Spread taxation of capital gains

When a company realises capital gains at the occasion of the sale of an asset, these capital gains are taxable. However the company can choose for the spread taxation of the capital gains. Therefore the received sales price should be re-invested in a new asset for professional use. The capital gains are consequently taxed as the new asset is depreciated.

Forced and voluntary capital gains

Capital gains can be realised forced or voluntarily. Voluntarily capital gains are realised when the company itself takes the decision to sell a certain material or immaterial asset. In case of forced capital gains, the company has no say in the matter: it occurs at the occasion on an accident (where the company receives damages), an expropriation or requisitioning in ownership by the government. These events take place independently from the will of the tax payer.

Spread taxation

Spread taxation means that the received capital gains are not taxed immediately, but as the good in which these are re-invested  is depreciated.

Which assets qualify?

The assets should qualify as fixed assets during a period of at least five years. This means that the asset should be used for a professional activity. The five year period is calculated as from the day the asset is used as a professional asset for the first time (which is in principle the first day when it is acquired by the company) until the day of its alienation.

The spread taxation is moreover only possible for assets which are depreciated. Assets on which no depreciation is made, e.g. the client base of the company, do not qualify for spread taxation.

Re-investment

The company is taxed on the capital gains to the extend that the new acquired asset is depreciated (= spread in time). This means that the re-investment should be made in an asset that can be depreciated. In other words, the company should re-invest in another asset that will be used for its professional activity.

The company should re-invest the total amount of the sales price or damages received. It is not sufficient that the capital gains are re-invested.

Example
Bvba Vermeulen has an old machine with a residual value of 50.000. The machine is sold for 150.000. The bvba realises capital gains of 100.000. In order to qualify for the spread taxation scheme bvba Vermeulen should re-invest the total sales price of 150.000.

In case of forced capital gains the company has a three year period counting as from the end of the taxable period in which the damages were received to re-invest. For voluntarily capital gains the company has a three year period starting from the first day of the taxable period in which the capital gains were realised.

Example
A company owns a professional building. The building burns down in September 2015. The company receives damages in May 2016. The company has the time until 31 December 2019 to re-invest the damages received.
A company owns a professional building and sells it in October 2015. The company has the time until 31 December 2017 to re-invest.

In case the company (with voluntarily realised capital gains) wants to re-invest in an building, a vessel or an airplane, the period to re-invest is extended to five years. Additionally the company can also re-invest in an asset which was acquired earlier. The re-investment period can after all start (upon the choice of the tax payer) on the first day of the second last taxable period preceding the realisation of the capital gains.

Example
The nv Build has realised capital gains on 8 February 2016 which it wants to re-invest in a new building. The nv can choose whether the re-investment period runs:

from 1 January 2016 until 31 December 2020;

from 1 January 2014 until 31 December 2018.

What in case no re-investment is made in due time?

In case the company does not re-invest in due time, the capital gains are considered as profit for the taxable period in which the re-investment period expired and is taxed as such.

Remark: the scheme is optional
The spread taxation scheme is optional. The tax payer can choose to be taxed fully and immediately on the capital gains.