Based on a strict reading of the law, pledged shares are not taken into account to determine if a shareholder has sufficient participation to benefit from dividends received deduction and dividend withholding tax exemption. The administrative tolerance in this respect has recently been confirmed by the Court of Appeal of Antwerp.
When a company takes out a loan to finance an acquisition, banks often require that (at least part of) the acquired shares are pledged as a collateral. Under Belgian tax law, pledged shares are not counted for the 10% (or, where applicable, €2.5m) minimum participation needed to benefit from the 100% dividends-received deduction (DRD) and the dividend withholding tax (WHT) exemption based on the Belgian implementation of the EU Parent-Subsidiary Directive. Read literally, this would mean that if all shares are pledged, the participation would be considered as 0% for DRD and WHT exemption purposes. In that case, the corporate shareholder would be taxed at 25% on the dividends received and would be subject to 30% WHT, an outcome that makes little economic sense.
In practice, and based on ruling practice, it is accepted that only pledges that transfer the legal ownership of the shares from the shareholder (pledgor) to the bank (pledgee) trigger the exclusion. Ordinary, non‑transferring pledges still count toward the minimum participation test. This has been the consistent approach in administrative rulings for years and matches the legislator’s intent to avoid “double counting” of participations while not penalizing standard collateral arrangements without transfer of legal ownership.
However, in a tax audit, a tax inspector denied the WHT exemption in a standard case involving a 100% share pledge without transfer of legal ownership of the shares. The case reached the Antwerp Court of Appeal, which, importantly, disagreed with the tax inspector and confirmed – with explicit reference to the established ruling practice and the Preparatory Works – that shares that are pledged without transfer of legal ownership can still be taken into account to determine if the shareholder meets the minimum participation test.
The Court also specified that the “dispossession” (“buitenbezitstelling” / “dessaisissement”) of the pledged shares (which is required for the pledge to be enforceable against third parties) does not imply a “transfer of legal ownership”, and that the collection of dividends by the pledgee bank does not indicate use as “owner” but merely constitutes an application of the pledge (Antwerp Court of Appeal, 25 Nov 2025, No. 2024/AR/511).
Summarising, corporate shareholders can still take into account their pledged shares to determine if they can benefit from DRD/WHT relief, as long as the pledge does not result in a transfer of legal ownership or otherwise grants the pledgee rights to use the shares as if it was the legal owner. We recommend reviewing the wording of pledge agreements and dividend mechanics to avoid any clauses that might be interpreted as granting owner‑like disposal rights.
Thanks goes to Christophe Rapoye and Estelle Louis for their contribution.
