As an independent business owner, it is important to invest your funds in a tax-efficient manner with the prospect of a nice return. It is recommended to find a clever way of handling the excess reserves rather than letting them evaporate in the corporate account. But what are good and tax-efficient alternatives for your available funds besides the standard supplementary pension schemes such as EIP and PLCI?
Excess funds are sometimes deposited in a company account for years and are barely bringing in anything. In times of increased inflation, such as now, the value of your capital will even decrease. Some of the funds used to set up a liquidation reserve may sometimes take years of waiting aimlessly for a return as well. We notice that current business owners are little acquainted with solutions to enhance the available assets within the company. Below we will give further information on two alternatives, branch 26 and branch 6, which are an interesting manner for an entrepreneur to increase his liquidity.
Branch 26 is an interesting investment for corporations. It is a safe investment with capital guarantee and a guaranteed minimum annual interest rate that can be taken out for a limited or unlimited period. It is an insurance contract but since no insured entity is linked to it, as is the case with branch 21 or branch 23, no legal entity tax of 4.4% is payable. Only a withholding tax is due on the realized return but this can be deducted from the corporate tax payable.
Key features:
Branch 6 is a Luxembourg capitalization contract that allows companies to invest in investment funds. Here, admittedly, there is no guaranteed return and the investment risk is borne by the entrepreneur himself. As with Branch 26, a withholding tax is payable only on the realized capital gain. Tax simplification is the greatest asset in this case. The company is not required to annually declare the capitalized revenue of the contract if it is not collected. This ensures that the entrepreneur does not have to go through a tax administration process each time.
Key features:
As a business, it is definitely worth looking into the possibilities of combining both branches into one solution. For example, there is the possibility of combining a branch 26 contract with a Belgian insurer and a branch 6 contract with a Luxembourg insurer, with the branch 26 contract forming the core of the investment that focuses on security and guarantee and the branch 6 contract acting as leverage to obtain a potentially higher return.
Taking into account the current uncertainty concerning the so-called DBI funds this solution is very interesting from several aspects.
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