The taxation of movable assets in Belgium

The general background

The taxation of financial assets in Belgium has three main components: firstly, the taxation of investment income; secondly, the tax on financial transactions, and finally on Securities Accounts. On the other hand, there is no tax in Belgium on holding transferable securities. These taxes are:

The withholding tax on income derived from securities

This tax is levied on income on securities due to retail investors. Thus all dividends and interest payments are subject to this tax. The withholding tax is considered as a payment in full discharge, that is to say once the tax has been paid, investors are no longer required to include the amount in their tax return.

The Tax on Stock Market Transactions

This tax is levied on purchases and sales of securities by retail investors, either on the market or, in some cases, directly with the issuer of a financial product. The tax rate varies according to the type of financial product and is capped.

The Tax on Securities Accounts

This is an annual tax on securities accounts held in Belgium whose average value (calculated on the basis of the value of the portfolio at the end of each quarter of the financial year) exceeds EUR 1,000,000.00. The tax rate is 0.15% of the average value.

The withholding tax

The withholding tax on income derived from securities was put in place in Belgium at the beginning of the 1980s in order to avoid tax fraud which consisted in not declaring investment income in tax returns. That practice had become frequent and was facilitated by, on the one hand, the existence of bearer securities and, on the other hand, the low level of computerisation of the various parties involved. That is why the legislator devised the idea of a single payment deducted at the source by the debtor and paid directly in full discharge to the Ministry of Finance. In the case of foreign debtors, the first Belgian paying agent is responsible for deducting the withholding tax.

The withholding tax rate was standardised in 2013 at 30%. However, for certain types of investment income (residential property investment funds) the withholding tax rate is 15%.

The withholding tax is calculated on the gross investment income payable to the investor. If this gross income is paid abroad (for example, dividends paid by a French company), the Belgian withholding tax is calculated on the gross amount of income, after deduction of local tax. Therefore, in our example, for a gross dividend of EUR 100 paid in France, the withholding tax will not be calculated on EUR 100, but on EUR 70, corresponding to the gross amount, less the French withholding tax of 30%, i.e. EUR 30. However, agreements exist to prevent double taxation or to reduce this double taxation (see the Double Taxation section).

The withholding tax can be considered as constituting the definitive tax on investment income for retail investors. In the case of investors that are legal entities they had to consider the withholding tax as an advance payment against their corporate tax liability (ISOC).

The withholding tax to be deducted depends on the type of investment income received. The different rates and the different implementing rules are described below :

Withholding tax of 30% on interest

A withholding tax of 30% must be deducted at the time of payment from all interest paid by a debtor to its creditor. The amount deducted by the debtor must be paid by the latter to the Ministry of Finance. The 30% rate therefore applies to interest paid on current accounts, time deposits, bonds, short-term notes and dividends of bond accumulation sicavs.

It is to be noted that any difference between the issue price of a bond and its redemption price is also considered as interest. In other words, where an investor has subscribed for a bond at 98%, which is then redeemed at 100%, withholding tax will be deducted at 30% on the 2%�difference; this will also apply if the investor purchased the bond during its life on a secondary market at a price above 98%.

It is also to be noted that accrued interest, paid when a bond is sold on the secondary market, is not considered as interest, in that it is not paid by the debtor, but by the purchaser of the bond. Therefore the 30% withholding tax does not need to be deducted. On the other hand, this payment must be declared in the seller’s tax return. However, the vast majority of bonds issued in Belgium (whose ISIN code begins with "BE") are now part of the National Bank of Belgium’s X/N system. This system provides for the withholding tax to be deducted when a bond is sold on the secondary market and therefore resolves this problem for transactions in Belgian bonds.

Withholding tax of 30% on dividends

All dividends paid by a company to its shareholders are subject to withholding tax at the rate of 30%. The amount due must be deducted at the source by the company, unless it is a foreign company. In the latter case, it is the first Belgian paying agent that is required to deduct the withholding tax on the gross “frontier” amount, i.e. the gross amount of the dividend, from which the taxes of the country of origin have been deducted.

The 19 Bis withholding tax on bond accumulation sicavs

Several financial institutions devised bond accumulation sicavs in order to avoid the payment of the 30% withholding tax on the interest on bonds. As Belgium does not have a capital gains system, this enabled investors to receive the interest on bonds without paying withholding tax in the form of capital gains when selling their accumulation sicavs.

In 2005, the legislator introduced the 19 Bis withholding tax (also known as the Onkelinkx withholding tax) which is levied on accumulation sicavs having more than 10% of bonds in their portfolio. In practice, these sicavs are required to calculate, in addition to their net asset value (NAV), the part of the NAV corresponding to the interest on bonds and money market products. This part is known as the TIS (Tax Income per Share). When the sicav is sold, a withholding tax of 30% must therefore be deducted on the difference between the TIS at the time of the purchase of the sicav and the TIS at the time of sale. If it was purchased before 1stJuly 2005, the TIS of 1stJuly 2005 must be used for the calculation.

