Initial Clarification
It is time to provide as much clarity as possible regarding the draft legislation for the introduction of the generalized capital gains tax. Within legal doctrine, various open questions circulate—some unanswered, others answered somewhat inaccurately.
Given the content of the draft texts and the background information provided in the explanatory memorandum, I believe it is unlikely that the Council of State will formulate insurmountable objections that could undermine the very existence of the new tax. Qui vivra, verra.
I would like to draw attention to three topics that may appear somewhat technical but are genuinely relevant in a significant number of cases.
Since each of these topics requires its own framework and explanation, I will limit myself to one topic per blog post.
Contribution of a Share Portfolio to a Civil Partnership / Civil Company
The Civil Partnership / Civil Company as an “Evergreen”
Coincidentally, my book Fiscal Transparency was published in 1992, precisely when the application of the then-Article 250 of the Income Tax Code (now Article 344, §2 ITC92) was extended to include “monetary assets.” From that moment on, transferring cash to a then tax-exempt Luxembourg holding company was no longer enforceable against the Belgian tax authorities—unless one could demonstrate that no tax savings were involved.
This marked the end of the Luxembourg “Loi 1929” holding company, which had been used by wealthy Belgians (with assets starting around 50 million Bfr. at the time), and led to the adoption of the “civil company” structure developed in my doctoral thesis—now often referred to as a civil partnership.
Why?
It allowed private wealth to be placed within a simple family-controlled structure, enabling intergenerational gifting in a controlled company context, without triggering the fiscally suboptimal corporate tax regime (particularly for investment portfolios). The absence of legal personality means that all income remains subject to personal income tax, as if the participating family members received it individually. Yet, it is possible to “accumulate” returns within an account held by the partnership, without distributing them individually.
Add to this the possibility of gifting while retaining control (and usufruct), and the idea of a “family investment club” emerges—with regular family consultations and, over time (and with the aging of the parents), increasing decision-making power for the next generation. Thus, the now-familiar “evergreen” model for wealth structuring was born.
A few sharp-minded private banking planners from two major banks, who were introduced to the concept during a large Biblo seminar at the Aula Maior in Antwerp, helped bring the product “Civil Company for Estate Planning” to life.
Legislative changes, accounting obligations, and UBO register regulations have prompted some families to reconsider their approach in recent years. The possibility or desirability of using a pure indivision structure—managed by a “third party” (the parents)—regarding the universality of an investment portfolio has since been considered as a potential alternative.
However, the appeal of using a civil partnership has not truly diminished, even though people now tend to use more imaginative names to make them less easily identifiable.
It would indeed be surprising if the new generalized capital gains tax were to obstruct the establishment of a civil partnership through the contribution of a share portfolio. Fortunately, as you will read further, some recent doctrinal alarm bells on this matter appear to be unfounded.
No, the contribution of a share portfolio to a civil partnership does not trigger the levy of the new generalized capital gains tax.
In assessing such matters, one must clearly distinguish between what is relevant under property law and what occurs under company law. That is, the presence of a (partial or full) transfer—and thus realization—is something entirely different from the concept of “making a contribution.”
A brief analogy
A contribution made by a silent partner in a silent commercial partnership may take the form of a transfer of ownership to the managing partner (who then acts in his own name but partly on behalf of the silent partner), or it may involve the contribution of a mere usage right (e.g. patents, real estate). In the latter case: no transfer of ownership (for those trained in Anglo-Saxon law: possibly an “assignment” of receivables or other rights), but still a contribution.
Transfer of ownership versus…
In my doctoral thesis on fiscal transparency, I developed the idea that contributing a (share) portfolio to a civil partnership can give rise to different scenarios.
Case 1
Undivided co-owners of shares decide to organize themselves under a partnership structure (without legal personality) and elevate their undivided ownership into a partnership agreement: they contribute the portfolio to a civil partnership. No transfer of any kind occurs. From a property law perspective, the existing undivided ownership remains intact. It simply receives a company-law “coat” because the four constitutive elements of a partnership agreement are brought together: plurality, contribution “at risk,” governance arrangements, and the intention to share the returns of what was collectively contributed. Some add “affectio societatis,” which I consider a synthesis of the four prior elements.
