You may remember that last year the Tax on Securities Accounts, or Securities Tax, was annulled by the Constitutional Court, but a new version has been in force since 1 January 2021.
The 1 million euro question: what are the differences between this securities tax and the previous one?
What is a securities account?
The new tax is applicable to all securities accounts held by Belgians and to securities accounts held by foreigners in Belgium.
Any account to which financial instruments can be credited or debited will qualify as a securities account.
In addition to shares, bonds, units in funds and trackers, the tax also targets financial instruments such as swaps, options and other derivatives.
The holder of the securities account is irrelevant.
Irrespective of whether the securities account is held by a natural person, a private foundation, a company or a partnership, it will be subject to the securities tax.
The manner in which the securities account is held is also irrelevant.
In full ownership, in undivided ownership, in bare ownership: the way in which the securities account is held and the number of holders is irrelevant. The tax is levied per account, not per holder. A joint securities account of 1.5 million euro will be subject to the securities tax. Two separate securities accounts of 750,000 euro each are not.
How much is the securities tax?
The annual levy of 0.15% targets all securities accounts holding taxable financial instruments, the average value of which exceeds 1 million euro.
The 1 million euro threshold applies per securities account, regardless of the number of holders. With the previous version of the securities tax, the average amount was divided by the number of co-owners. This new tax also targets smaller investors who deposited limited amounts in an insurance fund (branch 21, 23, 26, etc.). These limited contributions are in fact part of a 'large securities account' which in turn often exceeds the 1 million euro threshold.
What is exempt from the securities tax?
Registered shares are exempt,e.g. shares in your private limited company which you use to conduct your professional activities and which, due to their nature, are only registered in the shareholders' register, will not be targeted.
Cash which is not held in a securities account but, for example, in a savings account, is not targeted. Cash in a securities account is! If you have 700,000 euro worth of shares and 450,000 euro in cash in your securities account, you will also be subject to the securities tax.
Duty to report and potential sanctions
In principle the declaration of the securities account must be submitted by the Belgian intermediary, the bank or investment institution. If there is no intermediary involved, you have to declare the securities account yourself and pay the tax. You can submit this declaration electronically via MyMinfin. The submission deadline is the same as for a personal income tax return.
Non-declaration, late, inaccurate or incomplete declaration, non-payment or late payment shall result in a fine. Fines range from 10% to 200% of the tax due and late payment interest will be added.
Can you avoid this securities tax?
The 1 million dollar question: can you avoid this securities tax? There are a few options, but the legislator is definitely not making things easy. In addition to listing a number of specific situations that will be considered fraudulent, a general anti-fraud provision closes quite a few loopholes.
A move does not change anything unless a double taxation treaty is in place. The treaty between Belgium and the country of residence must stipulate that only the country of residence can tax assets. This is the case in, amongst others, Germany, Luxembourg, the Netherlands and Spain. Without a treaty of this kind the securities tax will remain payable.
Dividing a securities account will not affect the application of the securities tax. Dividing a securities account with a value of 1,100,000 euro into two securities accounts, each with the same characteristics and holders, makes no sense. The tax authorities will simply ignore this division and still demand payment of the securities tax.
There is still uncertainty as to how the tax authorities will react when a securities account held by a usufructuary and two bare owners is split into two securities accounts. Each securities account held by the usufructuary and one bare owner. One could argue that this is not a division. The necessary explanation is still lacking, so some reservations are in order.
Registered shares are not subject to the annual securities tax. That is why the legislator stipulates that the conversion of taxable financial instruments into registered securities is not subject to tax.
But remember that division and conversion are described as irrefutable presumptions, i.e. you will not be able to put forward purposes other than merely avoiding the securities tax. Nevertheless, division can sometimes be opportune within the context of wider estate and inheritance planning.
General anti-fraud provision
Conduct aimed at reducing the taxable value of a securities account in order to avoid the tax shall be considered contrary to the purpose of the securities tax.
This wide ranging formulation does not make it easy for you as a taxpayer to be familiar with the limitations of tax fraud and although the law only came into force on 26 February 2021, the anti-fraud provisions are backdated to 30 October 2020. So, if you restructured your assets following the initial media reports in order to avoid the securities tax, you are in trouble.
Donation as a way out...
Are there no possibilities now to avoid the implementation of a securities account? We believe that it can certainly be argued that, amongst other things, a donation of (part of) the securities account (to children or an entity such as a Belgian private foundation) in order to bring the value of the total assets below 1 million euro does not fall within the scope of the anti-fraud provisions and annuls the application of the securities tax.
Securities account as taxable event
The new securities tax looks at the securities account as a taxable event, without distinguishing between the financial instruments and the account holder(s). Nevertheless, some issues remain unclear and open to interpretation. So the question is whether this new version of the securities tax will pass a second constitutional test. In the meantime, however, current legislation must be anticipated and dealt with correctly.
If you have further questions about the application of the securities tax, please do not hesitate to contact our Estate Planning experts.