In brief
A corporate carve-out of a business followed by a sale of the isolated business by means of a share deal is common deal practice and generally more tax-efficient than an asset deal. To obtain upfront legal certainty on the tax treatment, taxpayers can apply for a tax ruling, but the Belgian Ruling Commission typically requires that sales proceeds be reinvested in qualifying assets or investments within the EU.
In a newsflash of May 2026, the Ruling Commission has updated its position on this reinvestment commitment (also referred to as “reorientation commitment”) that was already a requirement in rulings in the past.
Background
The reinvestment commitment applies when a carve-out is followed by a sale of the shares to a third party and such a combination of transactions had tax advantages. Individual shareholders must reinvest the full sales price (less certain transaction costs and capital gains tax due) into an existing or new company within a certain period. For corporate shareholders, reinvestment is limited to their proportionate share in the latent gain that would have arisen and have been taxed in case of an asset deal, and it should be made at their own level or sometimes also at the level of another group company.
Qualifying reinvestments include durable fixed assets, qualifying financial investments, and repayment of external bank debt.
The reinvestment commitment is not a legal requirement but often a condition to obtain a positive ruling. Clients planning such a combination of transactions (carve-out followed by a share deal) should weigh the benefit of upfront certainty against the constraints of the commitment, considering the shareholder profile and deal economics.
When a company decides to divest a business line to a third-party buyer, two structuring options are available:
- Asset deal: the company sells the assets directly. The resulting capital gain is generally subject to corporate income tax (25%), with a subsequent distribution of the sales proceeds in principle also being subject to withholding tax. In case ownership of or rights in rem on real estate are part of the transfer, also real estate transfer tax (RETT) will in principle become due.
- Pre-sale carve-out followed by a share sale: the company first transfers the business line into a separate entity on a tax-neutral basis (by way of a partial demerger, or contribution of a business line), after which the shares of that entity are sold. Alternatively, when the buyer wants to acquire a company but not certain of its assets (e.g., real estate), those assets are carved out (typically by way of a partial demerger) and the shares of the entity without the carved-out assets are sold. This is standard deal practice, often driven by legitimate business reasons such as facilitating acquisition financing, preserving business continuity, etc.
However, that second route generally offers a tax advantage (compared to the first one). No corporate income tax is triggered at the time of the carve-out, and the shareholder sells shares rather than receiving a distribution which may be taxable (typically when the shareholder is an individual). If the selling shareholder is a company, the gain may be fully exempt under the participation exemption (subject to certain conditions). If the seller is an individual, the capital gain realised through the combination of transactions (second route) was historically fully exempt if it qualified as normal management of private patrimony. Since 1 January 2026, a 10% capital gains tax applies to value accruals realised by such an individual from that date onwards, but this does not fully eliminate the possible tax advantage of the second route compared to the first one.
Because of the tax advantage it often entails, the choice of the second route (carve-out followed by share deal) may, in the absence of sufficient business reasons, be challenged as tax abusive. To obtain binding legal certainty upfront regarding the absence of tax abuse, taxpayers can apply for an advance ruling with the Belgian Ruling Commission.
In practice, the Ruling Commission requires in such a case that the sale proceeds (from the share deal) be reinvested in qualifying investments as a condition for confirming the tax-neutral treatment of the carve-out and the absence of tax abuse, the so-called reinvestment commitment. If the taxpayer does not agree with this position and files a ruling request excluding a reinvestment commitment, the Ruling Commission is likely to issue a negative ruling (see the Ruling Commission’s annual report of 2018, p. 27-28).
The reinvestment commitment was first imposed many years ago under a former president of the Ruling Commission and required the investment to be made in Belgian assets. Given obvious EU Law constraints, the scope was later expanded to also include EU investments.
For several years, this condition was imposed by the Ruling Commission without being formally communicated or published. This practice was challenged by a taxpayer, but the Tribunal of First Instance of Brussels (2018/2426/A) confirmed that such a condition could be imposed in the context of a ruling procedure. In a newsflash of 13 May 2026 (no. 2026/04), the Ruling Commission has now formalised a detailed framework around the reinvestment commitment (see the links in French and Dutch). The key elements are summarised below.
The reinvestment commitment
The Ruling Commission draws a distinction depending on who sells the shares and on the type of share deal transaction.
Scope
Generally speaking, the reinvestment commitment applies when a tax-neutral carve-out is followed by a transfer of all the shares of the relevant entity (at once or spread over time) to a third party. It does in principle not apply when a tax-neutral carve-out is followed by an intra-group share transfer or by a partial share transfer only (e.g., entry of key employees or minority investors).
