Contribution intention made clear: the letter of intent accompanying contribution

When converting a sole proprietorship or general partnership into a private limited company (BV) with retroactive effect: a letter of intent is mandatory before October 1 of the current tax year. It records the intention to convert via a tax-neutral or taxable contribution before January 1 of the following year. This is a Tax and Customs Administration document specifically for tax contribution routes. For SME entrepreneurs wishing to switch to a BV with retroactive effect: it is crucial not to miss the deadline. Requirements and pitfalls are listed below.

The short answer

• What: Written declaration before October 1st to convert a sole proprietorship/general partnership into a private limited company (BV) with retroactive effect to January 1st.
• Objective: Retroactive effect to the beginning of the current financial year is possible.
• Who: an entrepreneur who wants to convert to a BV.
• Deadline: before October 1 of the current year.
• Format: signed declaration, submitted to the Tax and Customs Administration.

Why a letter of intent?

For tax-neutral or taxable contribution of a sole proprietorship/general partnership to a BV: standard effect only from the date of incorporation of the BV. With a letter of intent: retroactive effect to January 1 of the current year is possible.

Advantage: the entrepreneur avoids the profit of the first part of the year being taxed under income tax (often a higher rate). As of January 1, the BV corporate tax rate applies.

Deadline — October 1

Key rule: declaration submitted to the Tax and Customs Administration before October 1 of the current year. After that, no retroactive effect is possible — conversion only takes effect from the date of incorporation of the BV.

In case of missed deadline: the entrepreneur can still generate turnover, but without retroactive effect. Profit from the first part of the year remains subject to income tax.

Content of statement

1. Entrepreneur identification: name, address, BSN.
2. Company identification: Chamber of Commerce, sector.
3. Intention to contribute: BV to be established.
4. Type of input: silent (Article 3.65 IB Act) or noisy.
5. Intended effective date: typically January 1 of the current year.
6. Date and signature.

Standard Tax and Customs Administration template available.

Silent vs. noisy input

Tax-neutral contribution (Art. 3.65 Income Tax Act)

• Tax neutral: no income tax on hidden reserves and goodwill.
• BV acquires book values.
• Conditions: continuation of the business, no external contribution.
• Often beneficial for growing SMEs.

Rustling input

• Tax settlement for the entrepreneur (income tax box 1 on hidden reserves and goodwill).
• A private limited company starts with the fair value of its assets.
• Often more favorable for future depreciation.
• Particularly attractive given expected strong growth.

The choice depends on the personal situation — consult a tax advisor.

Procedure

1. Before October 1: draft and submit the letter of intent.
2. Tax and Customs Administration confirmation: registration statement.
3. Setting up a BV: before January 1st of next year.
4. Deed of contribution: before a notary, with tax substantiation.
5. Tax return: in BV with retroactive effect.

What if the BV was not incorporated before January 1st?

Standard rule: The BV must exist before January 1 of the following year. Extension of the deadline is possible for a valid reason — request to the Tax and Customs Administration. In case of failure: retroactive effect lapses.

Example

Wim wants to convert his sole proprietorship into a BV:

• August 2024: Wim decides to convert.
• September 2024: letter of intent submitted (before October 1).
• November 2024: BV incorporated via notary.
• January 2025: official deed of contribution.
• Result: 2024 profit taxed in the BV (Corporate Income Tax), no longer in Income Tax Box 1.

For Wim's situation (profit €150,000 in 2024): savings on personal income tax versus corporate income tax are significant.

Pitfalls

• Late submission: no retroactive effect after October 1.
• Vague wording: The Tax and Customs Administration may refuse.
• Incorrect type of contribution: consequences for the tax outcome.
• BV not incorporated in time: time limit expires.
• Goodwill not documented: crucial for contribution subject to noise.

Honest recommendation

For entrepreneurs considering a BV (private limited company): request a plan. If retroactive effect to January 1 is desired: submit a letter of intent before October 1. Collaborate with a tax specialist for the optimal choice between a tax-neutral and a taxable transition. Use a notary for BV incorporation before January 1. Investing in good planning pays off many times over with a structured transition. Most importantly: do not miss the October 1 deadline — it cannot be rectified.

For other topics: letter of intent general, tax-neutral contribution and sole proprietorship to BV.

Frequently Asked Questions