What impact could Belgium's new capital gains tax have on stock option plans?

The Belgian federal government is looking to implement a new tax on capital gains realised on financial assets that is due to enter into force on 1 January 2026.

The new capital gains tax would be applicable to transfers of financials assets for a consideration ("à titre onéreux/onder bezwarende titel") and carried out outside the scope of a professional activity. 

However, the draft bill is yet to be submitted to the Belgian Parliament and is still subject to modifications and amendments.

Companies that have implemented or are considering implementing an employee stock options plan (ESOP) and beneficiaries of an ESOP, will likely want to look to assess the impact of the new capital gains tax on (qualifying) stock options.

Qualifying stock options

In Belgium, ESOPs are not only a tool for employers and companies to attract and retain talent by offering them an opportunity to participate in the company's success (and equity) on the long term but they can also represent a tax-advantageous form of remuneration for employees. 

The "qualifying" stock options that fall within the scope of the law of 26 March 1999 (qualifying options) may indeed benefit from an advantageous tax regime, provided that limited conditions are met. For an employee, this advantageous tax regime consists of:

• Limited taxation at grant only. Employees receiving qualifying options will be taxed on a limited lump-sum benefit in kind. This will be solely taxable upon grant of the options.
• An exemption from social security contributions. The benefit in kind deriving from the grant of the qualifying options is generally not subject to social security contributions;
• No additional tax burden following the grant. The grant of the qualifying options is the only taxable moment. In general, no taxation occurs upon exercise or sale of the options themselves or upon resale of the shares acquired following the exercise of the options.  

The "philosophy" and economic considerations of this tax regime are, however, likely to be called into question with the introduction of the new capital gains tax in Belgium.
 

New capital gains tax 

Until now, capital gains on shares (and other type of financial assets) realised by a private individual in the framework of the "normal management of one's private estate" were typically exempt from tax in Belgium (with some exceptions). Capital gains realised on options or shares received in the context of a qualifying ESOP are usually considered as "normal" – and therefore exempt – capital gains. 

However, the federal government has decided to reshape the Belgian tax landscape in this regard by introducing a general tax on capital gains from financial assets realised by private individuals. 

The new tax is expected to apply to capital gains realised from 1 January 2026 onwards, with an exemption for "historical" capital gains. This means that the tax would only apply to increases in value as of 1 January 2026. It will apply to a broad range of financial assets, including traditional instruments such as shares and options, as well as crypto-assets, bonds or currencies. 

The applicable tax rate will depend on the nature and of the realised capital gain.
 

Capital gain on "substantial participations" (over 20% participation in a company)

Amount of the capital gain (aggregate on a yearly basis)	Tax rate (progressive per bracket)
Up to 1M EUR	0% (first tax exempt bracket)
1M to 2,5M EUR	1,25%
2,5M to 5M EUR	2,5%
5M to 10M EUR	5%
> 10 million EUR	10%

Other capital gains (less than 20% participation in a company)

Amount of the capital gain (aggregate on a yearly basis)	Tax rate
Up to 10.000 EUR (may be increased to max. 15.000 EUR if the exemption is not used during five consecutive years)	0% (general exemption)
> 10.000 EUR	10%

Some capital gains – for example, so-called "internal capital gains" and "abnormal" capital gains – would be taxable at 33%.

  
This capital gains tax would only apply to the amount of the capital gain realised; that is the positive difference between the "sale price" received upon realisation of the asset and its "acquisition value". 

For shares acquired following the exercise of qualifying options and for qualifying options, the draft bill provides for specific (deemed) "acquisition values" to be considered for the computation of the taxable capital gains.
 

Deemed 'acquisition values'

The legislator provides for derogatory measures regarding the determination of the taxable capital gains realised on options and shares acquired within the scope of the Law of 26 March 1999. These aim to prevent excessive taxation of capital gains realised on these specific assets. 

The principle remains that the taxable capital gains will equal the positive difference between the "sale price" and the "acquisition value" of the realised assets. 

