dividend can only be paid once a year after the approval of the annual accounts.

Did you know…
If the annual accounts are closed earlier, you can decide to bring forward the date of the annual general meeting. This way, you can receive ordinary dividends more quickly and access your cash.

Example of an ordinary dividend:
If your financial year ends on 31 December, the annual general meeting will be held no later than 30 June of the following year. At this ordinary annual general meeting, you may decide to pay an ordinary dividend.

Interim dividends 

Are you having a very profitable year and would like to pay dividends early? Then you can opt for an interim dividend (‘dividende intérimaire’ / ‘interimdividend’).

Interim dividends can be paid during an accounting year under certain strict conditions.

Example of an interim dividend:
Imagine your financial year corresponds to the calendar year and therefore ends on 31 December. On 24 August, you notice that your results have been very good so far. You can then decide to pay an interim dividend before the end of the financial year. This decision can only be made at an extraordinary general meeting and only if the possibility to issue an interim dividend is explicitly mentioned in the company’s articles of association.

Intermediary dividends

You’ve closed the last financial year, but the annual general meeting hasn’t yet taken place, and dividends have not yet been distributed? It’s possible to pay out an intermediary dividend (‘acompte sur dividende’ or ‘dividende intermédiaire’ / ‘tussentijds dividend’) before the annual general meeting.

The difference between this and an interim dividend is simple: an intermediary dividend is paid when a financial year has already ended, while an interim dividend is paid while the financial year is still in progress.

Example of an intermediary dividend:
Let's say you need cash in April and the annual general meeting hasn't taken place yet. Your company has accumulated significant profits, and you want to use them to distribute some of the reserves you’ve built up. You can decide to distribute some of the reserves accumulated during the previous financial year, which has already closed. This can be decided either by an extraordinary general meeting or by the company’s governing body (e.g. the board of directors), if the articles of association provide for the possibility.

Tip for recovering part of the withholding tax on your dividends
You can pay yourself €800 in tax-free dividends (page available in French/Dutch/German). You pay the withholding tax up front, but you can then reclaim up to €240 of the tax paid. All you have to do is declare €800 of dividends on your personal income tax return. With this measure, the government is encouraging investors to inject their money into the economy, rather than letting it sit in their savings accounts.

Worth knowing: using dividends for private investments

Some lending products allow for repayment of the loan at a time when the entrepreneur can pay themselves dividends at the most advantageous rate. The dividends can then be used directly to repay the loan. This allows you to make larger private investments, such as purchasing real estate or building a large private portfolio of stocks or bonds.

Using your dividends wisely can therefore be an important part of your long-term financial strategy.

“For an optimal strategy, combine VVPR-bis or early withdrawal of liquidation reserves in the short term and classic liquidation reserves for later withdrawal or pension planning.”

Vincent Meesters - Certified Tax Advisor & CEO of Meesters Accountants

Legal obligations to protect society

Since the new Code for Companies and Associations (‘Code des sociétés et associations’ / ‘Wetboek van vennootschappen en verenigingen’) came into force, two tests are mandatory to prevent shareholders from taking dividends to the detriment of the company:

• Balance sheet test: The equity of the company cannot become negative following the payment of a dividend.
• Liquidity test: The company cannot have cash flow problems due to the distribution.

These tests aim to protect the company and all those who could be impacted, i.e. employees, suppliers, creditors, and the shareholders themselves.

Tax on dividends: overview of the options

The table below compares the tax burden for a gross distributable profit of €100,000, depending on the method chosen:

Maximise your remuneration with a smart dividend strategy

Dividends are an attractive way to withdraw money from your company in a tax-efficient way. By strategically using VVPR-bis, liquidation reserves, or a combination of both, while limiting your salary, you can significantly reduce your tax burden.

In addition, since the changes in July 2025, there’s now even more flexibility, as liquidation reserves can be paid out after only 3 years.

However, every situation should be analysed on a case-by-case basis. The most attractive form of distribution depends on your short- and long-term plans, your cash flow needs, your pension prospects, and your company's structure.

In short, the timing of dividend distributions – ordinary, interim or intermediary –plays an important role in optimising your taxes.

Your accountant can help you make the right choices based on your company’s financial situation and your personal circumstances. They are best placed to help you develop a sustainable and tailored dividend payment strategy, based on your objectives and your company’s specific context.

Author - Vincent Meesters

Vincent is a certified tax accountant, corporate lawyer, and CEO of Meesters Accountants.

Who is Vincent ?