Make optimum use of the dividend received deduction (DRD)

The DRD bevek

Make optimum use of the dividend received deduction (DRD)

The DRD bevek

No corporation tax on the earnings of a DRD bevek

The dividends and realised gains accruing from this investment are 100% exempt from tax.

An alternative to individual shares

Investing tax-efficiently in individual shares is subject to numerous conditions for a business. A DRD bevek, by contrast, has to meet far fewer requirements in order to qualify for tax relief.

Fund managers take care of the tracking

The fund’s managers use their knowledge and expertise to manage the equity portfolio on your behalf.

What is the DRD?

The DRD (dividend received deduction) is a tax exemption scheme applying to businesses that invest in the shares of other businesses.

Under the terms of the coalition’s 2017 summer accord, they are able, subject to certain conditions, to deduct share dividends and capital gains 100% from their earnings. The income had already been taxed at the distributing company, and so this approach avoids double taxation.

What are the conditions?

  • You must have held the shares for at least one year without interruption (holding requirement).
  • The profits of the distributing company must be taxed within a normal tax regime (taxation requirement).
  • Either you must own at least 10% of the shares in the company or the investment must amount to at least 2 500 000 euros (shareholding requirement).

How can I take advantage of the DRD in an easy way?

DRD (dividend received deduction)

Those conditions might well have left your head spinning. It’s not every firm, of course, that has 2.5 million euros to invest. That’s what makes a DRD bevek1 an alternative to investing in individual shares. A DRD bevek is a distribution fund2 that’s subject to fewer requirements.

The following conditions are the only ones that have to be met to benefit from a dividend received deduction with a DRD bevek.

  • The DRD bevek pays out at least 90% of its earnings each year as a dividend.
  • Dividends qualify for the DRD and the capital gains derive from shares that qualify for capital gains exemption.

What makes a DRD bevek attractive in tax terms?

1. An alternative to individual shares

The coalition’s 2017 summer accord has tightened up the conditions for tax-efficient investment in individual shares with effect from tax assessment year 2019, making it less beneficial for entrepreneurs to choose this option. If you do not fully meet the conditions, the dividends will be liable in full for corporation tax, which will gnaw away at your investment return.

A DRD bevek is a worthy alternative with which to avoid these onerous conditions and to benefit in an easy way from the dividend received deduction. There are associated risks, though, as with individual shares.

2. Dividends and capital gains are fully tax-exempt

Under the coalition’s 2017 summer accord, the dividend received deduction rose from 95% to 100%, which means from now on you can set your accrued dividends and realised gains against your taxable earnings in full. Since you don’t have to pay corporation tax on your investment profit, this is an attractive solution for your surplus liquidity.

What about the notional interest deduction?

Unlike shares in an ordinary distribution bevek, you don’t qualify for the notional interest deduction with a DRD bevek. Corporation tax reforms mean, however, that the importance of the notional interest deduction is being further reduced, making this only a minor drawback.

Tax treatment*

Withholding tax rate 30%
Withholding tax on dividends Yes
Withholding tax upon reimbursement no

* Applies to individual investors with a professional income who are subject to Belgian personal income tax.

Example

This example compares a share with a DRD bevek at a capital gain of 10 000 euros. Because the DRD bevek benefits from tax relief, your return is clearly maximised.

  Share DRD bevek
Purchase 100.000 100.000
Value on sale 110.000 110.000
Capital gain 10.000 10.000
Notional interest deduction (TAY 2018, e.g. 0.737%) ​-74
DRD exemption (100% from financial year 2018) 10.000
Taxable base 9.926 0
Corporation tax -2.936 0
Total net return 7.064 ​10.000

* Shares are taxed at between 20.4% and 29.58%. For the purposes of this example, we have assumed a tax rate of 29.58% and a capital gain after one year of 10 000 euros.

Which DRD bevek does KBC Brussels offer?

The KBC Equity Fund Eurozone DBI-RDT Classic shares DIV. Eurozone DBI-RDT is a sub-fund of the Belgian bevek KBC EQUITY FUND.