However, the Belgian federal government has decided to define the notion of "acquisition value" differently for assets derived from options and shares that have been received and acquired under the Law of 26 March 1999.

• Shares. In the event of a (re)sale of shares acquired under the Law of 1999 following the exercise of the qualifying options, the "acquisition value" will not be deemed equal to the exercise price effectively paid for their acquisition but rather to the fair market value of the shares upon exercise of the options.
• Options. In the event of a sale of the qualifying options themselves, the "acquisition value" of the realised Options is deemed equal to the fair market value of the Option when it becomes exercisable ("au moment où l’option peut être exercée/op het moment van mogelijke uitoefening van de optie"). The current draft legislation and the explanatory statements are however inconsistent in this regard, as the latter refers to the moment of "transferability".

ESOPs and practical issues

The derogatory "acquisition values" for qualifying options and shares acquired within the scope of the Law of 1999 imply that the "no additional tax burden following the grant" principle may – in some cases – be no longer valid as of 1 January 2026. 

In practice, beneficiaries of options – in some instances – would no longer only have to bear a tax burden upon grant but could also be subject to an additional tax on capital gains. 
 

First possibility: upon (re)sale of the underlying shares acquired following an exercise of the qualifying options

This relates to the more common case, where the beneficiary exercises their qualifying options before (re)selling the acquired shares. 

In this context, determining the deemed "acquisition value" of the shares will most likely lead to high administrative costs for companies, as it would in principle be necessary to assess the market value of the shares every time the options are exercised by the beneficiaries.

Furthermore, in such an instance, the (re)sale of the shares may take place: 

• Immediately after the exercise of the qualifying options. In this scenario, there would be no taxable base for the new capital gains tax , as the deemed "acquisition value" would in principle be equal to the market value of the shares upon exercise. The "sale price" received for the transferred shares immediately after exercising the options would be equal to the (deemed) "acquisition value" of the shares, resulting in no taxable capital gain. Given this rule, it would likely be judicious to exercise the options as late as possible before a liquidity event occurs, enabling the transfer of the shares in question for a consideration (for example, exit, share swap, initial public offerings, etc.);
• After a holding period. The full increase in value of the shares after the exercise of the qualifying options, if any, will be taxable under the new capital gains tax. 
   

Second possibility: upon sale of the qualifying options themselves (that is, in the absence of exercise) 

This is likely to apply in the event of a resale of listed qualifying stock options (for example, bank warrants), or in the event of so-called "cash cancellation" or a "cashless exercise" of the options. 

The deemed "acquisition value" of options as set out in in the draft bill will give rise to certain practical issues.

Firstly, basing the "acquisition value" of options on the "fair market value of the options when they becomes exercisable", will necessitate the valuation of the options themselves, which is a rather complex, if not impossible. 

Secondly, it raises the question of which "acquisition value" could or should be used in the event the options are sold before they become exercisable according to the plan (which is common in the event of a liquidity event). 

Hopefully, these practical issues will be resolved or clarified by the Belgian federal government before the entry into force of the new tax in 2026. 
 

Osborne Clarke comment

In practice, any capital gain realised in the framework of a qualifying ESOP would a priori trigger a 10% taxation (with the first €10,000 of capital gain exempt). ESOP beneficiaries generally do not hold a substantial participation (over 20%) in the company that employs them and issues the shares they sell.

This excludes them from progressive tax rates per bracket and the exemption on the first €1 million of capital gains. However, the sale of shares immediately after the exercise of the options is likely to result in the absence of any taxable base subject to the new capital gains tax.

Despite this new capital gains tax, qualifying options will remain a relevant tool for employer company to attract, remunerate, incentivise and retain talented employees, directors and independent service providers.

Companies just need to understand the practical implications of the new capital gains tax on ESOPs to tackle them efficiently.

Please get in touch with your usual Osborne Clarke contact or one of the experts below if you have any queries or would like to discuss further.