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Tax on securities and trading accounts
 
[update] On 1 February 2018, the federal parliament adopted an act that introduces a tax on securities and brokerage accounts. We are still waiting for the law to be published in the Belgian State Gazette.

The tax is due on Belgian and on overseas accounts. The tax is also due on Belgian securities accounts held by non-resident account holders.


1. Which accounts?

The tax is due on securities accounts held by individuals that have a value in excess of €500,000 per account holder (€1,000,000 for married couples and registered partners).

The tax is due on Belgian and on overseas accounts. The tax is also due on Belgian securities accounts held by non-resident account holders.

The tax is not due on savings accounts or term deposit accounts.

Investments held in a unitized life assurance policy linked to one or more investment funds (“insurance wrapper”) or in a pension savings account are exempt.

The tax is not due on accounts held by companies and legal entities.

2. Which securities?

Only the following financial instruments are taken into account to determine the threshold of €500,000 and to calculate the tax.

- stocks, both of listed and unlisted companies and share certificates of such shares;
- bonds, irrespective of whether they are listed, and certificates of such bonds;
- rights in mutual investment funds or shares in investment companies;
- cash bonds;
- warrants.

Please note that the tax is due on cash bonds but not on term deposit accounts, and on warrants but not on stock options. And investments held in an insurance wrapper or in a pension savings account are exempt.

3. How is the value of the account calculated?

The value of the financial instruments is calculated, as the average of the stock price or the asset value of funds over the period from 1 October to 30 September, recorded on 31 December, 31 March, 30 June and 30 September. Practically speaking, this is the stock price or valuation at close of the last day of the quarter or the last net asset value of the quarter that is publicly available.

If the account is opened or closed during the year, the value of that day is taken as a cut-off date to calculate the value and the tax proportionally to the number of days in the period October to September. The same applies when the account holder changes or when the account holder leaves Belgium and transfers his securities account.

The tax is calculated at 0.15% of that average value, not just on the tranche over €500,000.

4. When and how is the tax due?

Belgian banks report the values of the securities and the tax due per account holder and deduct the tax from the account holder’s account. The tax is to be reported and paid by 20 December, starting in 2018.

Overseas banks may also report and pay the tax via a fiscal representative based in Belgim.


If the overseas banks do not report and pay the tax, the Belgian resident account holder will have to report the value of his securities accounts online with his annual income tax return and pay the tax by 31 August.

5. And if a taxpayer has several securities accounts?

If the account holder has more than one securities account and he anticipates that the total value will exceed the threshold of €500,000, he must authorise the bank to deduct and pay the tax, or report the tax in a separate tax return.

He will have to report in his annual income tax return that he has more than one securities account.

6. What if the account is held by more than one account holder?

If the securities account is held by two or more individuals, it is presumed that the account is held in equal shares by all account holders. E.g. a couple can hold up to €1,000,000 before they have to pay the tax as it is presumed that they each hold €500,000.

If they hold different shares, it is possible that too much tax has been paid for one of them, and they will have to reclaim the excess.

It is also possible that the account is held by one spouse while the couple has community property; the bank may not be aware of that and calculate the tax for one account holder.

7. What about usufruct on securities accounts?

If one or more account holders have usufruit over the securities account, the value of their share may be lower than an equal share of the value of the securities account. They can recover part of the tax, by filing a joint account with the other account holders. They will have to prove the value of their share based on their age expectancy; the bare owners may have to pay a higher tax.

8. What are the penalties?

Failure to report, and late, incomplete or inaccurate filing can attract a penalty of 10 to 200 percent, depending on the importance of the infringement.
  
The fine can be dropped if the account holder was acting in good faith.

9. And if the bank has paid too much tax?

If too much tax has been paid, e.g. because the bank was not aware of the share held by an account holder (see 6), the latter has two years to claim back the excess. He will have to prove his share in the account.

10. How can I avoid the tax - legally?

The answer depends on the type of security.

- Registered stocks held in the name of the owner in the share register of a company are not held on a securities account and are exempt; however, a conversion of shares after 9 December 2017 is disregarded for the year of the conversion.

- Bonds held through a bond register of the company are not targeted;

- Cash bonds are liable to the tax, but term deposit accounts are not;

- Warrants are taxed, but stock options are not;

- Registered shares in investment companies such as the Luxembourg SICAV-SIF are exempt as well. 

- Securities held in a pension savings account are exempt;

 Investments in insurance wrappers are not taxed either;

- Securities accounts held by a company or legal entity are exempt. However, any transfer of the securities to the account of a company or legal entity that is liable to corporate income tax - for the sole purpose of avoiding the tax - will be disregarded, and not just for the year of the transfer.

- Alternative investments such as art, wine, gold, old-timers, … do not trigger the tax.

- Investing in real property is another valid alternative.

While there was no anti-avoidance provision in the tax code for this tax on securities accounts, a specific anti-avoidance provision is introduced to stop taxpayers from setting up a company to hold the securities.

11. What planning is possible?

Setting up more than one securities account is not an alternative, the account holder will have to report whether he has more than one securities accounts.

Moving securities accounts abroad is not a solution either as the Belgian resident account holder will have to report the tax himself. Moreover, the overseas bank account will be reported to the Belgian tax authorities by the bank. They will receive information about the assets on the securities account under the OECD’s Common Reporting Standard.

So, what is possible?

- Converting stocks on securities account to registered stocks, if allowed by the company, is a valid alternative. These stocks are not liable to the securities accounts tax and many companies have reported receiving requests to this effect.

- Converting bonds may be possible as well.

- If the value of your securities accounts is around €500,000, selling stocks to get under the threshold may be a solution, but it will trigger the stock exchange tax. This is currently 0.35% (since 1 January 2018). On a sale of stocks worth €100,000, the stock exchange tax is €350, but that may save €750 on an account worth €500,000.

- Married couples can hold up to €1,000,000 on one or more accounts. Rearranging the values of accounts held by spouses, or appointing another account holder may help reduce the tax. If spouses do not have community property, this may have to be organised as a donation to thwart any anti avoidance rule.

- Transferring securities to the securities account of a child is an alternative, it is anticipated that the tax will trigger a lot of donations by way of advance on an inheritance. However, giving the bare ownership of the account to one or more children does not solve the problem. You still have to declare the account.

Holding your securities in a company does not trigger the tax on securities accounts. However, there is a cost to run a company and a company pays corporate income tax and it must withhold dividend tax on the distribution of dividends.

Marc Quaghebeur
De Broeck Van Laere & Partners



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