Possible important amendments to the stock option legislation and the introduction of a specific tax regime for free shares


A government proposal regarding new legislation with respect to stock options and stock plans was announced in the Belgian press last week (cf. please find the link to the entire article). It is however important to note that no texts are currently available and that it is currently not certain whether this proposal will eventually be launched in its current format and if there is ultimately an agreement.

While the essence of the stock options legislation should not be impacted, some of the proposed changes may alter the way Management Incentive Plans (hereafter “MIP”) are structured onwards within the Private Equity Industry. For instance, the new legislation would only be applicable in case the shares underlying of the options are those of the employer or an operational entity of the group to which the employer belongs. Although it remains unclear what will be considered an “operational entity”, stock options on co-investment vehicles and/or passive holdings, not deemed to be operational entities (to be confirmed), might not be feasible anymore nor the so-called back-2-back for personal service companies.

The proposed legislation would also implement a new specific tax regime for the free grant of shares (also available for share certificates or profit certificates) allowing for a deferral of taxation until disposal of the instruments. At this stage, it remains unclear whether there will be strict requirements associated with this new regime but it will be interesting to further assess whether this new regime could become a valid alternative when structuring MIP going forward.  It is unclear whether the introduction of a partial 15% taxation for this specific regime would trigger a general taxation of capital gains.

More information to follow in the coming weeks….