The simple partnership: a structure that remains relevant, or one fraught with risk?

Long regarded as a flexible and tax-neutral vehicle, the simple partnership plays a central role in many wealth management structures in Belgium. Used for both property ownership and the management of investment portfolios, it enables the organisation of succession, clarifies governance, and provides a framework for financial flows between partners.

However, the tax and legal landscape is changing. The simple partnership is no longer immune to critical scrutiny by the tax authorities, who are increasingly examining its substance and economic purpose. Consequently, a question arises: is it still a relevant tool, or has it become a risky structure?

A historically effective and flexible tool

The partnership offers several structural advantages: lack of legal personality, considerable contractual freedom and tax transparency.

It is mainly used in two scenarios:

•    Property ownership: organisation of ownership among members of the same family, with centralised management and estate planning.

•    Securities portfolio: structuring of financial investments, often with a view to gradual transfer (gifting of shares).

In such cases, a simple partnership allows for the separation of economic ownership and management, whilst maintaining considerable flexibility in its operating rules.

An increasingly rigorous tax scrutiny

In recent years, the tax authorities have stepped up their scrutiny of asset structures. Simple partnerships are now examined through the lens of economic reality and the consistency of transactions.

Two key areas of focus have emerged:

•    The absence of real substance (‘shell company’ structure)

•    An exclusively tax-driven objective (particularly regarding asset transfers or income optimisation)

In this context, certain transactions may be reclassified on the basis of the theory of tax avoidance, with potentially significant consequences.

Typical cases subject to scrutiny

Several situations are now subject to increased scrutiny:

•    Contributions followed by rapid donations without economic justification

•    Artificial allocation of income among partners

•    Absence of genuine collective management or formalised decision-making

•    Use of the partnership as a mere ‘screen’ for asset protection

In these scenarios, the risk lies not so much in the structure itself, but in its use being disconnected from a credible economic rationale.

Comparison with other forms of ownership

The suitability of a simple partnership must now be assessed in comparison with other options:

•    Holding company (a company with legal personality):

Offers greater legal certainty and fiscal clarity, but at the cost of increased rigidity and its own tax regime (corporate income tax).

•    Ownership by a natural person:

Maximum simplicity, but no asset planning and direct exposure to risks (joint ownership, unstructured succession).

The simple partnership retains an intermediate position, but now requires a more rigorous structure.

Key points to bear in mind

To safeguard a simple partnership, several elements must be given particular attention:

•    Precise drafting of the partnership agreement (purpose, management rules, partners’ rights)

•    Existence of genuine governance (formalised decisions)

•    Consistency of cash flows with economic reality

•    Documentation of the wealth management objectives pursued

In practice, the simple partnership remains a relevant tool, provided it is used as a genuine wealth management instrument, and not merely as a tax lever.