The new Belgian government: What impact will it have on your investment portfolio?

1. Personal income tax

 1.1.  10% solidarity contribution (capital gains tax)

The government agreement explicitly states that: "There will be a general tax of 10% on the capital gain of financial assets, including crypto-assets, without retroactivity and with an exemption for historical capital gains from the entry into force of the tax. Historical capital gains are therefore exempt."

Consequently, only increases in value from the introduction of this rule would be taxable.

An exemption of €10,000 (to be indexed) would be provided for to protect small investors. 

In the case of a major holding of at least 20%, the tax burden should be progressive:

• An amount of €1,000,000 should always be exempt.
• Capital gains between €1,000,000 and €2,500,000 should be taxed at 1.25%.
• Capital gains between €2,500,000 and €5,000,000 should be taxed at 2.5%.
• Capital gains between €5,000,000 and €10,000,000 should be taxed at 5%.
• Capital gains in excess of €10,000,000 should be taxed at 10%.

Capital losses relating to this category of income would be deductible in the same tax year but could not be carried forward. 

In a nutshell:
 

Capital gain	Holding < 20%	Holding ≥ 20%
€0 - €10,000	Tax exempt	Tax exempt
€10,001 - €1,000,000	10% tax	Tax exempt
€1,000,001 - €2,500,000		1.25% tax
€2,500,001 - €5,000,000		2.5% tax
€5,000,001 - €10,000,000		5% tax
Above €10,000,000		10% tax

It remains to be seen how this contribution will fit in with other tax regimes currently in force, such as:

• The taxation at 33% of capital gains on shares as miscellaneous income, when the capital gain results from abnormal management of private assets.
• The taxation at 16.50% of capital gains on shares as miscellaneous income, when the capital gain relates to a ‘major holding’ sold to a purchaser established outside the European Economic Area.
• The taxation at 30% as movable income of the ‘interest’ component included in capital gains realized on units in certain collective investment schemes in which more than 10% of the assets are invested directly or indirectly in debt.
• Etc.

Finally, and more fundamentally, the practical implementation of this new contribution raises a number of questions (for example: how to determine the exempt historic value of the capital gain that may be realized, when the capital gain relates to shares in an SME? Should the net book value be taken into account?)

1.2.  Introduction of a specific "carried interest" regime

The government agreement provides for the introduction of a "specific and competitive" regime concerning the "carried interest" mechanism, in order to stimulate fund activity in Belgium. 

The aim is to provide greater legal certainty for fund managers, while maintaining attractive taxation. The government would introduce "a maximum tax rate of 30% for income from movable assets", with no impact on existing plans.

2. Corporate income tax

2.1.  Modification of the "ordinary" RDT/DBI regime

The deduction for "definitively taxed income" becomes an exemption at the corporate income tax (through an increase in the opening balance of reserves).
 
While the 10% shareholding threshold remains unchanged, the threshold of €2.5 million would be raised to €4 million for and between large companies only. In that case, the holding would also have to be booked as a financial fixed asset and not as a cash investment. These new conditions will not apply to SMEs.

The other conditions (subject-to-tax condition and one-year holding period) remain unchanged.

We assume that the provisions of the Belgian Income Tax Code will be amended accordingly, to reflect these new conditions for the exemption from withholding tax.

2.2.  Modification of the regime applicable to the RDT/DBI SICAVs

A tax of 5% on the capital gain realized on exit from a RDT SICAV (i.e., in practice, in the event of redemption of units) has been introduced. 

The withholding tax deducted by the RDT/DBI SICAV will also be offset against corporate tax on condition that the investor-company pays one of its company directors a minimum remuneration of €50,000 (to be indexed). It is difficult to understand why the RDT SICAV's tax regime should be linked to the condition that the director of the investor-company must receive a minimum remuneration.

2.3.  Modification of the regime applicable to the so-called "Private pricaf"

To strengthen risk capital, the regulatory framework applicable to Private pricaf’s will be made more flexible within a budget-neutral framework. The problems associated with the existing regulatory framework, such as the limited duration, the number of shareholders, the introduction period and the permitted investments, should be removed.  

On the other hand, the tax reduction for capital losses linked to the full distribution of the share capital of a Private pricaf will be abolished.

3. Miscellaneous duties and taxes

3.1.  Annual tax on securities accounts

 
The annual tax on securities accounts will remain at 0.15%, contrary to rumors of an increase in the rate to 0.25% (or even 0.40%).

However, measures will be examined to provide a better framework for any tax avoidance strategies, taking into account the recommendations of a recent report of the Court of Audit.

3.2.  Tax on stock market transactions

The government intends to “modernise and simplify” the tax on stock market transactions in order to resolve certain known problems and improve the conditions of competition between the investment vehicles, investment companies and investment funds (‘level playing field’). 

 

4. Permanent tax regularization procedure

 
The government agreement provides for the introduction of permanent tax and social security regularisation procedure.

The regularization procedure would provide for differentiated taxation according to the nature of the regularized capital: a rate of 30% would apply to capital that is not time-barred, i.e. capital for which the tax authorities could still recover tax (at least theoretically). On the other hand, a higher rate of 45% would apply to time-barred capital, i.e. capital whose origin goes back a long way and for which the tax authorities could no longer pursue tax proceedings (for example, on undeclared assets from an old estate). 

As some of the taxes concerned, mainly inheritance tax, fall within the remit of the Regions, they will have to be involved in the scheme.

An exception would be made for taxpayers acting in good faith, which could concern heirs who, on the occasion of a death, discover assets not declared by the deceased. However, the details of this exceptional regime are not yet known.

By introducing a new regularisation procedure, the government is responding to demand from the market, which is extremely reluctant to repatriate funds from abroad following a circular issued by the National Bank of Belgium in June 2021.

5. Crypto and online gambling accounts and the National Bank of Belgium's Central Contact Point

Crypto accounts and online gaming accounts worth more than €10,000 will now have to be declared to the National Bank of Belgium's Central Contact Point (CCP).

The tax authorities will also be able to consult the CCP directly if there are specific indications of fraud, subject to notification of the taxpayer within one month.

6. Other measures impacting the investment portfolio announced by the Belgian government

In general, the new government intends to reduce tax obstacles that unnecessarily advantage or disadvantage certain investments. The government wants to put in place a transparent tax framework that treats all types of investment in the same way. 

The following measures have also been announced in this context:

• Increased pension savings will be integrated into traditional pension savings within a budget-neutral framework. 
• In the event of a ruling by the Court of Justice of the European Union, the Minister of Finance will, within three months, make a proposal to the government for a budget-neutral solution concerning the system of exemption of income from savings deposits, in which the tax reductions and exemptions in force will be harmonized, thereby offering more freedom to the taxpayer. 
• The government will encourage people to invest their savings in the economy by means of a variant of the ‘Cooreman-Declerq’ law, integrating the current conditions of the existing tax reductions for start-ups and scale-ups into a single reduction. 
• The problems associated with investing in shares for certain types of investor (pension funds, insurers, etc.) will be reduced to allow them to invest more in the real economy.
• The government also wants to reduce accounting and administrative requirements and avoid over-regulation of IPOs.

We will give you more details about these measures as soon as they become available.

For more information, please contact:

• Bruno Orban
• Nicolas Thémelin