Last week, the Belgian tax authorities published a practice note enlarging the scope of application of the Belgian Tax on Savings Income (or “Reynders Tax”) so as to include new categories of funds.
Capital Gains Tax. As is already known, the Belgian Tax on Savings Income (“BTS”), also referred to as the Reynders Tax, (the main provision of which being “art. 19bis” of the Belgian Income Tax Code) provides for a 27% taxation of capital gains realised by Belgian resident individuals on some funds.
Tax Base. When the Belgian Taxable Income per Share (“Belgian TIS”) reporting is properly performed, the taxable amount of income is limited to the income deriving directly or indirectly, in the form of interest, capital gains or losses, from the return on assets invested in debts (capped by the capital gain realised by the investor on the units of the fund). A “tax base by default” applies otherwise.
Three Conditions. In order to determine whether or not a fund falls within the scope of application of the BTS, the following elements should be examined:
- the category of funds concerned;
- the asset composition (> 25% of assets invested in debts pursuant to the “Belgian Asset Test”);
- the distribution policy.
Category of Funds Concerned. Since the Act of 30 July 2013, the BTS applies to any undertaking for collective investment in transferable securities (“UCITS”) regardless of whether or not they have the EU passport. However, in the absence of any definition of “UCITS” in tax law, the exact range of funds falling within the scope of the BTS is debated.
Practice Note of 25 October 2013. This issue had been partially solved since the publication of the practice note of 25 October 2013. In that practice note, the tax authorities opted for a “regulatory” interpretation to assess the “in” or “out of scope” character of a fund.
The tax authorities considered that the following were in scope of the BTS (free translation), “the undertakings for collective investments as defined in art. 3 (1) of the Act of 3 August 2012, being ‘undertakings, Belgian or foreign, whose sole object is the collective investment of funds’, which place the funds they collect in one of the asset classes referred to in art. 7 (1) 1° or 2°, Act of 3 August 2012, namely:
- investments that meet the requirements of Directive 2009/65/EC;
- financial instruments and liquidity.”
Undertakings for collective investments out of scope of the BTS comprised those defined in art. 3 (1) of the Act of 3 August 2012, placing the funds they collect in one of the asset classes referred to in art. 7 (1) 3° to 9° of the Act:
- commodities, options and futures on commodities;
- options and futures on securities, currencies and equity index contracts;
- real estate;
- high-risk capital;
- claims by third parties and transferred to the undertaking for collective investment through a transfer agreement in accordance with the terms and conditions established by Royal Decree;
- financial instruments issued by unlisted companies;
- other investments authorised by Royal Decree.
Since 2014, asset classes 2°, 4°, 5°, 6°, 8° and 9° are ruled by the Act of 19 April 2014 (FR/NL) whilst asset classes 1° and 7° are still ruled by the Act of 3 August 2012, and 3° has been abolished.
Addendum of 8 April 2016. In an addendum of 8 April 2016 (FR/NL), the Belgian tax authorities announced that (free translation) “regarding the understanding of the concept of UCITS, a generalisation is required in order to favour an equal treatment of all funds, regardless of their legal form and of how they are offered to investors” so that the “category of funds” is not relevant anymore. This new interpretation takes effect as from 1 July 2016.
Strangely enough, the Belgian tax authorities based their new interpretation on the changes to the European Savings Directive provided by Directive 2014/48/EU (although never implemented in Belgian law, never applied, made superfluous by Directive 2014/107/EU and finally repealed by Directive 2015/2060/EU) and on the changes brought to the regulatory framework by the Act of 19 April 2014 (although the asset classes listed above were essentially moved from one legislation to another).