The bill introducing an annual tax on securities accounts also plans to introduce new specific and general anti-abuse rules applicable to all the indirect taxes ruled by the Code of Various Duties and Taxes.
As regards the tax on securities accounts, 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”). As regards the other taxes under the CVDT, they would apply on the day following the publication of the law in the Belgian official journal.
1. Specific Anti-Abuse Rules
As regards the new tax on securities accounts, two situations are covered by specific anti-abuse rules, based on irrebuttable presumptions of abuse:
- 1° the split of a securities account into several securities accounts held with the same intermediary.
However, in the event of separation or death resulting in the termination of the forced indivision of a securities account, the irrebuttable presumption would not apply. The same goes if, for example, an account of EUR 50.000 is divided into two accounts of EUR 25.000.
- 2° the conversion of taxable financial instruments, held in a securities account, into registered financial instruments.
2. General Anti-Abuse Rule
A general anti-abuse rule (GAAR) is introduced in the CVDT, the wording of which is similar to the GAAR existing in other tax codes.
2.1. New Tax on Securities Accounts
According to the parliamentary works, “this measure will act as a strong disincentive for both the intermediaries who would collaborate and the account holders to split a securities account in order to avoid the tax and will, if necessary, allow such splits to be combated”.
Reducing the taxable value of a securities account by using alternative forms and means of investment, but pursuing the same goal, only to circumvent the threshold of EUR 1 million per securities account, is contrary to the objective of the tax. Based on examples, the bill of law tries to explain the difference between abusive and non-abusive behaviours:
- Would thus be contrary to the objective of the law an investor having initially two securities accounts, one of EUR 1,5 million and the other of EUR 200.000, makes transfers from one to the other such that both securities accounts are below the taxable threshold without reducing the total value of his accounts.
- The conversion of shares, bonds and other taxable financial instruments into registered securities (other means, but same objective, same yield, same rights) would also be considered contrary to the objective of the law.
- However, the sale of securities from a securities account in order to reinvest the proceeds in assets, using not only another means but also with another purpose (e.g. real estate investments) would not be contrary to the objective of the tax. Indeed, an investment into real estate would be a different investment objective subject to different consequences (other type of return, payment of the property withholding tax, maintenance of the building, etc.).
The GAAR would also apply where the taxable value of a securities account is no longer increased in order not to increase the tax levied. According to the parliamentary works, the anti-abuse measure would come into play when a holder who owns a portfolio of listed securities held on a securities account, proceeds to purchase additional listed securities, but, “with the intention of evading the tax”, opts for:
- registered securities instead of dematerialised securities, or
- dematerialised securities on a new securities account.
In the light of the above, the following behaviours would fall under a rebuttable presumptions of abuse, when carried out “with a view to reducing or avoiding the tax” (the first five situations were already mentioned in the Notice on the introduction of an annual tax on securities accounts, Belgian official journal, 4 November 2020, sec. ed., pp. 79255-79256):
- 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.
This is, for example, the case when the conversion takes place in situations where it is customary for the securities to be held in a dematerialised manner and where the conversion does not concern (often large) equity holdings in (mainly) family companies held as a long-term investment and/or for control purposes, which are moreover outside the normal framework of an investment portfolio;
- the placement of a securities account subject to tax in a foreign legal person which transfers the securities to a foreign securities account;
- the placement of a securities account subject to tax in a fund in which the units are registered;
- the transfer of an existing securities account or a unit-linked life insurance contract to a unit-linked life insurance contract concluded with an insurance undertaking established outside Belgium;
- the transfer of a securities account when the securities are transferred abroad to the same financial intermediary or to accounts with another financial intermediary;
- the holding of a securities account in which all securities have been sold or transferred in order to create zero values at reference points in order to reduce the average value of taxable financial instruments during the reference period.
2.2. Other Indirect Taxes
The GAAR is not limited to the application of the new tax on securities accounts, but applies to all other duties and taxes of the CVDT, i.e.
- Writing duties: notary deeds, acts of judicial officers, bank writings, other writings;
- Various taxes: tax on stock exchange transactions (TSET) and deferrals, annual tax on insurance operations (IPT), annual tax on profit sharing, long-term savings tax, display tax, annual tax on credit institutions, annual tax on collective investment undertakings (so-called net asset tax), annual tax on insurance companies.
The parliamentary works provide some examples of potential abusive situations in this respect:
- IPT: the conclusion of an insurance contract, formally by an exempted public authority but to cover a risk in the hands of a third party private individual (e.g. the conclusion, by a public authority, of a car insurance contract for public vehicles which in reality relates to private vehicles. Another is the conclusion by a professional association of contracts of insurance against the professional risks of its members);
- IPT: the splitting of an insurance contract into two contracts, one to cover the risk and the other to manage the insurance contract so that the IPT taxable base is reduced by the amount of the commission which is normally part of the premium;
- IPT: on the basis of a separate invoice or contract, have the commission paid by the policyholder so that this commission does not appear as a charge on the insurance contract and thus as part of the IPT taxable basis;
- TSET: the issue of units by a private undertaking for collective investment with a view mainly to enabling investors to avoid the payment of the 1,32% TSET applicable to redemption of capitalising shares.
Do not hesitate to contact the undersigned if you require additional information.