Belgian tax exemption for interest on foreign savings accounts

The Belgian tax authorities recently published a circular letter (Nr. 2020/C/33, dd. 21 February 2020) that clarifies the tax exemption conditions for interest on (regulated) foreign savings accounts. This is relevant for anybody who is taxed in Belgium as a resident and who has one or more savings accounts abroad that earn interest. For many people this will probably not be for a large amount, considering the very low interest rates these days.

Currently in Belgium, interest on savings accounts is tax-free up to an amount of €990.00 per person per year (tax year 2021). If the account is in the joint name of a married or cohabitating couple, the exemption is doubled to €1,980 per year. Above that threshold, a flat tax of 15% applies.

In order to benefit from this tax exemption, the Belgian savings account should be ‘regulated’ in the sense that it should meet the conditions as stipulated by the National Bank of Belgium (NBB) and the Financial Services and Markets Authority (FSMA). The requirements have to do with the currency in which the deposits are denominated, the method of withdrawal and the structure, level and method for calculating the interest amount; it should consist exclusively of ‘basic interest’ and a ‘fidelity premium’.

Already in 2013, the European Court of Justice (ECJ) concluded that this national tax exemption system is in violation of the free movement of capital and services as it maintains a system of discriminatory taxation of interest payments by non-resident banks (ECJ C-383/10, dd. 6 June 2013). As a result, the Belgian legislator extended the exemption to savings accounts held with any financial institution in a Member State of the EEA

Traditionally, the Belgian tax authorities only allow an exemption if it can be demonstrated that the savings deposits held by the foreign bank complied with conditions like those applicable to regulated Belgian savings deposits, which are de facto specific to the Belgian national market alone. The Belgian Government argued that these specific conditions contribute to consumer protection, but in 2017 the ECJ ruled once more that this tax exemption, although applicable without distinction to any bank within the EEA, is still in violation of the free movement of services (ECJ C-580/15, dd. 8 June 2017).

The recently published circular letter is the long-awaited response from the Belgian tax authorities to the above ECJ decision (Nr. 2020/C/33, dd. 21 February 2020). 

Similar as they did back in 2014 (Nr. Ci.RH.231/633.479, dd. 12 June 2014), the tax authorities now simply repeat that savings accounts held in another Member State of the EEA need to be ‘regulated’. This means they need to comply with similar requirements as set by the legislator in that State and subject to prior notice from public authorities with powers equivalent to the NBB and the FSMA in Belgium. Furthermore, the foreign savings account must also be subject to certain restrictions relating to the methods and conditions of withdrawal from that account and, second, remuneration of such an account must consist of both basic interest and a fidelity premium, again similar to those currently in force in Belgium.

While everybody expected the Belgian authorities to change or adjust their approach after the 2017 ECJ decision, the recent circular letter simply disregards the ECJ’s comments (as well as similar decisions from several Belgian courts). Anybody who would claim a tax exemption in his Belgian tax return for interest earned on a (regulated) foreign savings account, should be aware that this could be challenged at some point by the Belgian tax authorities.

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