Belgian Tax reform – Individuals – Personal income tax
Latest update: 4 January 2021
Law of 20 December 2020 laying down urgent provisions in tax matters and the fight against fraud (Official Gazette of 30 December 2020)
On 17 December 2020, this draft law has been adopted by the Chamber. From a personal income tax perspective, it includes the following measures :
- restore the provisions regarding the sharing economy and make some changes to it;
- provide a legal basis in respect of the exemption from payment of withholding tax for researchers holding a bachelor’s degree.
Program Law of 20 December 2020 (Official Gazette of 30 December 2020)
The most important tax measures introduced from a personal tax perspective are the following.
Non-indexation of fiscal amounts
For the income years 2020 to 2023 the annual indexation of certain tax reductions and tax exemptions would be frozen. Consequently, the maximum amounts for a number of tax reductions would not be indexed during these four years and would remain at the same level of income year 2019. As from income year 2024, the annual indexation would take place again. Regarding the maximum amount for pension savings, please note that a majority amendment was tabled before the Finance Committee with a view to maintaining the upper limits applicable for the tax years 2022 to 2024 at their level for the tax year 2021, i.e. EUR 990 and EUR 1,270.
- Tax reduction for childcare: As from income year 2020 the maximum amount per childcare day and per child would be increased from EUR 11,20 to EUR 13. The age limit would be raised from 12 years to 14 years (and from 18 years to 21 years for heavily disabled children). Expenses for professional home care of sick children would become eligible. As from income year 2021 the maximum amount per childcare day and per child would be further increased to EUR 13,70 and it would be indexed every year. In order to benefit from this tax reduction, a certificate would be required.
- Tax free amount for informal care: Any taxpayer who takes in a family member to take care of, would be able to benefit from an increased tax-free amount, if it concerns a (grand)parent, brother or sister older than 65 years who is in need of help. To determine whether or not someone is in need of help, their degree of self-reliance would be taken into account. A reduced self-reliance of at least 9 points would be required.
The Central Contact Point (CAP), managed by the National Bank, contains the bank account numbers and certain financial contracts that are held by private individuals and legal persons, whether or not established in Belgium, which are held with Belgian financial institutions. Going forward, the CAP would also include data on the balance of those same accounts and contracts. This should enable the tax authorities to better expose and combat tax fraud.
Draft bill introducing a new annual tax on securities accounts
On 31 October 2020, the Council of Ministers approved a draft bill introducing a new annual tax on securities accounts in the Code of Various Duties and Taxes (CVDT). The Council of State is being requested to give its opinion on the draft bill. The Government intends to submit the bill to Parliament by year-end.
In a nutshell, the tax is an annual tax on the holding of a securities account, levied at the rate of 0.15% on the average value of the account in excess of EUR 1.000.000.
Scope of Application
The tax would apply to securities accounts as such and therefore in principle would concern all securities accounts, whomever the account holder is – natural person, company, legal entity, “legal arrangement” in the meaning of the Cayman Tax or de facto association – whatever its tax residency status – resident or non-resident – and its legal rights on the account (full ownership, bare ownership, usufruct).
However, the tax would not be due on securities accounts held by specific types of financial institutions in the course of their own business activities, i.e. (sic) “exclusively for their own account”.
Residents would be taxable on securities accounts held in Belgium or abroad; non-residents would be taxable on securities accounts held in Belgium only (and provided the double tax treaty concluded with its country of residence allows such wealth taxation)
The tax would be levied on securities accounts with an average value of taxable financial instruments in excess of EUR 1 million.
The nature of the financial instruments held on the securities account is irrelevant, only the total value of the securities account is.
To compute the “average value” of the securities account, the reference period would be a period of twelve successive months beginning on 1st October and ending on 30th September of the following year. The tax would be due on the first day following the end of the reference period. Specific rules apply for securities account closure and tax residency changes:
- The reference period would end early if the securities account is closed. Consequently, the deadlines for declaration and payment woulb be triggered upon closure of a securities account.
- The same would apply if the sole account holder, who is resident in Belgium, would become resident in a Country with which Belgium has concluded a double tax treaty with the effect that the power to tax an asset is attributed to the other Country (e.g. the Netherlands). Consequently, the deadlines for declaration and payment would be triggered upon a tax residency change.
The last day of each quarter of the reference period would be a benchmark and the taxable base would be the sum of the value of the financial instruments at the benchmarks divided by the number of such benchmarks.
Tax Rate and Ceiling
The tax rate would be set at 0.15 p.c.
Where applicable, the amount of the tax would be limited to 10 p.c. of the difference between the tax base and the threshold of EUR 1,000,000. In this way, the government wishes to prevent the collection of the tax from causing the assets to fall below the threshold of EUR 1,000,000.
Declaration and Payment
The tax would be collected indirectly, i.e. through a financial intermediary (i.e. any intermediary which offers securities accounts: credit institutions, brokerage firms, investment firms).
