Donation of movable property is still the flagship of Belgian estate planning. In addition, it is a very common practice for donors to keep the usufruct over the donated movable goods, e.g. a portfolio of securities, for as long as they live. Through this usufruct they can continue to enjoy the lifelong income (such as interest, rent or dividends). Very frequently, a Dutch notary is involved in the donation of movable goods. A Dutch notary can issue a notarial deed with the same legal value as a Belgian notarial deed, but without an obligation to register the deed in Belgium. Therefore, gift tax is not charged – or, at least, not immediately.

Until recently, the general idea was that no inheritance tax (up to 27% in the direct line) would be applicable after such a Dutch notarial donation, as long as the donors survived three years after the donation (seven years for the donation of a family business). Moreover, even if those three years proved to be a problem, one could always choose to register the Dutch notarial donation in Belgium. Thus, if one of the donors became ill within three years after the Dutch donation, one could still decide to register the donation, and hence pay gift tax. The gift tax in Flanders is 3% in the direct inheritance line and for spouses and partners, and 7% for all other persons.

However, this system of donation without taxation with a "risk period" of three years has now been challenged by the Flemish Tax Administration. In a new decision, the Flemish Tax Administration holds that, whenever movable goods are donated by a donor who reserves the usufruct, either inheritance tax (up to 27% in the direct line) or gift tax (3% in the direct line) must be paid (position 15004). Technically, the Flemish Tax Administration relies on a fiscal fiction, on the basis of which the donated goods are considered never to have left the estate of the donor.

The new decision of the Flemish Tax Administration is rather severe, and it is possible that the decision will not survive a judicial review – but it will be a number of years before this is known. In the meantime, the Flemish Tax Administration will in any case claim inheritance tax on unregistered donations with reservation of usufruct which are made as from 1 June 2016. Donations that took place before 1 June 2016 fall outside the scope of the new position.

The fiction only applies when a donation is made with reservation of usufruct. When full ownership is donated to the children or third parties, the fiction is not relevant. When a donation is made before a Belgian notary, the new position is not relevant either. The new decision is relevant only to residents in the Flemish Region.

Finally, a significant exemption exists in respect of the donation of family businesses. In principle, these can be donated before a Belgian notary, with or without reservation of usufruct, with 0% gift tax being levied. There is no risk period of three or seven years in such cases.