So case 1: no transfer, but a contribution.
This situation arises when parents first donate the share portfolio to the next generation, and then establish the civil partnership around it.
Case 2
The owner of a share portfolio contributes it to a civil partnership, while other participants contribute other elements—some cash, for example. In that case, the owner moves from 100% ownership of the portfolio to undivided ownership with the other partners. If the portfolio is worth 50 and two other participants each contribute 25, they each acquire 25% of the undivided ownership of the entire portfolio, and the original owner “exchanges” 100% full ownership for 50% co-ownership in the portfolio and 50% co-ownership in the contributed cash[1].
In this case, the contributor “exchanges” half of the portfolio ownership (retaining the other half, albeit under shared rules) for an undivided share in the cash. He must therefore be deemed to realize the capital gain associated with that 50%. That much seems clear.
Doctrinal divergence
Some commentators view this differently: they argue that the contributor realizes 100% of the portfolio’s capital gain, since the entire portfolio is contributed. They support this by noting that, following amendments to the Companies Code, even partnerships without legal personality now have “assets.” True! But one must understand what is meant by “partnerships without legal personality have assets.” From a property law standpoint, they cannot own anything due to the absence of legal personality. So the entire contribution cannot be transferred “to the partnership.” It is redistributed among the partners.
In the revised company law, it is stated that there is an “asset” because the contribution of assets to a civil partnership subjects them to new rules—governance rules, and also rules affecting the rights of creditors of the participating members, etc.
In short, it seems clear that a contribution to a partnership without legal personality—even if it thereby acquires “assets”—has no property law consequences beyond those described above in cases 1 and 2.
… Versus Contribution
The above reflections are highly useful and interesting, but they have no direct impact on the new generalized capital gains tax insofar as share contributions are concerned.
Indeed, the draft legislation explicitly provides for an exemption regarding “capital gains realized upon the contribution of shares.”
In other words, regardless of which theory one adopts—whether proportional transfer/realization (the correct approach, in my view), or full transfer/realization (not advisable)—there is no issue.
A contribution to a civil partnership is a “contribution,” and this applies to the entire portfolio contributed. In both case 1 and case 2, the entire share portfolio is contributed. Therefore, the exemption applies.
Phew.
Misreading in recent doctrine
Some recent writings claim that no contribution is made to a “company with legal personality,” and therefore the exemption does not apply.
But this interpretation contradicts the very clear wording of the draft legislation. It does not say “contribution to a company.” If it did, one could refer to the definition of a “company” in Article 2, §1, 5° ITC92 and argue that the contribution must be to a company with legal personality.
But the text simply refers to a “contribution.” Therefore, the exemption fully applies to contributions of shares to a civil partnership[2].
What About Acquisition Value?
Regarding the participation in the partnership:
If the exemption applies, the rule also holds that the acquisition value of shares obtained through a tax-exempt contribution equals the acquisition value of the originally held shares.
For the contributing shareholder, the application of this provision seems straightforward: the entirety of the partnership units received in exchange for the contribution (for the purposes of the new generalized capital gains tax) inherits the acquisition value of the contributed shares. This applies to the full package, even if a property law analysis might limit the transfer of ownership to the “swapped” portion.
Whether this is practically relevant remains to be seen. In my view, not really… Units in (family) civil partnerships are rarely, if ever, sold to third parties. They are more commonly gifted to the next generation. And for that, the rules regarding the new generalized capital gains tax are well known.
For the other partners, the situation is necessarily different.
They did not contribute shares. They now acquire an undivided interest in shares that were contributed to the partnership and thus their acquisition value for the partnership units is the actual value on the date of contribution—i.e., the value of what they gave in return. Again, practical relevance is limited.
Acquisition Value Upon Sale by/from the Partnership
What if the partnership later sells contributed shares at a value higher than the contributor’s acquisition value or the value on the date of contribution? This question is likely more relevant than the acquisition value of the partnership units.
