Key takeaways
- The shareholder current account records the sums a shareholder or director lends to their company, or owes to it: it is a receivable or a payable, never capital.
- In credit, it finances the company; in debit, it reflects funds drawn out by the shareholder.
- Interest on a credit balance is only deductible within the two limits of article 18 of the CIR 1992; beyond them, it is reclassified as a dividend.
- The permitted rate is capped at the market rate of article 55, recalculated every year.
The shareholder current account, flexible financing for an SME
In many Belgian SMEs, the shareholder or director advances money to their company without going through a capital increase or a bank loan. This operation is booked in the shareholder current account: the account that, in the company's books, tracks the movements of funds between it and the person who owns or runs it. It is one of the most widely used financing tools, and also one of the most closely watched by the tax authority.
The principle is simple. When the shareholder leaves cash at the company's disposal, the account is in credit: the company owes them money. When they draw sums beyond what is due to them, the account goes into debit: they owe money to the company. This dual nature explains most of the rules around it.
This article describes what a current account covers, how interest on a credit balance behaves, and why a debit balance deserves attention. For reading the annual accounts where it appears, see The balance sheet and income statement of a Belgian SME.
Credit or debit current account: two situations to tell apart
The two directions of the account do not follow the same logic. The credit direction is financing of the company by its shareholder; the debit direction is financing of the shareholder by their company. The table below sums up what separates them.
| Credit-balance current account | Debit-balance current account | |
|---|---|---|
| Who owes whom | The company owes the shareholder | The shareholder owes the company |
| Nature on the balance sheet | A payable of the company | A receivable of the company |
| Main tax question | Deductibility of the interest paid | Benefit in kind if no interest |
| Repayable | Yes, in principle at any time | To be repaid to the company |
In both cases, the current account must reflect real, documented movements. A written agreement, even a simple one, that sets the interest rate and the repayment terms saves many later discussions with the tax authority and between shareholders.
Interest on a credit-balance current account and its reclassification
When the company remunerates its shareholder's advance, it pays interest. That interest is in principle a deductible expense for the company and investment income for the shareholder. But the legislator set a limit to prevent a distribution of profit being dressed up as deductible interest: this is the mechanism for the reclassification of interest as dividends in article 18, paragraph 1, 4° of the Belgian Income Tax Code (CIR 1992).
Reclassification applies as soon as one of the following two limits is exceeded, and to the extent of the excess.
The two limits of article 18 of the CIR 1992
The rate limit
The interest rate must not exceed the market rate defined in article 55 of the CIR 1992.
The amount limit
The total interest-bearing advances must not exceed the sum of the taxed reserves at the start of the taxable period and the paid-up capital at its end.
Whatever exceeds one of these limits is no longer treated as interest: the excess is reclassified as a dividend. It ceases to be deductible for the company and follows the dividend regime, in principle subject to the 30% withholding tax. The "advance" is understood broadly: any money loan granted to the company by a natural person who is a shareholder or director of it, including through an entry in the current account.
The permitted interest rate: the notion of the market rate
The first limit refers to a market rate, defined precisely since 2020. It is not a free estimate: the reference rate is the rate charged by Belgian monetary financial institutions on loans up to 1,000,000 EUR with a variable rate and an initial rate fixing of up to one year granted to non-financial companies, as observed in November of the preceding calendar year, increased by 2.5 percentage points.
In practice, this rate is recalculated every year from a published indicator. Applying to a credit-balance current account a rate above this cap exposes the excess portion to reclassification. That is why a prudent SME aligns the rate of its current account with this reference rather than setting a rate by guesswork.
Keep your cash flow and books clear
YouInv tracks your payments, reconciles your bank statements and keeps your invoices ready for the audit and your accountant.
When the current account goes into debit
The reverse direction deserves just as much attention. A debit-balance current account means the shareholder or director has drawn funds from the company: they owe it money. For tax purposes, if this sum is made available with no interest or at a rate below the market, the company must tax a benefit in kind on the beneficiary, valued on a reference rate set each year by royal decree.
Beyond tax, a debit current account that settles in raises a management question, and sometimes a company-law one: it ties up cash the business needs. Following it closely, documenting it and planning its repayment are part of sound management. For cash flow more broadly, read Managing an SME's cash flow.
Further reading
- The balance sheet and income statement of a Belgian SME: where the current account appears in the annual accounts.
- The general ledger and the trial balance: how an account is kept day to day.
- Managing an SME's cash flow: tracking the liquidity that repayment of the current account depends on.
The reference texts prevail: article 18 of the CIR 1992 on the reclassification of interest, and the Code of Companies and Associations for the distinction between a debt and a contribution.
What is a shareholder current account?
It is the account that records the sums a shareholder or director leaves at the company's disposal, or owes to it. It is in credit when the company owes money to the shareholder (a cash advance), and in debit when the shareholder owes money to the company. It sits on the balance sheet among receivables or payables, separate from capital.
Is interest on a credit-balance current account deductible?
It is, within two limits set by article 18 of the Belgian Income Tax Code (CIR 1992): the rate must not exceed the market rate defined in article 55, and the total interest-bearing advances must not exceed the sum of the taxed reserves at the start of the taxable period and the paid-up capital at its end. Beyond that, the excess is reclassified as a dividend and is no longer deductible.
How is the market rate for a current account calculated?
Since 2020, the reference market rate is the rate charged by Belgian monetary financial institutions on loans up to 1,000,000 EUR with a variable rate and an initial rate fixing of up to one year, taken from November of the preceding year, increased by 2.5 percentage points. It is therefore recalculated every year.
What happens if the shareholder's current account is in debit?
If the shareholder or director owes money to the company with no interest or at a rate below the market, the company must tax a benefit in kind on the beneficiary, computed on a reference rate set each year. A debit current account can also raise a company-law question depending on the circumstances.
Is a shareholder current account a capital contribution?
No. A current account advance remains a debt of the company, repayable, whereas a contribution increases equity. The distinction matters in case of difficulty: the holder of a credit-balance current account is a creditor, not a contributor, which changes their repayment ranking.
