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1.1.1.3. Types of Partnerships and Hybrid Entities Available for International Business / Structuring

Available Types

SNC/VOF

The general partnership (société en nom collectif, SNC/vennootschap onder firma, VOF) is regulated by Arts. 201 and 203-209 BCL. The general partnership has no legal personality and the partners’ liability is unlimited (Arts. 46 and 201 BCL). There is no minimum capital requirement. Contributions may be in cash or in kind or consist of the allocation of certain expertise (Arts. 23, 28 and 30 of the CC). The partners are jointly and severally liable for the debts of the partnership (Art. 204 BCL). If a partner leaves the partnership, he remains liable towards third parties for all debts incurred before his departure (Art. 208 BCL).

The partners must approve the financial statements at the annual general meeting, which must take place within six months after the end of the calendar year (Art. 92 BCL). Other mandatory meetings may be included in the articles of association. General meetings must also be held upon a partner’s request.

Unanimity is required for the appointment or dismissal of the managing director, the sale or donation of participation and the transformation of the partnership into another legal form unless the articles of association provide otherwise.

The managing directors may be a partner or not, individuals or legal entities (Art. 35 BCL). The partners may freely agree on the number of directors (Art. 36 BCL). Managing directors bear civil and criminal liability and they may be liable for the payment of taxes and duties.

CV/SCS

The limited partnership (société en commandite simple, SCS/gewone commanditaire vennootschap, CV) is regulated by Arts. 202-209 BCL. It has legal personality. Two types of partners can be distinguished: (i) active partners, whose liability is unlimited and who are engaged in the management of the partnership and (ii) passive partners, whose liability is limited to their contribution, provided they do not participate in the management of the partnership.

CVOA/SCPA

The partnership limited by shares (“open limited partnership”) (société en commandite par actions, SCPA/commanditaire vennootschap op aandelen, CVOA) is regulated by Arts.654-660 BCL. It has legal personality. The partnership limited by shares is formed by (i) one or more partners whose liability is unlimited and who are engaged in the management of the partnership and (ii) shareholders whose liability is limited to their contribution.

Société civile/burgerlijke maatschap

The civil society (société civile/burgerlijke maatschap) is mainly used by individuals providing professional services, such as medical doctors and lawyers. Civil societies have legal personality. They need to have statutes defining the professional purpose, and a register of the participants must be kept. A civil partnership does not have to be established by a notarial deed and it has no obligation to publish annual accounts.

Fondations privées/particuliere Stichtingen

Private foundations (fondations privées/particuliere stichtingen) are formed by one or more persons in a legal act. The founders may be individuals or companies. Private foundations acquire legal personality as from the day of the deposit of their statutes with the local court. The statutes must be published in the official gazette.

The statutory purpose of a private foundation must be of an idealistic or social nature, but not to make payments to its founders, managers or third persons. A private foundation may also be used as an administration office holding shares of which certificates have been issued. The accounting obligations are the same as for associations.

Gifts to a private foundation exceeding EUR 100,000 need to be authorized by the Federal Government Service for Justice. (Ministerial Decree of 14 April 2005 on the implementation of Arts. 16, 33 and 54 on associations without profit aim, international associations without profit aim and foundations).

Tax Treatment

SNC/VOF

The general partnership is treated as a non-transparent company and subject to corporate income tax. The tax calculation is the same as for companies.

CV/SCS

Closed limited partnerships are non-transparent and subject to corporate income tax (Art. 179(1) ITC).

CVOA/SCPA

Open limited partnerships are subject to corporate income tax as taxable persons according to the normal rules (Art. 179 ITC).

Société civile/burgerlijke vennootschap

Civil societies (société civile/burgerlijke vennootschap) are transparent (Art. 29(10) of the ITC). The principle of transparency means that there is no taxation at the level of the partnership. Each partner is apportioned his share of the assets, liabilities, income, deductions, and losses of the partnership. However, in order to avoid abuse, Art. 80 of the ITC expressly states that the losses so attributed may only be offset against a partner’s other professional income resulting from the same or similar professional activity. The partners may depreciate assets at different rates if they so wish. If no apportionment is made in the partnership agreement, each partner is assumed to be entitled to an equal share of the assets, liabilities, income, deductions and losses.

If an asset is contributed to a partnership, either upon its formation or extension, the contribution is treated as a disposal of part of the asset for the contributor and the other partners are deemed to acquire part of the asset. The contribution of assets may, therefore, give rise to the taxation of capital gains and/or recaptured depreciation for the contributor. Partial distribution of assets of a partnership upon death, retirement or exclusion of one of the partners is treated as partial disposal and acquisition. In the case of a limited partnership on shares, the par value of the contributed capital corresponding to the repaid part is treated as a distributed dividend (Art. 187 ITC).

Fondations privées/particuliere Stichtingen

The income tax status of the private foundation is directly linked to its activities. Art. 181, Para. 1, nr 8 ITC was introduced by Art. 62 of the Law on Private Foundations. Only private foundations that carry out activities of certification of shares as per the Law of 15 July 1998, qualify for the full transparent tax regime and are, as such, exempt from corporate income tax. Consequently, such foundations are subject to the Legal Entities Tax Regime (Art. 220 nr 3 ITC).

Any private foundation established with a purpose other than the certification of shares, or where the certification of shares is not carried out in accordance with the Law of 15 July 1998, are subject to the corporate income tax regime.