Simplified sister mergers & tax neutrality
Recent intervention in Belgian tax legislation has transformed (most) simplified mergers between sister companies into a full-fledged restructuring alternative.
- Simplified sister mergers can now be carried out tax neutral if certain conditions are fulfilled.
- The tax neutrality will not be applicable retroactively, but only as from 25 November 2025.
- From now on, simplified sister mergers of companies directly held by the same shareholder can be considered a less administrative and cost-saving full-fledged restructuring alternative in the context of group restructurings. For companies indirectly held by the same shareholders, the tax uncertainty remains.
Key takeaways
With the transposition of the EU Mobility Directive, simplified mergers between sister companies, without share issuances or extensive reporting, became possible. However, due to flawed fiscal implementation, this form of merger could not proceed on a tax-neutral basis. Recent legislative intervention has now resolved this issue, guaranteeing the tax neutral character of (most) simplified sister mergers going forward.
Simplified sister merger
The Law of 25 May 2023 transposed the EU Mobility Directive into Belgian law and introduced several new forms of corporate reorganization into the Belgian Code of Companies and Associations, one of which is the simplified sister company merger. This type of merger is applicable between companies when all shares and voting securities of the companies involved are held, directly or indirectly, by the same shareholder or by multiple shareholders in identical proportions. This form of merger can be applied both domestically and cross-border.
The simplified sister merger is treated as a merger by acquisition, but the acquiring sister company does not need to issue new shares to the shareholder or shareholders of the acquired sister company. Since the shareholder proportions remain unchanged, issuing new shares would be largely redundant. The procedure mirrors that of the existing simplified merger by acquisition (parent- subsidiary), where no additional reporting is required beyond the merger proposal, therefore leading to a simpler process. In order to affect a simplified sister merger, one simply needs to draft and publish a merger proposal in the Belgian State Gazette, adhere to the six weeks waiting period and have the sister merger enacted before a notary.
Incomplete fiscal implementation
Following the introduction of the simplified sister merger into the Belgian Code of Companies and Associations, the Law of 28 December 2023 also amended the fiscal definitions of mergers in the Income Tax Code (WIB 92) to ensure full tax recognition of the simplified sister merger. However, the law did not amend article 211 Income Tax Code, which sets out the conditions under which a merger can be carried out on a tax-neutral basis. The article provides specific tax consequences in case the shareholder of the merged entity is not remunerated with shares of the acquiring entity whereby a specific exception which was reserved exclusively for silent mergers (parent-subsidiary) and could not be invoked for simplified sister mergers.
Following a parliamentary question on this issue, the legislator took action. Through the adoption of this new legislation, tax neutrality was explicitly extended to include (most) simplified sister mergers. In line with the original legislative intent, which was to ensure that the corporate law changes introduced by the transposition of the EU Mobility Directive are fully reflected in tax law, the Income Tax Code (a.o. article 211 WIB 92) was amended accordingly. This tax neutrality for simplified sister mergers applies as from the first day after the publication of the new law in the Belgian Official Gazette which took place on 24 November 2025 (not retroactively). As a result, simplified sister mergers carried out as from 25 November 2025 are eligible for a tax-neutral treatment if certain conditions are fulfilled.
Important to note is that the tax neutrality is limited to simplified mergers between sister companies which are directly held by the same shareholder(s). Extending the tax neutrality to mergers between companies who are indirectly held by the same shareholder(s) would likely have resulted in complexity and tax concerns.
In addition to the above adjustment, specific rules and amendments were made with respect to the notion “acquisition value” and the holding period of shares that have been held in an entity that was subject to a simplified sister merger.
Finally, the new law also amended the code of Registration Duties to foresee in an exemption of proportionate registration duties in case of a simplified sister merger.
Action Points
- Simplify your corporate structure using the tax-neutral simplified sister merger as a less administrative and cost-efficient restructuring tool.
- Contact EY Law and EY Tax for assistance with reorganizing your group structure.
