The reconstitution reserve allows to exempt profits from corporate tax


The so-called reconstitution reserve is part of the additional economic, tax and financial measures to soften the economic consequences of the COVID-19 pandemic and supports companies to restore their equity level and safeguard sufficient cash flow and solvability in the years to come. 

Covid-loss, future profits, how does it work in practice?

The reconstitution reserve is an optional measure, which allows companies to create a temporary tax-free reserve during the assessment years 2022, 2023 and 2024 (i.e. with the profits of the 3 financial years, ending as of 31 December 2021). 

The total amount of tax-free reconstitution reserve that has to be accounted for in a separate account on the company’s balance sheet, is limited to the amount of the operating loss of the financial year ending in 2020*, with an absolute maximum of 20 million EUR. Companies with an operational profit in the financial year 2020 are hence not eligible.
The amount of reconstitution reserve that can be created in a particular assessment year is also limited to the taxable profit of the company for that assessment year.

The reconstitution reserve is subject to the intangibility condition, meaning that the reserve will become taxable ultimately in full or partially for instance at the occasion of a liquidation or other events such as a dividend distribution.

*Companies that close their financial year between 1 January 2020 and 31 July 2020 have the choice: they can choose to take the operating loss into account of the financial year closing in 2020 or in 2021.


As with most measures, the reconstitution reserve is subject to various conditions. The exclusion of certain companies is in line with previous Covid-corporate tax measures.The two most important conditions are summarized below.

Companies which, in the period from 12 March 2020 up to and including the day of the submission of the tax return linked to the assessment year in which the reconstitution reserve is created, carry out a distribution of equity (e.g. distribution of a dividend, capital decrease) are excluded from the measure.

Furthermore, there is also a specific employment condition. The personnel costs included in the account ’62’ must be at least equal to 85% of the wage costs on the closing date of financial year 2019. In case the costs would decrease by more than 15%, the reconstitution reserve will be taxed proportionally.


If you would like more information on the above or would like our assistance in analysing and applying the reconstitution reserve for your company duly taking into account the interaction with other corporate tax measures, please do not hesitate to contact your regular PwC advisor or Tim Pieters or Karl Struyf of our office.