Context

We refer to our HRS headlines of 17 January 2003, 11 February 2004 and 17 February 2005.

On two occasions, the Court of Cassation has overturned the decision by the Brussels Court of Appeal in terms of which pre-1999 options (not qualifying under the Act of December 1984) were taxable upon exercise and the spread was deemed to be taxable pay. On the contrary, the Court of Cassation has held that the options should be taxed on their “attribution date” (as defined in the Belgian income tax legislation).

On 19 February 2002, the Antwerp Court of Appeal held that, with regard to the taxable moment for pre-1999 stock options whose exercise was subject to an employment condition, the options were what is called “permanently precarious” in nature and that this prevented their attribution date – and hence the moment at which they are taxed – being regarded as sooner than the exercise date. On 4 February 2005, the Court of Cassation surprisingly did not overturn the Antwerp Court of Appeal’s 2002 decision.

News

On 20 September 2005, the Antwerp Court of Appeal held in four cases in which the exercise periods of three tranches of pre-1999 stock options were deferred until the 1st, 2nd and 3rd anniversaries of the grant date and the options were liable to be forfeit in the case of dismissal for cause or resignation that the options were all to be regarded as definitively attributed and taxable upon grant. These decisions thus depart from the 2002 Antwerp Court of Appeal decision.

As the case law now stands, the trend with respect to the tax treatment of pre-1999 options is as follows: options “liable to be forfeit” (i.e. exercise of which is subject to a condition subsequent) are taxable on grant while “precarious” options (options that vest subject to a condition precedent) are taxable on another date, whether that be upon vesting or exercise.