Belgian intermediaries must levy the tax, i.e. intermediaries constituted in accordance with Belgian law, intermediaries established in Belgium, and intermediaries not established in Belgium which have appointed a responsible representative.
- Belgian intermediaries shall file a declaration with the competent office, and shall pay the tax, no later than the 20th day of the 3rd month following the end of the reference period.
If the intermediary would not declare and collect the tax, this obligation would fall back on the account holder. If a securities account is held by several holders, each holder would be jointly and severally liable for the declaration and payment of the tax.
- In the cases where the holder is liable, the latter shall file an electronic declaration, no later than the last day provided for the submission of the personal income tax return. A paper filing can be accepted in specific cases.
Sanctions and procedures for tax audits would be foreseen.
A general anti-abuse rule (GAAR) would be introduced in the CVDT.
Specific anti-abuse rules would also be introduced with respect to the tax on securities accounts which covers, among others, the following situations:
- the split of securities accounts by which securities are moved between securities accounts with the same financial intermediary or to securities accounts with another financial intermediary in order to prevent the total value of the securities on an account from exceeding the threshold of EUR 1.000.000;
- the opening of securities accounts by which securities are distributed between accounts with the same financial intermediary or with another financial intermediary in order to prevent the total value of the securities in an account from exceeding the threshold of EUR 1.000.000;
- the conversion of shares, bonds or other financial instruments into registered securities so that they are no longer held on a securities account, in order to avoid the tax;
- the placement of a securities account subject to tax in a foreign legal person which transfers the securities to a foreign securities account, in order to avoid the tax;
- The placement of a securities account subject to tax in a fund in which the units are registered, in order to avoid the tax.
These anti-abuse rules would retroactively apply as from 30th October 2020 so as to counter restructuring of portfolios to avoid the tax before the law enters into force (“effets d’anticipation”/”anticipatieve effecten”)
A refund procedure would be foreseen in case of overpayment.
These features are likely to evolve during the legislative process.
Belgian tax reform : new measures announced
On 30 September 2020, 7 political parties reached an agreement on the formation of a new Belgian government (the so-called Vivaldi government). The agreement mentions the intention for a relance and investment plan of 4.7 bln EUR including measures with important social accents. To provide the necessary budgetary room for this plan, some important tax measures have been announced :
- besides the measures related to the taxation of digitalised companies and the introduction of a minimum tax for businesses, during the term of the government, a significant tax reform (with a particular focus on the personal income tax side) would be prepared which should be realised in 2024. Guiding principles are, among others, the simplification by gradual abolishment of deductions, tax reductions and exception regimes and the gradual shift from alternative remuneration to remuneration in cash.
- In combination, the fiscal amnesty procedure would be terminated by the end of 2023.
- The tax reform does not seem to include a capital gain tax or securities tax but would include a fair share of contribution from the wealthiest – with respect for entrepreneurship.
- Increase of the tax reduction for child care and of the tax-exempt income share supplement for the care of relatives (parents, grandparents, dependent brothers and sisters over the age of 65);
- reform of the current fiscal and parafiscal advantages of professional sportsmen and sports clubs;
- organisational measures would be taken to combat social and tax fraud, such as the creation of multidisciplinary investigation teams, and an action plan against tax fraud would be put in place;
- transparency and preventive measures would be taken, and therefore the saldo of Belgian bank accounts would be shared to the PCC, combined with rules when the PCC can be consulted;
- introduction of a tax charter and code of conduct in the framework of tax audits;
- the “cheese route” (“kaasroute”/”route de fromage”) would be closed by requiring the registration of foreign notarial deeds by Belgian residents in Belgium, taking into account the opinion of the Council of State;
- all new company cars should be carbon-neutral by 2026 ; tax rules dealing with company cars would be impacted;
- the government would put in place a framework allowing workers who do not have company cars to receive a mobility budget from their employer. This would stimulate sustainable mobility alternatives (public transport, cycling, carbon-neutral cars, etc.) and the willingness to live or move close to the workplace;
- in the framework of the recovery and transition plan, the introduction of the reconstitution reserve would be provided;
- in order to stimulate productive investment, the increased investment deduction would be extended by two years. The current investment criteria would be evaluated and, if necessary, adjusted.
- The government would also draw up tax benefits for companies which grant their employees more hours of training than is provided for in the regulations, while avoiding deadweight effects as far as possible. The aim is to support those companies which currently do not offer sufficient training.
Further details will come in the next weeks and months.The announced measures are, of course, subject to change.
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Impact of COVID-19 : Belgian federal measures to support the economy
For the latest news regarding the tax measures taken by the Belgian government in the framework of the Covid-19 crisis, please visit our websites :
- the PwC report including tax measures from 108 countries : Navigate Tax, Legal and Economic measures in response to COVID-19 and select Belgium
- PwC Belgium Covid-19 website : Helping firms mitigate the potential impact of COVID-19