Expertise in DRD-funds since 1997
A DRD-fund or bevek is an interesting alternative to an investment in individual shares, because the capital gain can be 100% tax exempt under certain conditions.
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What does DRD
mean?
‘DRD ‘stands for Dividend Received Deduction and is an exemption regime for companies that invest in individual shares of other companies. However, dividends and capital gains from these investments can only be exempt from (double) taxation under strict conditions.
Conditions for the DRD-exemption
The capital gain realized by the company on individual shares is taxed. This is at a rate of 20% for SMEs and 25% for large companies. This capital gains tax is waived if the investment meets the following DRD conditions:
1.
Participation condition
The investing company must own at least 10% or 2.5 million euros of the other company
2. The investing company must own at least 10% or 2.5 million euros of the other company
Valuation condition
The company in which the investment is made, must have undergone a normal valuation regime
3. The company in which the investment is made, must have undergone a normal valuation regime
Condition of permanence
The investing company must hold its participation for at least 1 year
The investing company must hold its participation for at least 1 year
What is a DRD-fund
or DRD-bevek?
An investment in a DRD-fund or DRD-bevek does not have to meet these strict conditions to benefit from the exemption regime. The DRD-investment fund, a distribution fund, itself however must comply with a number of other rules.
For example, a DRD-bevek must annually distribute at least 90% of its net income (after deduction of expenses, fees and commissions) as dividends. The investments of the DRD-fund itself must meet the valuation requirement to benefit from the exemption regime. Therefore, such an investment constitutes an interesting solution for your excess liquidity.
For example, a DRD-bevek must annually distribute at least 90% of its net income (after deduction of expenses, fees and commissions) as dividends. The investments of the DRD-fund itself must meet the valuation requirement to benefit from the exemption regime. Therefore, such an investment constitutes an interesting solution for your excess liquidity.
Advantages of investing
in a DRD-fund or bevek
- Diversification through the funds and therefore less risk than individual shares
- Tax optimization
- Cost optimization
- Dividends and capital gains are exempt from corporate income tax
- Withholding tax recoverable through corporate income tax
Are there risks involved?
- As with any equity mutual fund, investing in DRD funds means that you are subject to fluctuations in the value of the fund, but also may have better longer-term return prospects
- DRD-funds have no fixed return, no capital protection and no maturity date
Taxation
The DRD-regime applies to companies subject to Belgian corporate income tax or to BNI-companies .
A 30% withholding tax will be deducted when the dividend is paid out. The withholding tax paid is not a deductible professional expense and must therefore be processed as a disallowed expense in the corporate income tax return. However, this withholding tax is deductible and repayable. For this purpose, the amount of the withholding tax must be entered in the corporate income tax return under the 'deductible withholding taxes' box.
The tax treatment depends on the investor’s personal situation and whether the DRD-fund or bevek may change in the future.
Why invest in DRD
through Degroof Petercam?
Experience
- Since 1997
DRD-mandate
- Economic and Monetary Union (EMU)/USA/World
- Actively managed portfolios
A wide range of
DRD-bevek
In principle, a company can invest its entire liquidity surplus in DRD-funds. However, there is a wide range of DRD-bevek on offer, which is why it’s important that you are well informed. After all, you have to take into account the service offered, the cost structure, the transparency, the spread of the underlying positions, the chosen investment strategy, the expected return, liquidity and investment horizon.
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