For many SME executives, the choice between the VVPRbis regime and the liquidation reserve has been a key aspect of tax planning for several years. These mechanisms allow a company’s profits to be distributed at a reduced tax rate under certain conditions.
However, the tax reform proposals currently under discussion have reignited questions: Are these schemes still worthwhile, and should one adjust one’s strategy?
Two Mechanisms Pursuing the Same Goal
Both the VVPRbis and the liquidation reserve aim to reduce the overall tax burden on profits distributed to shareholders.
Nevertheless, they operate differently.
The VVPRbis scheme allows, under certain conditions, for a reduced withholding tax rate when dividends are distributed.
The liquidation reserve, on the other hand, is based on a different approach: the company sets up a specific reserve by paying a separate contribution, which then allows for a distribution under favorable tax conditions after a certain period has elapsed.
In both cases, the goal is to offer a more tax-efficient alternative than a traditional dividend distribution.
A Changing Landscape
Recent budget discussions have brought these mechanisms back into the spotlight.
Although certain details have yet to be confirmed, the general trend appears to be toward a gradual adjustment of certain tax benefits granted for profit distributions.
This development does not necessarily mean the end of these regimes, but it serves as a reminder that no tax mechanism is set in stone.
For executives, the challenge is therefore more about anticipating change than reacting in a rush.
Should distributions be made more quickly?
In light of the announced reforms, some shareholders might be tempted to accelerate certain distributions.
This approach may be appropriate in certain situations, but it warrants a more nuanced consideration.
Before making any decision, several factors must be analyzed:
An early distribution is not always the best solution.
In some cases, retaining reserves within the company may remain the more economically advantageous option.
A comprehensive analysis remains essential
The choice between VVPRbis, a liquidation reserve, or retaining earnings within the company cannot be reduced to a simple comparison of tax rates.
Other factors must be taken into consideration:
Taxation is an important factor to consider, but it should not be the sole criterion for decision-making.
Our mission in the field of corporate taxation is to help you manage a reasonable tax burden that aligns with your income and the opportunities provided by tax legislation.
