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The “Cheese route” may soon be closed; What’s next?

Traditionally, when persons proceed to a gift of movable goods (mostly cash or shares) the gift is registered in front of a Dutch notary. The reason is obvious: no Belgium or Dutch registration tax is thus due whereas the gift transaction has a “fixed date”. This is important, because if the person making the gift does not pass away within 3 years (possibly, this may become 4 years in Flanders as of 2021 …) as of this fixed date, no Belgium succession tax is due anymore on the gift when that person passes away afterwards. However, the Belgium legislator plans to close the so-called “cheese route” as of 1 December 2020. Does that mean that a tax-free gift is thus no longer possible?

Pursuant to the proposed new Belgium tax legislation, also gift deeds that were processed outside Belgium would need to be registered in front of a Belgium notary to create a fixed date for Belgium succession tax purposes. The Belgium gift tax rates vary depending on the Region where the person making the gift resides. In Flanders, 3% gift tax applies between partners and (grand) parent and (grand) children. Otherwise, 7% is due. Specifically, if gift tax is paid in Belgium, no Belgium succession tax is due even if the person making the gift dies the day after.

If the proposed new law to close the cheese route will be finally enacted, it will be pointless to still register a gift in front of a foreign (Dutch) notary as of 1 December 2020. But what are the meaningful alternatives then?

  • As before, persons can still consider a manual donation (handgift, don manuel) of the movable good in Belgium. In summary: this means that one person physically hands over the asset to the beneficiary. Based on a combination of carefully drafted documents, the “fixed date” of the donation can be evidenced to manage the aforesaid 3 (soon 4 ?) years period.
  • A very similar alternative is to proceed to a bank donation (bankgift, don bancaire).

In addition, when a manual or bank donation is made the following clauses are often laid down in the underlying documentation (called pacte adjoint in jargon):

  • Sometimes, the beneficiary needs to keep paying a monthly fixed amount (called lijfrente, rente viagère) to the person making the gift as long as the latter lives
  • According to an “exclusion clause”, it is stipulated that the beneficiary cannot use the donation for certain purposes, e.g. contribute it into his or her marital patrimony
  • According to a “conventional return clause”, the donation returns to the person making the gift if the beneficiary passes away first
  • According to a “non-alienation clause”, the beneficiary is not allowed to alienate the donation without the upfront approval of the person making the donation.

For completeness’ sake, as Belgium tax legislation already provides for a gift tax exemption when giving away (the shares of) a “family business”, the closing of the cheese route has no adverse impact on family business succession matters. There is neither any impact when the object of the gift is Belgium based real estate as the latter needed to be registered in front of a Belgium notary anyhow. However, also the latter gift transactions are already eligible for attractive Belgium gift tax rules.

The closing of the cheese route will give rise to a significant cultural chock in Belgium. Taxpayers are thus strongly encouraged to reflect on viable alternatives as of December 2020. In addition, in the event of a “rest gift” (in summary: this is a gift whereby 2 beneficiaries (often the children and grandchildren) are defined whereby the 2nd beneficiary receives the balance of the gift when the 1st beneficiary passes away) made before December 2020, the 2nd leg of the gift may take place after December 2020 implying that it may be hit by the new tax rule.


Kurt De Haen

E: kurt.dehaen@pkf-vmb.be
T: +32 (0)2 460 09 60

Wouter Brackx

E: wouter.brackx@pkf-vmb.be
T: +32 (0)2 460 09 60