The liquidation reserve is one of the most effective tools a Belgian SME director has to extract cash from a company at a controlled cost. The Arizona reform makes it faster — the waiting period drops from five to three years — but also more expensive: the withholding tax on distribution rises from 5% to 9.8%. Behind that apparent simplicity, two regimes now sit side by side. Here is how to navigate them.
For liquidation reserves built up from 1 January 2026, the waiting period falls from five to three years, but the withholding tax on distribution rises from 5% to 9.8%. Together with the separate 10% levy paid at the time the reserve is created, this brings the effective tax burden to roughly 18% (versus 13.64% before). Reserves built up until 31 December 2025 keep the old regime: five years' wait and 5% withholding tax. The increase to 9.8% applies to dividends allocated or made payable from 11 June 2026.
For a decade, the liquidation reserve was the preferred compromise of cautious directors. You set up the reserve at year-end, you waited, and you recovered your cash at a total cost few other mechanisms could match. The Arizona reform does not abolish this tool — it recalibrates it. And, as so often in Belgian tax law, the devil lives in the combination of dates and rates.
The purpose of this article is to set out the exact figures, as they stand in June 2026, and to show why the decision to build up or distribute a reserve now depends closely on the year in which it was created.
The mechanism in one sentence
The liquidation reserve allows a small company (within the meaning of article 1:24 of the Companies and Associations Code) to allocate all or part of its after-tax profit to a special reserve, against immediate payment of a separate 10% levy. That levy is final. In return, the later distribution of the reserve benefits from a reduced dividend withholding tax, provided a waiting period is respected.
The regime is grounded in the Belgian Income Tax Code (articles 184quater and 269 §1, 8°). Its appeal lies in predictability: unlike an ordinary dividend, hit by a 30% withholding tax, the liquidation reserve offers a total cost that is known in advance and spread over time.
What the Arizona reform actually changes
The Arizona coalition agreement of 31 January 2025 had a clear objective: to align the taxation of the liquidation reserve with that of the VVPRbis regime. Two parameters were changed, in two opposite directions.
The waiting period is shortened. For newly created reserves, the period to respect before distributing at the reduced rate drops from five to three years. That is a real liquidity gain: the director recovers cash at the reduced cost two years earlier.
The exit withholding tax goes up. In exchange, the withholding tax due on distribution after the waiting period is raised. The first step of the reform (program law of 18 July 2025) moved it from 5% to 6.5%. A second program law, tabled in early 2026, went further: the rate is now set at 9.8%, so that the total effective tax burden reaches 18% — strictly aligned with the new VVPRbis rate.
One and the same company may, in June 2026, hold both "old" reserves (built up until 31 December 2025, 5% after 5 years) and "new" reserves (built up from 2026, 9.8% after 3 years). The two are not distributed under the same conditions. Distributing the wrong tranche at the wrong moment can cost several points of withholding tax for nothing. Before any distribution, the exact composition of the reserves must be identified, financial year by financial year.
The figures compared, year by year
The table below summarises the applicable rules depending on the year the reserve was created.
| Parameter | Reserve created ≤ 31/12/2025 | Reserve created from 2026 |
|---|---|---|
| Levy at creation | 10% | 10% |
| Waiting period | 5 years | 3 years |
| Withholding tax on distribution (period met) | 5% | 9.8% |
| Total effective tax burden | ≈ 13.64% | ≈ 18% |
| Early distribution (before the period) | 30% | 30% |
The 13.64% effective burden of the old regime is explained by the rate mechanics: on €100 of profit, the 10% levy leaves a net reserve of €90.91, on which the 5% withholding tax is then applied. The sum of the two charges, measured against the original profit, works out to about 13.64%. With a withholding tax raised to 9.8%, the same calculation produces an effective burden of roughly 18%.
The pivotal date: 11 June 2026
The increase of the withholding tax to 9.8% does not hit older reserves. It applies to dividends allocated or made payable from 11 June 2026, being the tenth day following publication of the program law in the Belgian Official Gazette. For reserves built up until 31 December 2025, the 5% rate remains secured once the five-year period has run — that is precisely the point of the transitional regime.
This date creates a strategic asymmetry. A director holding older, matured reserves would do well to examine the timing of distributions carefully, because those are the cheapest reserves on the balance sheet. Conversely, reserves created from 2026 follow the new grid, with no choice available.
Even at an 18% effective burden, the liquidation reserve stays well below the ordinary 30% withholding tax on a standard dividend. And the move to three years significantly improves the tool's liquidity: for a company creating a reserve today, the cash becomes available at the reduced cost as early as 2029. Over succession or reinvestment horizons, that shortening partly offsets the higher rate.
A worked example to anchor the numbers
Take a Belgian SME with after-tax profit of €100,000, fully allocated to a liquidation reserve.
At creation, the separate 10% levy amounts to €10,000. The net reserve recorded on the balance sheet is therefore about €90,000 (in practice €90,909 on a gross base of €100,000, but let us keep the order of magnitude).
Under the old regime (reserve created in 2025), after five years the distribution bears a 5% withholding tax, i.e. about €4,545. The director receives roughly €86,360 net, for a total burden of about 13.64%.
Under the new regime (reserve created in 2026), after three years the distribution bears a 9.8% withholding tax, i.e. about €8,900. The director receives roughly €82,000 net, for a total burden of about 18%. The difference — in the region of €4,360 on €100,000 — is the price of the new balance: two years gained against four points of additional burden.
Liquidation reserve, VVPRbis or art rental: how to arbitrate
The reform brings the cost of the liquidation reserve and that of VVPRbis closely together — both converge towards an 18% effective burden. The choice between them then turns less on the rate than on the eligibility conditions and the timing: VVPRbis requires an eligible cash contribution and counts by financial year since the contribution, whereas the liquidation reserve is built up freely on the year's profit, with no contribution condition.
For a director seeking to neutralise the effect of the increase, other structural approaches deserve consideration. The rental of a work of art in particular follows no waiting logic: the rental charge is deductible for corporate income tax under the conditions of article 49 of the Belgian Income Tax Code, and the artwork, as a tangible non-financial movable asset, remains outside the scope of the Arizona capital gains tax. Where the liquidation reserve manages the outflow of cash, art rental works upstream, on the taxable base itself.
None of these tools is superior in the abstract. The right decision depends on the horizon, the composition of the balance sheet and the director's personal objectives — and that is decided in a conversation, not in a table.