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Belgian tax on securities accounts: also for expats?

The Belgian law implementing a tax on securities accounts (TSA) has been adopted back in February 2018. As a reminder, the TSA is a new tax levied at the rate of 0.15% on the total value of in-scope securities held by Belgian individual tax residents on securities accounts with Belgian or foreign banks; or foreign individuals on securities accounts maintained with Belgian banks.

The tax is not due on savings accounts or term deposit accounts. Investments held in a unitized life assurance policy linked to one or more investment funds (‘insurance wrapper’) or in a pension savings account are also exempt from the TSA.

To the extent that the average annual value of such securities exceeds € 500,000 per account holder, the TSA would be due. The € 500,000 threshold is calculated in accordance with a specific mechanism.

The following instruments would be considered to determine the total value :

(i)              stocks (both of listed and unlisted companies) and certificates of such shares;
(ii)             bonds (irrespective of whether they are listed) and certificates of such bonds;
(iii)            rights in mutual investment funds or shares in investment companies;
(iv)            cash bonds;
(v)             warrants (but not stock options).

The TSA follows in the footsteps of the Belgian stock exchange tax introduced already in 2017. Both tax regimes can have significant extraterritorial implications and foresee optional withholding mechanisms for non-Belgian financial intermediaries.

Your Belgian bank will report the values of the securities and the tax due per account holder and deduct the tax from the account holder’s account. The tax is to be reported and paid by 20 December, starting this year. Overseas banks may also report and pay the tax via a fiscal representative in Belgium.

Belgian non-resident taxpayers

The tax on securities accounts aims at securities accounts of private individuals. Securities accounts of legal entities (e.g. companies and non-profit organizations) are excluded from the scope.

In the first place, it applies to private individuals who are Belgian tax resident, including professionals, who during the reference year are the beneficiary of one or more securities accounts held with a Belgian or foreign intermediary (e.g. a bank).

Initially it was the intention, as is the case with the Belgian stock exchange tax, to only tax securities accounts of Belgian residents. But eventually, it was decided to also apply the TSA on securities accounts held by non-resident taxpayers with a Belgian bank. Therefore, Belgian securities accounts of (foreign) expats, diplomats, EU officials, etc. who, on the basis of specific regulation, have the status of Belgian non-resident taxpayer, are also subject to the TSA.

This implies an equal treatment of Belgian resident and non-resident taxpayers, as both categories would be subject to the TSA.

However, the question arises whether an extension of the scope of the TSA to non-residents will not simply lead to the transfer of their securities account(s) to another country. As non-residents can only be taxed at source, Belgium cannot levy the TSA on a foreign securities account held by a foreigner who qualifies as a Belgian non-resident taxpayer.

As a result, the taxability of Belgian securities accounts of non-residents may not result in significant additional tax revenue and entails a significant risk of capital and employment in (foreign) banks and asset managers active in Belgium focusing mainly on non-residents, being chased away.

Double tax treaty

The question is also whether the applicable double tax treaty does not prevent Belgium from imposing such a (wealth) tax on a Belgian securities account held by a non-resident. Assuming that the TSA can be qualified as a wealth tax, it needs to be verified first whether the applicable treaty does not prevent the Belgian tax authority from levying such a tax.

For example, for a Dutch tax resident, the double tax treaty between Belgium and the Netherlands (Article 22, 3 ° DTT) stipulates that assets such as securities on a securities account may only be taxed in the country of residence (i.e. the Netherlands) and thus not in Belgium.

This will undoubtedly lead to discussions with the Belgian tax authorities.