Family members are treated as third parties, so the commitment also applies to transfers of shares (following the carve-out of certain activities or assets) between family members.
As to the quantum of what needs to be reinvested, a distinction is made between the situation applicable to individual shareholders and the situation applicable to corporate shareholders.
Individual shareholders
Individual shareholders must reinvest the entire sale price received for their shares, reduced only by (i) direct transaction costs borne by them, such as the commission paid on the sale price for transaction guidance (other advisory fees, including lawyer and ruling costs, are explicitly excluded) and (ii) any Belgian capital gains tax due by them in relation to the share transaction (e.g., if the new capital gains tax at 10% applies to it). The funds must be injected within three months into a company by way of a capital increase. Reinvestment by way of a loan is not accepted. The relevant company must subsequently use the funds for qualifying investments (see below). To secure the long-term character of the reinvestment, the Ruling Commission indicates that it is “forbidden” for the receiving company to make any capital reduction until its liquidation, with dividend distributions (subject to withholding tax at the statutory rate of 30% or the reduced rate of 18%) of course remaining possible. The Ruling Commission does not specifically provide what the practical consequences would be if the company would nevertheless make a capital reduction, say after the relevant statute of limitations.
Corporate shareholders
As far as corporate shareholders are concerned, the reinvestment amount is limited to their proportionate share of the latent taxable gain that would have arisen in a case of an asset deal, calculated as the difference between the sales price of the shares and the net book value of the assets (less any latent gain on shares (as part of the assets) that would have benefitted from participation exemption anyway). Based on the current version of the newsflash, tax-exempt reserves of the company of which the shares are disposed, which could have been taxable in the case of an asset deal and distribution of the net sales proceeds, are not considered for determining the amount to be reinvested, which is in favour of the taxpayer. This limitation of the reinvestment commitment for corporate shareholders to the amount of the latent taxable gain on the underlying assets is in line with the practice adopted by the Ruling Commission for a few years, after it initially required that corporate shareholders also reinvest the entire sales proceeds from the share deal.
The reinvestment commitment does not apply if there are no latent capital gains at the level of the company.
In principle, the selling company itself must make the reinvestment, although group-level reinvestment may be accepted in specific cases.
Qualifying reinvestments
The Ruling Commission accepts reinvestment in durable tangible, intangible or financial fixed assets used for business purposes within the EU, qualifying financial investments generating recurrent taxable income (which may or may not be capitalised), sometimes subject to a distribution condition, and repayment of external bank debts (leading to a reduction of the interest charges of the group). Excluded are: share buybacks, investments in assets acquired from another group company, assets acquired through intercompany reorganisations, loans granted to individuals-shareholders, repayments of intercompany or shareholder loans, real estate assets made available to shareholders or managers, and investments in certain luxury goods.
Timeline and reporting
The investment period generally runs from the date of the share sale until six months before expiry of the three-year statute of limitations applicable to the assessment year of the carve-out. For earn-outs or deferred payments falling outside that window, a two-year period from receipt of the funds applies. The applicant must provide an overview of completed investments to the local tax office within the same deadline.
It seems that the Ruling Commission will continue to take the standard three-year statute of limitations into account while many taxpayers are nowadays subject to a four-year statute of limitations, and thus notwithstanding the fact that these taxpayers could in principle be granted an additional year to make the necessary reinvestments while still securing the tax authorities’ taxing rights on the original transaction.
Assessment and recommendations
The reinvestment commitment is not a condition set by law. It is a condition introduced by the Ruling Commission for obtaining a positive ruling. A taxpayer who does not seek a ruling may still rely on tax-neutral treatment based on the law itself, provided there are sufficient (well-documented) genuine business reasons, but will bear the risk of a challenge during a subsequent audit.
The formalisation of the framework provides useful clarity but also raises concerns as other valid business reasons seem to be less considered by the Ruling Commission. A pre-sale carve-out may indeed be driven by legitimate business reasons that are entirely independent of what happens to the sale proceeds after closing.
Clients planning a pre-sale carve-out should therefore assess at an early stage how the reinvestment framework may impact deal structuring. The benefit of upfront legal certainty through a ruling should be weighed against the constraints of the reinvestment condition, taking into account the shareholder profile and the economics of the transaction. Where a full reinvestment would be disproportionate, tax risk insurance may offer a viable alternative.