The transfer of a sole proprietorship to a company combined with the establishment of usufruct on business premises may be motivated by non-tax grounds in which case the general anti-abuse provision will not apply.
For example. Two paramedics contract a loan to finance a building. The ground floor is used for professional purposes. The first floor is rented and the second floor is occupied by the paramedics. After a few years the business has grown so much that two floors have to be used for the business. The paramedics buy a second building for private purposes. They now have to repay two loans.
The paramedics establish a private limited liability company in which they will exercise their professional activity for the remaining duration of their professional practice, estimated at 25 years. The paramedics are appointed as director of the company. The company buys the temporary usufruct.
The Belgian ruling office is of the opinion that in this case there is no “abuse” in the meaning of the new article 344 § 1 of the Belgian Income Tax Code.
The following non-tax grounds are accepted:
– The improvement of the risk-profile of the individuals (financing optimization, loan spreading);
– The bank requires a mortgage loan;
– Known financial flows in the future (volatility index hedging);
– Guaranteed period: 25 years according to the time expectation of the company (the professional career of the director).