A New Era for Investors: Belgium’s Capital Gains Tax Explained

2025 Coalition Agreement

The new Belgian Government’s coalition agreement includes the introduction of a general capital gains tax on shares for private individuals—euphemistically referred to as a ‘Solidarity Contribution’. While it is currently only a proposal, the drafting of the necessary legislation is still underway but presents significant challenges, particularly in designing an appropriate transition scheme. Lawmakers must be careful to craft the legislation in a way that can withstand potential challenges before the Constitutional Court.

The coalition agreement explicitly states the following under the heading ‘Solidarity Contribution’ (Agreement, p. 12):

“A general solidarity contribution of 10% will be levied on future realized capital gains from financial assets, including crypto assets, accrued from the moment the contribution is introduced.
Historical capital gains will be exempt.
Losses (within this category of income) will be deductible within the same year but cannot be carried forward.
A €10,000 exemption threshold will be introduced in tax returns to avoid overburdening small investors. This exemption will be indexed annually.
For significant holdings of at least 20%, an amount of €1 million will always be exempt.
A capital gain between €1 million and €2.5 million will be taxed at 1.25%.
A capital gain between €2.5 million and €5 million will be taxed at 2.5%.
A capital gain between €5 million and €10 million will be taxed at 5%.
A capital gain exceeding €10 million will be taxed at 10%.”

Unanswered Questions & Legal Uncertainties

Although the above text appears straightforward at first glance, it raises several important questions when taking a closer look:

Since historical gains will remain tax exempt, how will the historical portion of a realized capital gain be determined? For publicly traded shares, this may be even simpler than for private equity.
How will this new capital gains tax interact with existing capital gains taxation on shares classified as ‘abnormal management of private wealth’, currently taxed at a flat rate of 33%? Will one rule out the other or both can potentially apply?
How will this new tax compare to the existing ‘Substantial Interest Tax’ which applies to significant holdings of 25% or more (rather than 20%) and is currently taxed at 16.5%?
Additionally, just like the existing Substantial Interest Tax, the new solidarity contribution will require clarity on how a 20% significant holding is exactly calculated.

The Need for a Transition Scheme

One of the key unresolved issues is whether a transition scheme will be introduced and, if so, how it should be structured.

General Rule & Disproportionate Effects

The standard Solidarity Contribution rate is set at 10%, with a €10,000 exemption. This means that the first €10,000 in capital gains is tax-free. This applies to all capital gains realized from the moment the new law takes effect. As of now, this date has not yet been determined.

For example, a private individual realizing a capital gain of €15,000 on shares in a given year would owe the following contribution: (15,000−10,000)×10% = €500.

Exception for Substantial Holdings

A separate regime applies to shareholders with a substantial holding (at least 20%):

They benefit from a €1 million exemption (instead of €10,000).
The tax rate is significantly lower, starting at 1.25% for the portion of capital gains between €1 and €2.5 million.

Anomalies in the Current Proposal

The difference between these two systems creates significant disparities, this can be illustrated with the following case:

Jeff holds 20% of a US company and realizes a capital gain of €1.5 million. He will need to pay a contribution as a Belgian tax resident of: (1.5 million−1 million)×1.25% = €6,250.

Suzan, however, holds 19.9% (just 0.1 percentage point less than Jeff) and realizes the same capital gain of €1.5 million. Since she does not reach the 20% threshold, she falls under the general system and pays instead: (1.5 million−10,000)×10% = €149,000. This results in €142,750 EUR more than what Jeff needs to pay —almost 23 times higher—even though her participation is only 0.1 percentage point lower.

This discrepancy is problematic from a legal standpoint. Given past decisions by the Constitutional Court, such a system is unlikely to pass the constitutional equality test, unless a well-designed transition scheme is introduced. The Belgian Constitutional Court ensures that laws comply with the principle of equality and non-discrimination. It reviews legislation, annuls unconstitutional provisions, and provides binding rulings to prevent unfair or discriminatory treatment.

Towards a Gradual Transition

Crafting a smooth transition is challenging because two key variables must be adjusted:

1. The exemption threshold (€10,000 vs. €1 million).
2. The tax rate (10% vs. a lower progressive rate).

The shift between these regimes must be gradual, avoiding abrupt tax burdens or disproportionate differences.

Alternative Approach: Introducing a Third Category

A logical transition mechanism could create an additional category of taxpayers in addition to the two groups that have already been introduced:

1. Small Investors
- Those with no significant participation (e.g. below 1% or 5%).
- These investors remain under the general scheme:
  - Exemption: €10,000
  - Tax rate: 10%

2. Substantial Shareholders (≥20%)
- Those who meet the 20% threshold receive a more favourable regime:
  - Exemption: €1 million
  - Progressive rates: starting at 1.25%

3. Intermediate Shareholders (1%-20%)
- This group falls between the two other categories and requires a gradual transition.
- A potential solution:
  - Phase in the exemption, increasing it gradually from €10,000 to €1 million as participation grows closer to 20%.
  - Reduce the tax rate progressively, decreasing from 10% to 1.25% as participation approaches 20%.

Transition Scheme Proposal

Such a progressive transition would create fairer taxation, reduce legal challenges, and ensure a smoother implementation of the solidarity contribution.

It offers an additional advantage beyond ensuring a harmonious transition between the three categories. It also has an implicit incentivizing effect—encouraging investors in the other two groups to increase their participation levels. By doing so, they benefit from a higher exemption threshold, indirectly promoting capital investment in companies. The higher the participation, the greater the tax-free amount.

Conclusion

The most pressing concern is the disproportionate tax burden for investors just below the 20% participation threshold, which could be challenged based on equality and non-discrimination principles. Additionally, issues remain regarding the treatment of multiple participations, the interaction with existing tax rules, and the definition of historical capital gains.

In political circles, there is also ongoing discussion about allowing a full exemption for long-term capital gains, specifically for assets held for more than 10 years. However, this is not currently part of the government agreement.

To ensure both fairness and economic efficiency, Belgium faces a critical decision: refining the transition mechanism, learning from other countries, and ensuring legal robustness to avoid constitutional challenges. We will keep you informed when more concrete information becomes available.