The DRD bevek seeks to maximise the dividends received and capital gains achieved on shares that qualify for the ‘dividend received deduction’ system. What’s more, there is no minimum amount on subscription.

Why choose the DRD bevek promoted by KBC Brussels?

1. Fund managers take care of the tracking

As an entrepreneur, you’re almost always short of time, while investing in shares demands a lot of time and energy. Wouldn’t you rather devote that energy to your own business? Thanks to the DRD bevek, you can! Our fund managers look after the share portfolio with the greatest care.

2. Risk diversification

When you choose a DRD bevek, you also benefit from the risk diversification inherent to investment funds. Unlike individual shares, a fund invests in a group of companies. If one share performs poorly, this has less of an impact on your overall investment return, as the other shares can keep things on track.

3. Easy exit

Do you want to have ready access to your money so you can invest in your business if an attractive opportunity arises? That’s no problem with an investment in a DRD bevek. You can exit on any given day, without having to pay extra exit fees (except in the event of exit within a month of entry).

What are the risks?

KBC Equity Fund Eurozone DBI-RDT Classic Shares DIV invests at least 95% of its assets in shares of businesses from the euro area. The more a fund invests in shares, the more likely its value will fluctuate, but also the better its long-term return prospects may be. For that reason, the fund has a legally prescribed risk and return profile of 6 on a scale of 1 (low risk) to 7 (high risk).

It is also important to bear in mind that this DRD bevek does not offer a fixed return or capital protection, and that it does not have a maturity date.

Charges

Entry 3%
Exit

Free

On exit within a month of entry: max. 5%

Ongoing charges 1,83%
Switching
sub-fund3
Exit fee for old sub-fund + entry free for new sub-fund

Practical information

The prospectus, the Key Investor Information Document (KIID) and the most recent periodic reports can be obtained in Dutch free of charge from KBC Asset Management NV and are also available to the public at www.kbcam.be. The net asset value can be found at www.beama.be or using our fund finder at www.kbcbrussels.be/fundfinder.

This information is governed by the laws of Belgium and is subject to the exclusive jurisdiction of its courts. The financial services are provided by KBC Bank NV.

If you have a complaint, you can send it to complaints@kbc.be, tel. 0800 62 084, and/or ombudsman@ombudsfin.be.

Documentation

Read the Key Investor Information Document and the Prospectus before deciding to invest in this DRD bevek.

Would you like to invest tax-efficiently too?

Make an appointment with an Enterprise Wealth Management expert for more information on the tax advantages of investing in a DRD bevek. They specialise in optimising businesses’ liquid assets.

They will work with you and, where appropriate, your bookkeeper, to identify tax-friendly alternatives to individual shares. You will also run through your existing portfolio together to look for potential improvements in line with your business’s goals.

Get help from a Wealth Management Expert for Businesses

This page contains only marketing information. It does not contain any investment advice or investment research, just a summary of the product’s features. The information could change in the future.

1 ‘Bevek’ stands for BEleggingsvennootschap met VEranderlijk Kapitaal in Dutch (‘Sicav’ – Société d’Investissement à CApital Variable in French). A ‘bevek’ is an open-ended investment company, a statutory UCI, a legal entity and usually a company with limited liability. A typical feature of an open-ended investment company is that it can increase its capital at any time, without any formalities, by issuing new units or can decrease its capital by buying back existing units. As a result, investors can buy or sell units in the fund at least twice a month, at the net asset value.

2 ‘Fund’ is the common name for an Undertaking for Collective Investment (UCI). The term can refer to a sub-fund of an open-ended investment company under Belgian law (bevek), a sub-fund of an open-ended investment company under Luxembourg law (sicav), a collective investment fund or a sub-fund of a collective investment fund.

3 An open-ended investment company or mutual fund may consist of various sub-funds. That means that the open-ended investment company or mutual fund is split into separate portfolios, each with its own investment policy. Each sub-fund should be considered as a separate entity. Investors have a right only to the assets of and return from the sub-fund in which they have invested. The obligations of each individual sub-fund are covered only by the assets of that sub-fund.

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