In the framework of the ‘Tax Shift’ agreement, the Belgian government announced a new speculative tax (or capital gains tax, below ‘CGT’). The bill of law on measures for strengthening job creation and purchasing power dated 10 December 2015 provides further details in this respect.
Speculative tax/capital gains tax
In a nutshell, here are the main characteristics of the upcoming piece of legislation (the piece of legislation ultimately adopted may slightly vary):
- Taxpayers concerned: individuals subject to personal income tax (individuals considered as resident in Belgium for income tax purposes) or subject to non-resident personal income tax.
- Financial instruments concerned: listed shares, options and warrants, and more generally any financial derivatives provided that (i) they are listed and (2) whose underlying asset is exclusively made up of one or several specified listed shares. Units in undertakings for collective investments (UCITS, including ETF; AIF) and Belgian regulated real estate companies are excluded from the scope of application of the CGT. Specific definitions and references to regulatory definitions are provided (among others shares, undertakings for collective investment, options, warrants, etc.). The leverage is not relevant.One should note that the exclusion of Belgian regulated real estate companies from the scope of the tax is not extended to similar foreign REIT, which may likely give rise to some concerns from an EU law point of view.
- Triggering event: transfer for valuable consideration, be it on financial instruments held in portfolio (‘long’) or not (‘short’), which are voluntary (i.e. excluding operations exclusively held at the issuer’s initiative and for which the taxpayer has no opportunity to choose) and not within the conduct of a business activity.
- 6-month holding period: the transfer for valuable consideration is only taxable if the holding period is less than 6 months (calculated as the number of months between the purchase date and selling date). Gifts inter vivos are disregarded for calculating the holding period.
- Taxation method: when a financial institution based in Belgium intervenes in the transaction, the tax charge is made through the levy of a Belgian withholding tax. In the absence of financial institution based in Belgium (typically, a securities account held with a foreign credit institution or broker), the individual taxpayer will have to declare the income in his/her annual personal income tax return.
- Taxable basis:
- [(Sale price – Belgian tax on stock exchange transactions supported by the seller) – (acquisition price + Belgian tax on stock exchange transactions supported by the buyer, subject to the disclosure of appropriate supporting documents)]
- Calculation of the standard tax base:
- To determine the holding period (and capital gain, probably), a ‘Last In first Out’ method is applied (be it in case of long or short positions).
- In case bunches of identical securities have been purchased successively and are sold at a given date, the amount of realised income (capital gain or loss) is first determined separately per bunch of securities, and then added up together (with a minimum net result of zero, which enables to some extent offsetting gains against losses for a given sale).
- Tax rate: 33%
- Entry into force: 1 January 2016
- Source: sections 43 to 85 (p. 211 et seq.) of the bill of law (ref. 54K1520/001)
- Main provisions: sections 48, 55, 61, 68, 73, 74, 78, 79, 83 and 85 (the other provisions being mere reference updates)
General tax increase on income from investments in transferable securities
The bill of law also provides for a general withholding tax rate increase on income from investments in transferable securities from 25% to 27% (and in specific cases such as on regulated cash deposits, from 15% to 17%) as from 1 January 2016.
More than ever, Belgian financial institutions should set up the appropriate procedures so as to enable foreign beneficiaries to directly apply the treaty protection they are normally entitled to on their Belgian-source income from investments (reduced withholding tax rate at source).