On 25 February, the new securities tax was officially published in the Official Gazette. It also came into effect the following day. It is therefore time to explain a few things. Let’s start with the (old) securities tax 1.0 that came into effect on 10 March 2018.
The securities tax 1.0
The first securities tax was payable by natural persons, the holder or holder of the securities account, regardless of whether this was in full ownership, usufruct or bare ownership. If there were several holders, the average value per share was considered. If a securities account with a value of, for example, EUR 1.2 million was shared among three holders, let us say both parents the usufruct and the only child the bare ownership, then the value per head was EUR 400,000. No securities tax was payable. The rate of the tax was 0.15%.
Which components of equity were targeted?
Financial instruments in a securities account with an average value of EUR 500,000 or more were taxed. However, a number of financial instruments were excluded from the securities tax, namely options, futures, swaps, individual life insurance funds or pension savings. Registered shares were also not subject to the securities tax.
The Belgian banks and intermediaries had the duty to withhold the levy in discharge. If no levy was withheld, for example a securities account held with a foreign institution, the taxpayer had an obligation to declare and therefore had to pay the securities tax to the state themself.
On 17 October 2019, the Constitutional Court annulled the securities tax 1.0 because several aspects of the tax violated the constitutional principle of equality.
What exactly does the new securities tax 2.0 entail?
Where the previous securities tax only concerned natural persons, the tax is now extended to legal persons, founders of legal structures and partnerships. The only thing that has not changed is the rate of the securities tax because it remains at 0.15%.
The previous tax had a limited scope. Now the legislator wants to tax all financial instruments held in a securities account, including turbos and trackers, for example. In addition, cash held in a securities account is also subject to the new tax.
If the value exceeds EUR 1 million, the tax will be levied on the full amount. The taxable value is the average value of the account on 4 reference dates: 31 December, 31 March, 30 June and 30 September.
A consideration and important change with the annulled securities tax is that the securities account itself is taxed and not the holder any longer. In our example mentioned earlier, this means that a securities account of EUR 1.2 million, held by three holders, exceeds the threshold of 1 million and is therefore subject to the securities tax.
Moreover, the securities tax is not limited solely to Belgian territory. A resident of Belgium for tax purposes owes the securities tax on his worldwide assets, including foreign securities accounts. On the other hand, an individual who is not resident in Belgium for tax purposes will only be taxed on his Belgian securities accounts.
For securities accounts held with Belgian intermediaries such as banks, the intermediaries will be responsible for the calculation and withholding of the tax. In cases where the tax has not been withheld, it is up to the holder themself to file a declaration and pay the tax to the FPS Finance.
Introduction of two anti-abuse measures
The legislator has devised two anti-abuse measures with effect from 30 October 2020. On the one hand, the government has introduced an irrebuttable presumption of tax abuse in two specific situations. On the other hand, a general anti-abuse provision has been added to the (Belgian) Code governing miscellaneous duties, levies and taxes (Wetboek Diverse Rechten en Taksen).
These are the two situations where an irrebuttable presumption was introduced.
Situation 1: Splitting a securities account into several securities accounts with the same intermediary.
Situation 2: Converting taxable registered financial instruments that are not held in a securities account.
“Irrebuttable” means by definition that there is tax abuse without the tax authorities having to demonstrate abuse. In practice, the Belgian intermediary or the account holder must then continue to declare and pay the tax as if the transaction had not taken place.
In addition, there is the introduction of the general anti-abuse provision in the Code governing miscellaneous duties, levies and taxes. Tax abuse occurs if the taxpayer, by means of a legal transaction, places themself outside the scope of the securities tax or if a tax advantage is obtained and granting thereof would be contrary to the objective of that provision.
This general anti-abuse provision is a rebuttable presumption. The taxpayer therefore has the right to prove that their transaction is for reasons other than simply avoiding this tax.
Will the new securities tax 2.0 meet expectations? That is difficult to predict. The legislator has clearly broadened the scope and learned from its mistakes following the annulment by the Constitutional Court. However, the Council of State stated that a threshold amount is not compatible with the principle of equality without objective accountability. It therefore remains to be seen whether the securities tax 2.0 will pass the test of the Constitutional Court this time.
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You see, there are still some uncertainties. If you have any questions or would like some advice about your tax obligations regarding foreign securities accounts, we are here to offer you support with compliance with your tax obligations. Please feel free to contact us.