On 30 September 2019, the Flemish negotiating political parties presented the Flemish Coalition Agreement (the Agreement), setting the scene and focus areas for the Flemish Government in the 5 years to come (read the full text here).
The last chapter of the agreement outlines the priorities of this Flemish Government in terms of finances and budget. This (relatively short) chapter also announces a few important measures concerning Flemish gift and inheritance tax, that could have an impact on existing practices.
Please find hereafter a brief overview of these proposed measures:
- In first instance, the non-registered donations are targeted. If you would do a donation for a Belgian notary, 3% gift tax would be due on the donated assets. However, if you would make a donation in front of a Dutch notary or you would do an indirect donation (hand by hand or via bank transfer), no gift tax would be due, except when you would register the donation with the tax authorities voluntarily. In case of a non-registered donation, a 3-year risk period will start as from the moment that the donation is executed. If the donor deceases within 3 years after the gift, inheritance tax will be due on the market value of the donated assets. In this respect, the Agreement announces that this 3-year risk period will be prolonged to 4-years as to encourage registering donations or executing donations before a Belgian notary at the gift tax rate of 3% or 7% for moveable assets.
- Further, a so-called “friend inheritance” will be introduced. This measure aims to reduce the inheritance taxes for inheritances between distant relatives or friends. In this respect, a distant relative or friend could inherit a certain amount at the inheritance tax rate of 3% instead of the usual applicable progressive rates between distant relatives or third parties (going up to 55%). This announced measure makes sense, certainly given the reform of inheritance law that was implemented in 2018, increasing the portion of one’s estate that can be freely transferred without forced heirship limitations.
- Finally, the regulation with respect to the so-called “duo bequest” would be amended. It is not entirely sure how these rules will be amended. The Agreement mentions that the applicable tax rate on a duo bequest will be lowered and that the purely altruistic effect of these duo-bequests will be restored. In our view, this means that the duo bequest will remain possible, but will most likely be subject to more specific conditions, aiming to tackle abusive situations.
At this point in time, the proposed measures are not yet enacted and hence, it is not yet clear how the implementation of these measures will look like and what the exact impact will be. Needless to say that we will closely follow-up and keep you informed on relevant developments in this respect.
Should you already want to discuss this in more detail, please feel free to contact Kristof Wuyts.