Many foreign issuers do not calculate this TIS, making it impossible to calculate the amount subject to the 19 Bis withholding tax. In such cases, the legislator has specified that the taxable base for the 19 Bis withholding tax will consist of the difference between the buying price and the selling price, weighted by the percentage of bonds held by the fund at the time of the sale (called Asset Test).

In July 2013, the legislator extended the scope of application of the 19 Bis withholding tax to sicavs not having a European passport. In the latter case, the reference date is not 1st July 2005, but 1st July 2013, with a special calculation regime for the period from 1st July 2008 to 30 June 2013.

As the taxable base of the 19 Bis withholding tax is calculated on different buying and selling price values, the legislator has specified that this taxable base may never exceed the actual capital gain realised by the investor.

The Tax on Stock Market Transactions

The Tax on Stock Market Transactions (TOB) is a tax calculated on the gross amount of all transactions in transferable securities, except for transactions in options and futures and IPOs. The amount of the tax is capped. Foreign residents, as well as certain Belgian legal entities, maybe exempted from the Tax on Stock Market Transactions, subject to a declaration when they open their account with their financial institution.

Depending on the type of financial instrument, the tax rate and its cap may vary :

Rate of 0.12 % capped at EUR 1,300.00

The rate of 0.12 % applies to all transactions in bonds on the secondary market, regulated real estate investment companies (SIR/GVV), Belgian certificates of foreign securities, distribution sicavs listed in Belgium and securities sold by enforced public auction.

However, the total amount of the tax may never exceed EUR 1,300.00.

Rate of 0.35 % capped at EUR 1,600.00

The rate of 0.35 % applies to all transactions in equities, warrants, real estate certificates, as well as allotment rights and subscription rights.

However, the total amount of the tax may never exceed EUR 1,600.00.

Rate of 1.32 % capped at EUR 4,000.00

The rate of 1.32 % applies to all transactions in listed accumulation sicavs, as well as to sales of unlisted accumulation sicavs.

However, the total amount of tax may never exceed EUR 4,000.00.

The Tax on Securities Accounts

The annual tax on securities accounts was introduced by the law of 11 February 2021. The law came into force on 26 February 2021. The tax is calculated on the annual average value of all taxable financial instruments (shares, bonds, investment funds, options, cash, etc.) held in the securities account if this average value exceeds EUR 1,000,000.

The tax is applicable per securities account, regardless of the number of holders of the securities account, their status (full owner, bare owner, usufructuary, etc.), their nature (natural person or legal entity) or their tax residence (Belgian or foreign). Thus, for example, an individual holding three securities accounts of EUR 700,000 each will not be affected by this tax. On the other hand, a couple with a securities account of EUR 1,200,000 will have to pay the tax.

The reference period is twelve months, starting on 1 October and ending on 30 September of the following year. The calculation is based on the value of the securities account at the end of each quarter, namely 31 December, 31 March, 30 June and 30 September. For the tax year 2021, as the law only came into force on 26 February 2021, the tax year will exceptionally only have 3 reference quarters, i.e. 31 March 2021, 30 June 2021 and 30 September 2021.

The tax rate is 0.15% of the average value thus calculated. However, the law also introduces a mechanism to limit the tax on securities accounts with a value of just over one million euros. In this context, the tax is capped at 10% of the difference between the total value of the securities account and the fixed amount of one million euros.

Example 1

You personally hold a securities account with a value of EUR 500,000.00 on 31 March 2021, EUR 650,000.00 on 30 June 2021 and EUR 600,000.00 on 30 September 2021. The average value of your securities account for the tax year 2021 is EUR 583,333.00.

As this average value is less than EUR 1,000,000.00, the tax on securities accounts does not apply. You therefore do not have to pay anything.

Example 2

Your company has a securities account with a value of EUR 1,500,000.00 on 31 March 2021, EUR 2,100,000.00 on 30 June 2021 and EUR 1,800,000.00 on 30 September 2021. The average value of your company's securities account for the tax year 2021 is EUR 1,800,000.00.

As this average value exceeds the threshold of EUR 1,000,000.00, the tax on securities accounts applies. The amount of the tax is EUR 2,700.00, i.e. EUR 1,800,000.00 at 0.15%. The tax ceiling was EUR 80,000.00 (i.e. 10% of the average value of EUR 1,800,000.00 minus the EUR 1,000,000.00 threshold), the tax is not capped. You will pay tax of EUR 2,700.00.

Example 3

Together with your brother and sister, you hold a securities account with a value of EUR 980,000.00 on 31 March 2021, EUR 1,050,000.00 on 30 June 2021 and EUR 1,010,000.00 on 30 September 2021. The average value of the securities account for the financial year 2021 is EUR 1,013,333.33.

As this average value exceeds the threshold of EUR 1,000,000.00, the tax on securities accounts applies. The amount of the tax is EUR 1,520.00, i.e. EUR 1,013,333.33 at 0.15%. However, the tax ceiling was EUR 1,333.33 (i.e. 10% of the average value of EUR 1,013,333.33 minus the EUR 1,000,000.00 threshold), so the tax is capped. You will pay tax of EUR 1,333.33.