Company
Liquidation reserve
By the Finances Indépendants editorial teamUpdated on 3 min readAlso known as: Réserve de liquidation, Liquidatiereserve
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Contents
What is the liquidation reserve?
A 3-year waiting period and withholding tax of 9.8% on distribution, making a total burden of 18% including the 10% levy. This rate applies to dividends distributed or allocated from 11 June 2026 (Programme Act of 30 May 2026). A distribution before the 3 years are up is taxed at the standard rate of 30%.
The mechanism is reserved for small companies within the meaning of the Code of Companies and Associations, and applies financial year by financial year: each allocation creates a separate reserve with its own start date.
What the operation really costs
The 10% levy is paid immediately, on profit after corporate income tax. It is not deductible, which explains why the combined cost with the exit withholding tax comes to around 15% and not 15%.
Compared with the 30% standard withholding tax, the difference is considerable. It remains favourable even against VVPRbis at 18%, with the advantage of not depending on any condition about the origin of the shares.
The waiting period, and what the reform changed
The reduced rate of 9.8% requires the reserve to have been kept for 3 years. A distribution before then is taxed at 30%, which brings the cost close to the standard regime.
The waiting period runs per reserve, not per company. An SME that adds to its reserve every year therefore has, year after year, a tranche that has become available at the reduced rate: that is what makes the mechanism worthwhile over time.
Three regimes coexist, and what decides is the closing date of the financial year in which the reserve was created, not the date of distribution. A reserve created in a financial year closed before 31 December 2025 keeps the choice between 5 years at 5% and 3 years at 6.5%. A reserve created in a financial year closed on or after 31 December 2025 falls solely under the 3-year, 9.8% regime. The FIFO principle applies mandatorily on distribution, and a change of closing date decided after 24 November 2025 for tax purposes has no effect.
Taking it out on liquidation
When the company is actually liquidated, liquidation reserves come out with no withholding tax on movable income. The total cost is then limited to the 10% levy paid when the reserve was set up.
This is the most favourable scenario, and it reflects a common use: a director preparing to wind down their business builds up liquidation reserves over the final years, then liquidates the company at retirement.
How it fits with the rest
The liquidation reserve does not compete with the IPC (individual pension commitment, EIP/IPT), it complements it. The IPC comes out of profit before corporate income tax and builds a pension; the liquidation reserve works on profit after tax and builds assets that can be drawn on.
The logical order remains the same: first fill what is deductible before tax, the PLCI/VAPZ (free supplementary pension for the self-employed) then the IPC, and then allocate to the reserve what the company does not need to distribute. Tying up funds for 3 years assumes you will not need them in the meantime.
Not to be confused with
The terms close to Liquidation reserve and what sets them apart.
- Liquidation reserve and VVPRbis
- VVPRbis costs nothing upfront but imposes strict conditions on the origin of the shares. The liquidation reserve costs 10% immediately, with no condition on the shares.
- Liquidation reserve and the legal reserve
- The legal reserve is a compulsory allocation of profit under company law. The liquidation reserve is an optional tax choice, with its own regime.
- Liquidation reserve and the IPC
- The IPC comes out of profit before corporate income tax and builds a pension. The liquidation reserve works on profit after tax and remains a company asset.
Further reading
Liquidation reserve: frequently asked questions
A 10% levy when it is set up, then 9.8% withholding tax on exit after 3 years. The combined cost comes to around 15%, compared with 30% for an ordinary dividend.
The withholding tax rises to 30%, which brings the total cost close to the standard regime. The levy paid when the reserve was set up is still due: taking it out early costs on both sides.
Per reserve. Each annual allocation has its own start date, so a company that adds to it regularly has a tranche becoming available at the reduced rate every year.
Liquidation reserves come out with no withholding tax on movable income. The total cost is then limited to the 10% levy paid when the reserve was set up, which makes it the most favourable scenario.
No, the regime is reserved for small companies within the meaning of the Code of Companies and Associations. Qualification is assessed on the size criteria, financial year by financial year.
Both, in this order: the PLCI/VAPZ and then the IPC come out of profit before corporate income tax, and the reserve works on what is left afterwards. It also assumes you can tie up the funds for 3 years.
Official source
- FPS Finance. View (new tab)(Official source, accessed on 2026-09-19)