Silent sister merger: tax neutrality enshrined in law

Following the transposition into Belgian company law of the European Mobility Directive (2019/2121/EU), at the end of 2023, the tax definitions of Article 2, §1, 6°/1 BITC 1992 concerning mergers, demergers and transactions assimilated to mergers and demergers were adapted. In that context, the definition of “transaction assimilated to a merger by absorption” was expanded to include the simplified merger of sister companies. Previously, this definition was limited to the silent parent-subsidiary merger (Article 2, §1, 6°/1, second paragraph, c, 2) BITC 1992). Today, the simplified sister merger is defined as “the legal act by which the assets and liabilities of the estate of a company, as a result of its dissolution without liquidation, are transferred in their entirety to another company without the issuance of shares by the latter company, when all the shares and other voting securities issued by the absorbed and acquiring companies are held by one and the same person or when the shareholders in the merging companies hold their securities and shares in all the merging companies prior to the merger in the same proportion.”

This addition was necessary to avoid that as a result of Articles 209 and 210, §1, 1° BITC 1992, a simplified sister merger would be considered for tax purposes as a dissolution and liquidation. However, the legislator then failed to adapt other articles of law specifically relating to (with) mergers by acquisition (assimilated transactions) to the fact that a simplified sister merger does not include a share issue. This problem arose not only in the area of direct taxes, but also in terms of registration duties.

To solve this problem, a bill was submitted to parliament in early 2025 “amending the Income Tax Code 1992 and the Code of Registration, Mortgage and Court Fees as regards tax-neutral reorganizations.” After numerous comments from the Council of State, the proposal was expanded and amended. The final vote in parliament followed on October 23, 2025. Meanwhile, the Law of October 30, 2025 was published in the Belgian State Gazette (B.S., November 24, 2025).

In summary, we can describe the main legislative changes as follows.

(a) As to direct taxes:

• In the tax definitions and a number of other articles of the BITC 1992, the terms “business unit” and “branch of activity” are replaced – at the suggestion of the Council of State – by the term “business division””. This term is defined as “an entity that carries out an autonomous activity at technical and organizational level and that can operate on its own”;
• In personal and corporate income tax, a number of issues are clarified regarding the acquisition value of shares following a simplified sister merger. Thus, a new second paragraph is added to Article 102 BITC 1992. This new paragraph defines the capital gain on shares in the personal income tax, stating that the shares in an acquiring company as a result of a simplified sister merger have as their acquisition value: the value at which the taxpayer (or its legal predecessor) acquired the shares in the acquiring company in question for consideration, increased by the acquisition value at which the taxpayer (or its legal predecessor) acquired the shares in each acquired company for consideration.
• As to corporate income tax, the legislator clarifies in Article 192, §1, seventh paragraph, 2° BITC 1992 regarding capital gains on shares how the holding period of at least one year should be determined in the absence of issuance of new shares. The portion of the value of the shares in the acquiring company arising from the acquisition value of the shares in the acquired company is deemed to have been acquired on the date on which the shares in the acquired company were acquired. The portion that does not arise from the acquisition value of the shares in the acquired company is deemed to be acquired on the date on which the shares in the acquiring company were acquired;
• In Article 210 BITC 1992, which equates taxed mergers or demergers with a dissolution and liquidation, paragraph 4 – which states that in a taxed transaction, the capital paid in by contributions corresponds to the real value of the assets contributed – distinguishes between the simplified sister merger without the issuance of new shares and other transactions, with the latter being subject to the equivalence only to the extent that the contributions are remunerated with newly issued shares;
• In Article 211 BITC 1992, which deals with tax-neutral mergers or demergers, §1, first paragraph, 2° adds the silent sister merger to the transactions without issuance of new shares that can benefit from a tax exemption, provided that the exempt reserves present are taken over. At the same time, in the case of a simplified sister merger without the issuance of new shares, there will be no reduction in the paid-up capital and reserved profits (new paragraph 4 of Article 211, §2 BITC 1992). For the same reason, a similar exception is provided in Article 184bis, §4, third paragraph of the BITC 1992 in the case of a merger by absorption of an intra-European sister merger.

(b) As to registration duties:

• In Article 117, §1, second paragraph, 2° Reg. Code, which provides for an exemption from the contribution duty in the event of a contribution of the universality of assets in the case of a merger or demerger or otherwise, the legislator makes an exception to the condition that the contribution is remunerated exclusively by the attribution of shares or share certificates for the silent parent-subsidiary merger, together with the simplified sister merger which is equated by Article 12:7 Code of Companies and Associations (‘CCA’) with a merger by absorption. This provides, after nineteen years, a legal basis for the position taken by the Supreme Court in its March 9, 2006 ruling on silent parent-subsidiary mergers.At the same time, the reference in Articles 116 and 117, §1 first paragraph of the Reg. Code to the 0% contribution duty in Article 115 (movable property) is extended to Article 115bis (immovable property, other than dwellings). This adjustment rectifies an earlier oversight in the earlier legislation;
• Article 117, §2 Reg. Code, which provides for an exemption from the contribution duty in the case of the contribution of one or more business divisions, now also provides for an exemption from the contribution duty on movable and immovable property in the case of legal acts considered by Article 12:8, 2° CCA as legal acts assimilated to demergers. In this case, it concerns the silent partial demerger, where part of the estate of a company is transferred without dissolution to another company that already holds all of its shares and other voting securities.

What the new legislation does not address is the tax neutrality of a simplified sister merger, whereby the participations in the sister companies are also held indirectly. Where, under company law, this also constitutes a simplified sister merger, it will not be able to benefit from tax neutrality on the basis of the tax definition in Article 2, §1, 6°/1, second paragraph, c, 2) BITC 1992.

The law came into force on November 25, 2025, i.e. the day following its publication in the Belgian State Gazette. There is no retroactivity.

The question, then, is how the tax administration will view simplified sister mergers that have already taken place since June 16, 2023 (the date the simplified sister merger was introduced into corporate law). Originally, the bill provided for retroactive enactment effective June 16, 2023. However, this retroactivity received severe criticism from the Council of State, so the bill was subsequently amended.

It would be desirable for the Direct Tax Administration to take a clear position on the tax neutrality of simplified sister mergers carried out until November 24, 2025. Regarding registration duties, this has already been done by an administrative decision of March 11, 2024 (rep. RJ, R 117, §1/10-03). In this decision, we read that the 2006 Supreme Court’s view on silent parent-subsidiary mergers can also be applied mutatis mutandis to the simplified sister merger.