Typical due diligence issues
In Belgium, it is customary to finalize due diligence before the execution of the acquisition agreement. There are no particular issues that a foreign investor should be aware of when undertaking due diligence review of a Belgian entity or group of assets other than those usually reviewed. The main areas of review in the due diligence process vary from project to project but generally include corporate, financial, commercial, litigation, employment, real estate, intellectual property, environmental, regulatory and tax matters. Based on the due diligence findings, the parties may negotiate special closing conditions and specific indemnities and tailor representations and warranties.
Pricing and payment
The "locked box" mechanism has become common for determining the purchase price for share deals in Belgium. However, closing accounts mechanisms are also used. Earn-outs are also sometimes seen. An escrow account may be opened for the purpose of holding an agreed amount of the purchase price for a specified period of time following completion (known as the retention period) and used as a means of off-setting claims made by the buyer under the terms of the agreement (in particular, claims under the warranties or any indemnities) that are notified prior to the expiry of the retention period.
Wire transfers of funds, including through the SWIFT code international system, are the way of making cash price payments.
Signing/closing
Pre-contractual obligations
Under Belgian law, parties negotiating a transaction, including a sale and purchase of shares, assets, or a business, are under a general obligation to conduct the negotiations in good faith. This entails, among other things, that negotiations that are at a reasonably advanced stage where a party can reasonably expect that a transaction will occur, in principle, cannot be terminated unilaterally without due and reasonable justification. Where there is a breach of pre-contractual obligations, the party in breach, and potentially even its representatives, can be held liable for damages.
Simultaneous signing and closing/conditions precedent
In smaller deals, and otherwise where possible, simultaneous signing and closing is common. Whether signing and closing is simultaneous, or there is a gap between signing and closing, will depend on whether there are conditions precedent that must be satisfied, including regulatory approvals (e.g., merger control or foreign direct investment (FDI) approvals), carve-outs of certain parts of the target entity, third-party consents or waivers, or the resolution of issues discovered during due diligence.
Foreign investment restrictions
Belgium has a mandatory and suspensory foreign investment screening procedure, which means that transactions that meet the relevant criteria need to be notified to the relevant authority and cleared before they can be completed.
The foreign investment review regime is targeted at foreign direct investments by foreign investors that can have an effect in Belgium on the following: (i) security; (ii) public order; or (iii) the strategic interests of the regions and communities. For further information, see the more detailed section on "Foreign investment restrictions".
Antitrust/merger control
Belgium has a mandatory and suspensory merger control regime, which means that transactions that meet the relevant criteria need to be notified to the Competition Authority and cleared before they can be completed.
It is also necessary to consider EU merger control rules. Mergers involving companies active in several member states and reaching certain turnover thresholds are examined at European level by the European Commission. This allows companies trading in different EU member states to obtain clearance for their mergers in one go. For further information, see the more detailed section on "Antitrust/merger control".
EU Foreign Subsidies Regulation
As of 12 October 2023, the EU Foreign Subsidies Regulation (FSR) requires qualifying transactions, and bids in response to certain large public tenders in the EU, to be notified for upfront clearance by the European Commission where the companies involved have benefited from foreign financial contributions (a broad concept) that exceed certain (low) thresholds. Acquisitions of a target with annual revenues in the EU of at least EUR 500 million will trigger FSR deal notifications. Acquisitions of smaller targets will not, regardless of deal value. Outright mergers and large joint ventures will trigger a notification requirement if the EUR 500 million EU-wide revenue threshold is met by one of the merging parties or the joint venture.
Other regulatory or government approvals
Approval by the competent regulator may be required for acquisitions of companies that are subject to specific regulatory supervision, such as financial institutions, airports, telecom providers, etc.
Method of transfer under local law
Share sale
In a share purchase, all rights, duties and liabilities owed by, or to, the target company's employees continue to be owed by, or to, the target company, also after the acquisition.
If there is an integration of the target company's business with the buyer's business post-acquisition, this is likely to constitute an acquisition of assets or a business transfer, and the considerations set out below will be relevant.
Asset sale
If the asset sale qualifies as a transfer of an undertaking or part of an undertaking within the meaning of the Belgian transfer of undertaking legislation (National Collective Bargaining Agreement 32bis – CBA 32), the employees of the seller's business will automatically transfer to the buyer with all rights and obligations (with the exception, in principle, of extra-legal pension rights). These employees do not have the right to refuse to transfer to the buyer. If the asset sale does not qualify as a transfer of undertaking with the meaning of CBA 32, then the employees will only transfer subject to their consent.
Approval or information/consultation requirements
Share sale
A company must, in principle, inform its Belgian works council (if any) upon the occurrence of events that are likely to have important consequences for the company. The fact that, as a result of a share deal, the company belongs to another group is often considered as triggering this obligation to inform the works council. Providing the works council with information should be done, if at all possible, at the latest when the news is disclosed to the public. A consultation of the works council is not required. If there is no Belgian works council, there is no information obligation.
