Buying an Existing Franchise in Belgium: Check for Tax Debts

Buying an existing franchise outlet may seem straightforward: you can see the shop, its customers and its turnover. But the seller’s tax debts are less visible. When a business is transferred as a going concern, the buyer can, under certain statutory conditions, become jointly liable for those debts. Even within a close-knit franchise community, trust is no substitute for tax due diligence. This guide explains how to organise those checks before you pay the purchase price.

1. Establish which tax risks you are taking on

Tax due diligence starts with a clear description of what you are buying. In a share purchase, the same company continues to exist, along with its tax history. When buying a business as a going concern, you acquire specified business assets. However, this does not automatically mean that all tax debts remain solely the seller’s responsibility.

Belgium has rules protecting the tax authorities when a business is transferred as a going concern. Depending on the applicable rules, these can affect whether the transfer is legally effective against the tax authorities and whether you incur joint and several liability. This means that, under certain conditions and within statutory limits, the authorities can also pursue you for payment.

Ask your accountant and solicitor to establish the following first:

• who legally owns the business being transferred;
• which activities and business assets the transfer covers;
• which tax rules and authorities are relevant;
• which certificates and notifications are needed to limit your risk.

A statement from the seller that ‘no debts are included’ is no substitute for this analysis. Your contract does not bind the tax authorities in the same way as it binds the seller.

2. Request the right certificates at the right time

Do not rely solely on recent annual accounts or a summary of the accounting records. These documents provide useful background, but they do not prove that the tax formalities for the transfer have been properly completed.

A tax certificate for the transfer of a business as a going concern serves a specific purpose. It is not the same as a general certificate or proof of payment of a single tax assessment. Have your adviser check that the document relates to the correct seller, the applicable rules and the planned transaction.

Timing is essential. These certificates have limited validity periods and deadlines for use. Coordinate the application with the intended transfer date and the required notification. If the transfer is postponed, your adviser should assess whether a new certificate is needed.

Also ask about ongoing tax audits, disputed assessments, payment plans and outstanding tax returns. A certificate is not a blanket guarantee that every historical tax issue has been ruled out. Ask the seller to confirm their answers in writing and provide supporting evidence.

Keep tax checks separate from social security checks. A tax certificate does not prove that all social security debts have been settled; separate checks and formalities may be required.

3. Make payment conditional on a safe completion process

Before signing, draw up a checklist showing who will request each document, who will check it and when it must be available. Also specify who will notify the relevant authority of the transfer and who will verify that the notification has been made in a legally valid manner.

Then include a clear payment arrangement in the purchase agreement. Discuss the following options with your solicitor:

• a condition requiring the necessary certificates to be available on time;
• postponing the transfer if documents are missing or have expired;
• retaining an appropriate portion of the purchase price until the risk has been resolved;
• paying the relevant authority directly where debts need to be settled;
• warranties and an obligation for the seller to indemnify you against undisclosed tax issues.

Do not simply pay money intended to settle a tax debt to the seller on the understanding that they will pass it on. Ask your adviser to confirm the correct payment route and its implications for the transfer.

A contractual warranty remains useful, but its value is limited if the seller later cannot pay. Documents, formalities and control over the flow of funds must therefore work together to protect you.

4. Coordinate the tax timetable with the franchise agreement

Completing the tax formalities and joining the franchise network involve separate checks. Approval from the brand or a new franchise agreement does not prove that the business can be transferred safely from a tax perspective.

Belgium also has specific pre-contractual rules for commercial cooperation agreements in Book X, Title 2 of the Code of Economic Law, particularly Articles X.26 to X.33. When entering into an agreement covered by these rules, the franchisor must provide the draft agreement and the pre-contractual disclosure document at least one month in advance. General contract law also applies.

Coordinate this disclosure period with the validity of the tax documents, the financing and the payment date. Ask your solicitor to determine which commitments you may make during the pre-contractual period. This helps avoid a situation in which the tax paperwork is ready but the franchise agreement cannot yet lawfully be concluded.

Practical takeaway: pay the purchase price only in accordance with a schedule that has been legally reviewed in advance. The right certificates, proper notification and a secure payment arrangement matter more than a general promise that the outlet is debt-free.