On 9 May 2018, the Belgian tax administration has issued a Practice Note providing guidance on the deduction of costs in the framework of the computation of the Belgian Taxable Income per Share, also known as “Belgian TIS” or “BTIS”.
For recall, the BTIS allows an accurate taxation of Belgian private investors of certain capitalizing funds investing at least 10% of their assets in debt-related assets. While the inclusion of the negative results on the debt-related assets in the computation of the BTIS was not subject to discussions, the treatment of other costs (transaction costs, management costs, etc.) was more unclear.
This Practice Note – in the elaboration of which PwC has participated – should result in an alignment of the different approaches followed on the market on this specific point, which is of course welcome.
In terms of content, the methodology described in the Practice Note is quite detailed as it tackles the different types of costs (direct costs, indirect/operational costs, etc.) and their impact on the computation of the BTIS. It also addresses the situation of fund-of-funds and other methodological aspects (cascading approach, consistency, etc.) and provides concrete examples.
The different stakeholders (investors, banks, fund managers, etc.) should consider this new development since, mechanically, a BTIS taking into account the costs should result in a more granular taxation at investor level, hereby lowering the tax cost in accordance with the laws.
In particular, fund managers should assess the opportunity to implement the deduction of costs in their BTIS computation methodology. Note that this feature is for a long time part of the methodology used by PwC which currently provides daily BTIS computations for a large part of the market.