Asset sale
Whether or not the acquisition of assets/transfer of business qualifies as a transfer of undertaking within the meaning of CBA 32, the works council (if any) or, in the absence of a works council, the internal trade union delegation, or in the absence of an internal trade union delegation, the committee for the protection and prevention at work (CPPT) (if any) of the target company must be informed and consulted at a time when such information and consultation is still meaningful. It is usually considered that this information/consultation must occur before the final decision to transfer the assets/business. At the request of the representatives of the employees involved in the transfer of undertaking, the transferor must disclose the substance of the information and consultation to the identified transferee and invite the latter to introduce itself to the employees’ representatives during this information and consultation process. The transferee, however, cannot be compelled to accept the invitation.
Provided that the sale of assets/transfer of a business qualifies as a transfer of an undertaking within the meaning of CBA 32, in the absence of a works council/trade union delegation/CPPT, the employees must be informed before the effective transfer. They must be informed about the contemplated date of the transfer, the reasons for the transfer, the contemplated measures towards the employees and the possible consequences of the transfer for the employees. Employees involved in the transfer of undertaking can request disclosure of the substance of the information to the identified transferee and invite the latter to introduce itself to the employees before the transfer.
Protection against dismissal
If CBA 32 applies, the employees cannot be dismissed by reason of the transfer (be it by the buyer or the seller). If this prohibition is violated, the terminated employees may claim damages (in addition to the severance indemnity) the value of which may differ depending on the case law and the legal basis invoked by the employee.
Share sale
The transfer of shares will generally not trigger any stamp duty in Belgium. A share transfer will generally be more beneficial for the seller than an asset deal, as capital gains realized in the context of a share deal are most often exempt from taxation for companies.
Under current Belgian tax law, capital gains realized by individuals on the disposal of privately‑held shares are, as a rule, exempt from personal income tax when the transaction falls within the scope of the “normal management of private wealth.”
Gains may nevertheless become taxable in specific situations, such as speculative transactions or sales of substantial shareholdings to non-EEA purchasers.
For purposes of this regime, a substantial shareholding means that the individual (alone or together with close family members) has held, at any point during the last five years, more than 25% of the shares of the Belgian company whose shares are sold. Where this condition is met and the shares are sold to a company established outside the European Economic Area (EEA), the resulting gain is taxed at a flat rate of 16.5%. The same 16.5% rate also applies where the initial sale is made to an EEA company but is followed by a resale to a non‑EEA company within 12 months. This is why restrictions on the further sale, disposal, merger, etc. are often included in the initial share purchase agreement when the seller is a resident individual holding (or having held) such significant participation in the Belgian target.
Against this backdrop, the Belgian government has proposed the introduction of a new capital gains tax on financial assets as part of a broader tax reform package. Although presented publicly, the measure has not yet been voted on by Parliament, and the final scope, rates, and timing may still evolve.
As currently drafted, the reform would introduce, as of 1 January 2026, a tax on capital gains realized by Belgian‑resident individuals on the sale of shares and other financial instruments. The taxable gain would be limited to the value accrued from 1 January 2026 and would generally be subject to a flat tax rate of 10%, after deduction of an annual tax‑free allowance of EUR 10,000.
For individuals holding a substantial participation—defined as more than 20% of the shares—the regime would be partially progressive. The first EUR 1,000,000 of capital gains would remain exempt, while the gain exceeding this threshold would be taxed at progressively increasing rates between 1.25% and 10%.
The draft legislation also includes a parallel provision broadly aligned with the current rule for sales to a non-EEA company: capital gains realized by Belgian‑resident individuals on a substantial participation (again more than 20% on an individual basis — and no longer 25% on a close family basis) in a Belgian company sold to a non-EEA company would remain taxable at a flat 16.5% rate (but the first EUR 1,000,000 capital gains also would be exempt) where the shares are sold to a non‑EEA company.
As the legislative process is ongoing, the final contours of the regime may still change. Taxpayers entering into transactions in 2026 and beyond should therefore closely monitor developments and seek tailored advice on the potential impact of the reform on any share disposal.
Traditionally, share deals were less attractive for the buyer because of the absence of step-up in basis and because it was difficult to offset any interest paid on the acquisition financing against income from the Belgian target due to the absence of tax consolidation (group relief) in Belgium. However, Belgium has introduced some tax consolidation rules, applicable since financial year 2019. Under these rules, it is now possible to achieve the benefits of tax consolidation, however only after a minimum holding period of five years which, in practice allows for such benefit to arise after three to four years after acquisition, subject to certain additional conditions.
Asset sale
Depending on the nature of the assets transferred, certain transfer taxes could become due. The sale of real estate (including heavy machinery that is an immovable property by incorporation) is, as a rule, subject to a transfer tax of generally 12% or 12.5% (depending on the region in which the real estate is located) calculated on the sales price or the fair market value, whichever is higher (certain reductions of the rate may apply). The transfer tax is normally payable by the buyer unless otherwise agreed between the parties. If a lease agreement is transferred, such transfer is subject to a transfer tax of 0.2%, calculated on the cumulative amount of the remaining lease payments and charges which are still due under the remaining term of the contract (5% in the case of the transfer of a leasehold right).
