Recently, many stock prices have dropped significantly. In consequence, many beneficiaries of stock options will not be able to exercise the options granted to them when stock markets were high. For those who were subject to Belgian income tax at the time of grant of their stock options, they may not even be able to recover the Belgian taxes paid upfront at the ‘attribution date’.

As we mentioned in our PTX headlines of 23 January 2002, the Belgian Government had the intention to change the tax treatment of stock options.

In a Press Release by the Prime Minister following the Belgian Cabinet Meeting of 18 January 2002, the Government expressed the intention to allow the beneficiary to opt for a tax charge at grant or at exercise (the choice having to be made from the outset). However, from contacts with the Cabinet of the Minister of Finance today, we understand that this anticipated change has been abandoned.

Mr. Didier Reynders, Minister of Finance, very recently stated (as confirmed today in the press) that the government was instead considering authorizing companies to extend the exercise period of existing stock options (in principle for a 2 years period) without additional Belgian income tax cost. There may of course remain a financial cost related to such possible extension.

From our contacts with the Cabinet of the Minister of Finance, we learned that a draft bill of law had been discussed yesterday at the level of the Cabinet and that discussion would be ongoing at today’s Council of Ministers. The current status of the draft bill is not fully clear and it may be that it still needs to be discussed at the next Council of Ministers on 23 October 2002 (“Kern”).

Further information will follow as it becomes available.