The rules of the new generalized capital gains tax are embedded in personal income tax and must be applied in line with the “normal” personal tax rules. The capital gain realized must be transparently attributed to each participant as if the partnership did not exist and each person realized the gain individually. That’s the only viable method. After all, the partnership itself has no acquisition value for these shares—it never became their “owner.” One must look at the situation of each member, to whom the capital gain is attributed via transparency.
So:
- For the contributor (or their successor), the initial acquisition value (or the “snapshot” as of December 31, 2025) of the contributed shares is used.
- For the other participants, the value of the shares on the date of contribution (or the “snapshot” of December 31, 2025) becomes their acquisition value.
A rather practical example
- A contributes shares with an acquisition value of €8,000, valued at €10,000 on the date of contribution.
- B contributes bonds with an acquisition value of €9,800, also valued at €10,000.
- Each receives 50% of the partnership.
A “realizes” half of the contributed shares, but since this is a share contribution, the exemption applies, and he retains the original acquisition value of €8,000.
B “realizes” half of the bonds and owes capital gains tax on (€10,000 – €9,800)/2.
If the partnership then sells the shares for €12,000, transparency applies:
- €6,000 is attributed to B, who acquired this undivided portion through realization of half of his bonds, hence an acquisition value of €5,000 → capital gain of €1,000.
- €6,000 is attributed to A, who retained the original acquisition value → capital gain of €2,000.
And ther number do indeed add up correctly!
Let us assume the partnership also sells the bonds for €10,000:
- €5,000 goes to A → capital gain of €1,000 (his portion “cost” him €4,000 due to the exemption).
- €5,000 goes to B → taxed on €100 (this portion wasn’t realized at contribution).
Hence: – Total original acquisition value: €17,800
- total sale proceeds: €22,000
- Total gain realised overall: € 4.200
We should find this amount back in the total of taxable gains, and indeed:
Breakdown of taxable components:
- €100 for B at bond contribution
- €100 for B at bond sale
- €1,000 for B at share sale
- €1,000 for A at bond sale
- €2,000 for A at share sale
→ Total matches the expected €4,200!
“Beer Route” Scenario
In cases where parents make additional contributions without issuing new units, children see their share in the partnership’s value grow. This is an indirect gift. Upon later sale from the partnership, the capital gain attributed to members is fully calculated based on the original acquisition value of the contributing parents. There’s no “swap” for a higher-value asset—no step-up.
Other Assets
This blog does not address situations where real estate is contributed to a partnership. These are not “financial assets” and fall outside the scope of the new generalized capital gains tax. Moreover, civil partnerships are not typically used for estate planning involving real estate.
Other movable assets can be included in a civil partnership. For these, the above legal analysis applies, but without an explicit exemption. Thus, a (often partial) taxable moment may occur due to the contribution. These assets—often fixed-income securities—can be more easily sold and reinvested during the partnership setup, potentially generating cash to pay capital gains tax.
For members of the civil partnership, a “step-up” in value applies, so no additional (double) tax is due later—only a possible early levy. If the partnership later sells these financial assets for more than their value at contribution, full fiscal transparency applies, including the new capital gains tax. This is illustrated in the example above.
[1] When putting into placet he so-called “Beer route” (what a terrible name for this) which is a typical Flemish approach to inheritance tax matters, this approach is pushed to its limits. Parents and children put into place a private partnership arrangement with a limited contribution by each, the result of which is that the children have an important proportion of the partnership. Next the parents contribute an important value, without issuing new partnership interests. The result is that large part of that value accrues to the value of the interest held by the children in the partnership, in the undivided ownership. As such, an “indirect donation” is established, not subject to the gift tax. But with relevant limitations attached to the approach as compared to gifting by notarial deed.
[2] In ancient fiscal times, do you remember?, the “contribution right” (a registration duty) which was first levied at 1%, the reduced to 0,5% and eventually reduced to 0% upon the introduction of the regime of the “notional interest deduction”, was also applicable to contributions to private partnerships, in case these entailed the obligation to register the deed (notarial deeds) or in case the deed was registered spontaneously.