Although interest charges related to debt-leveraged equity distributions can in principle be deducted (subject to conditions), previous case law consistently held that taxpayers had not demonstrated that the interest was incurred to obtain or preserve taxable income. Two recent decisions of the Ghent Court of Appeal (10 December 2024, 2023/AR/901; 18 February 2025, 2023/AR/1520) have marked the first positive case of law in favour of the taxpayer.
Why is this important?
Following the previous strict approach to the deduction of interest charges related to debt-leveraged distributions, the application of the asset stripping theory was accepted as proof that the finality condition in Article 49 ITC 92 is fulfilled.
In both cases, the taxpayer successfully demonstrated that the interest charges were incurred to obtain or preserve taxable income by showing that the external financing allowed them to retain their income-generating assets, rather than having to sell or transfer those assets to proceed with the distribution. Notwithstanding this positive case law, the Belgian tax administration is expected to maintain its stringent position in this respect for the foreseeable future.
Read the full article in the latest edition of Fiscale Actualiteit (available only in Dutch)
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.
