Incorporating extraordinary items in the calculation of the net result of sole proprietorships or transparent partnerships

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Extraordinary items are non-recurring transactions that are not part of the usual activity of the business. The difference between extraordinary expenses and extraordinary income is the extraordinary profit (or loss) which, when added to the operating profit (or loss), gives the overall result for the business.

Extraordinary income

Extraordinary income covers capital gains from disposals and other non-recurring income (indemnities, subsidies, debt write-offs, etc.).


A distinction should be made between operating subsidies and capital investment subsidies.

Operating subsidies take the form of financial aid granted by the public authorities to compensate for certain operating expenses or insufficient operating income. Operating subsidies do not benefit from favourable treatment and they are subject to tax as soon as they have been received from the public authorities.

Capital investment subsidies take the form of financial aid paid by the public authorities to finance fixed assets. Capital investment subsidies are deducted from the acquisition cost of the fixed asset paid by the business. Capital investment subsidies are not immediately subject to tax; they are only indirectly subject to tax if the asset concerned is sold and a capital gain is made. Note that if the fixed asset can be depreciated, the subsidy reduces the depreciation basis by the same amount, thereby further reducing the deductible annual depreciation charges.

Disposal of immovables

A business may sell all or part of its fixed assets and make a substantial capital gain. Such a capital gain is taxable unless it is exempt under certain conditions:

  • if the asset sold forms part of the fixed assets (building or site) other than a production tool;
  • if the asset has been held for at least 5 years;
  • if the business reinvests the capital gain in another fixed asset (reinvestment asset). In principle, reinvestment requires that the original asset be sold first; Exceptionally, advance reinvestment is allowed for property; in this case, the prior acquisition of the reinvestment asset must be vital to the continuation of the business, the business must move to the new building as soon as it is completed (acquisition) and the old building must be sold within 24 months of the date of completion (acquisition) of the new building;
  • if the business carries out proper bookkeeping.

In this case the capital gain will be temporarily exempt. It is deducted from the purchase cost of the asset so that in the event of the subsequent sale of the replacement asset, the transferred capital gain will be subject to tax. Note that in the event of replacement by a depreciable asset, the exempt capital gain can be deducted from the purchase cost of the asset concerned, thereby reducing the annual depreciation charges by the same amount.

Example: a plot of land is sold with a capital gain of 1,000. The business reinvests this capital gain in a building purchased for 5,000. The depreciation rate is 4 %. The fiscal purchase cost of the building will be 4,000 and the annual depreciation will be 160 instead of 200.

Extraordinary expenses

In principle, extraordinary expenses are deductible. They only have to relate to the commercial activity of the business (example: destruction of the business premises).

Particular case of debt write-offs: A debt write-off is a debt cancellation granted by the creditor to the debtor. This is generally an extraordinary operation because business logic does not easily accommodate such actions. A distinction must be made between:

  • debt write-offs of a business nature: if granted in the business interests of the creditor company, the write-off will be deductible.
  • debt write-offs of a financial nature: debt write-offs granted not for business reasons but because of a partnership agreement (example: the parent company writes off a debt due by its subsidiary). This debt write-off is not deductible; it represents an additional investment on the part of the creditor and increases the acquisition cost of its holding.

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