Asset deals are generally less attractive for sellers because of the taxation of capital gains realized upon such transfer, except if there are sufficient losses to offset such gains. In view of the minimum taxation rules in Belgium which limit the use of carry-forward losses on the amount of taxable income exceeding EUR 1 million, even if there are sufficient losses to offset such gains, an asset deal may still no longer be attractive for the seller (as 30% of the amount of the net gain exceeding EUR 1 million will remain effectively subject to tax). By contrast, the benefit of asset deals for buyers is that they allow them to obtain a step up in basis (i.e., higher depreciable amounts), including goodwill, which can be amortized for tax purposes.
Value added tax
While the sale of shares is normally exempt from Belgian value-added tax (VAT), the sale of assets is, as a general rule, subject to VAT at the standard rate of 21%. However, the transfer of certain assets (e.g., receivables) and the transfer of liabilities are VAT exempt. The sale of buildings is subject to VAT only if the buildings are still new for VAT purposes, i.e., if they are transferred within two years following the year of their first use. If the seller has deducted input VAT on the construction or renovation of the buildings, the transfer of those buildings without VAT within the applicable VAT recapture period – as a rule 15 years – (calculated as of 1 January of the year during which the right to deduct the input VAT arose) will normally trigger a pro-rata recapture at the level of the seller of (part of) the VAT initially deducted.
The buyer normally pays the VAT due on the transfer to the seller, who is to remit that VAT to the authorities. If the buyer is entitled to fully deduct input VAT, the payment of such VAT to the seller merely entails a pre-financing cost. However, if the buyer is not entitled to fully deduct the input VAT, the non-deductible portion of the VAT due on the transfer constitutes an actual cost for the buyer.
As an exception to the above rules, the transfer of assets and liabilities under an asset deal is exempt from VAT if it relates to an "entire business" or a "branch of activity" (so-called transfer of going concern or "TOGC exemption"). Transferred items constitute an "entire business" or a "branch of activity" if, for the buyer, they constitute a combination of elements allowing the buyer to carry on an independent economic activity. If all elements relating to an existing business are transferred, the TOGC exemption normally applies. If certain elements of the business are excluded from the transfer, it may be advisable to seek confirmation through a (formal or informal) ruling from the tax authority on whether the TOGC exemption will be applied.
Avoiding joint tax and social security liabilities in an asset sale
In an asset deal, some special formalities should be observed by buyers to avoid joint liability with the seller for any outstanding tax and social security liabilities that the seller may have.
If an asset deal qualifies as a transfer of "an entirety of goods composed of, among other things, elements that enable keeping the clientele," a certified copy of the transfer agreement must be filed with the relevant tax and social security authorities to make the transfer binding upon these authorities. The transfer will only be binding upon these authorities at the end of the month following the month of this notification, and meanwhile the buyer of the business is jointly liable for the tax (income tax and VAT) and social security liabilities of the seller up to the amount of the purchase price already paid (or deemed paid) to the seller during the aforementioned period during which the transfer is not yet binding upon the relevant tax and social security authorities.
As an exception to this rule, a transfer will be immediately binding upon the relevant tax and social security authorities and the buyer will not be jointly liable for any outstanding liabilities of the seller if: (i) the seller obtains a "clean certificate" from the relevant tax and social security authorities (i.e. a document certifying that the seller does not have any outstanding liabilities vis-à-vis that particular authority); and (ii) the "clean certificate" is notified to the respective authorities at the same time as a copy of the transfer agreement. Note that the date on which the "clean certificate" was issued may only precede the date on which it is notified to the relevant authorities by a maximum of 30 days. To avoid last-minute complications, it is important to obtain any necessary "clean certificate" early on in the process.
Note that none of the above applies (i.e. there is no need to obtain certificates or to notify the transfer deed) when the asset transfer is made in compliance with the transfer of an "entire business" or a "branch of activity", demerger or merger procedures set out in the Code of Companies and Associations, or provisions of foreign law applicable to the legal act when they offer equivalent protection to the creditor. In such circumstances, there is thus no risk of the assumption of any joint liability for tax and social security of the seller.
OECD's Two Pillar Solution
The OECD/G20 Inclusive Framework on Base Erosion and Profit Shifting has put forward a so-called Two-Pillar Solution to address the tax challenges arising from the digitalization of the economy. Pillar Two was intended to introduce a global minimum effective rate of tax of 15% for large businesses in each jurisdiction where they operate, leading to fundamental changes in the international tax system. It has been implemented in a large number of jurisdictions, but some outside the EU resist (for example, the US).
Generally speaking, groups will need to consider how the Pillar Two rules, as implemented, have an impact on the life cycle of M&A transactions during the pre-acquisition phase (including transaction planning (such as the choice of acquisition structure and financing) and due diligence of the target group), the acquisition phase (and, in particular, the contractual risk allocation around Pillar Two) and the post-acquisition phase (impact of Pillar Two on any post-acquisition integration).
For information on post-acquisition integration matters, please see our Post-acquisition Integration Handbook.