- Your mother who was living in New Zealand passed away and you inherited a nice sum of money. You want to bring this back to Belgium. Is any inheritance tax due?
- You sold your share of the family farm in Kansas and you made a nice capital gain, you paid capital gains tax in the US, is any capital gains tax due in Belgium?
- You owned a company with your brother in Sweden and he bought you out, or at least the company bought you out. No capital gains tax is due in Belgium, is there?
Three questions, with different answers
- No Belgian inheritance tax is due on your mother’s estate (I assume she lived in New Zealand and that she had no property in Belgium). That no inheritance tax is due in New Zealand is irrelevant. No inheritance tax is due in Belgium.
- If you sold your share of the family farm in Kansas, capital gains tax is due in the US. No capital gains tax is due in Belgium for two reasons. In the first place because the double tax treaty between Belgium and the US would not allow Belgium to tax the capital gain. But also, because Belgium does not charge capital gains tax on private assets when the capital gain is made in the course of the normal management of your estate (that is the case when you own a share of a farm and years later, you decide to sell it).
- When your brother buys you out of the family company because he is working in that company, and you are living and are not involved in the running of that business, that capital gain is not liable to capital gains tax even if you own 50%. If he buys you out, no capital gains tax is due on the profit you made.
- However, if he proposes that the company buys you out, no capital gains tax may be due in Sweden, but in Belgium, some form of capital gain will be due. The difference between the sales price and the value of the share capital that corresponds to your shares is a liquidation dividend and that is taxed like a dividend at a fixed tax rate of 30%. Maybe the solution is that your brother buys you out first and then sells to the company.
In short, you have money abroad that is not liable to tax in Belgium. And now you want to bring it back to Belgium.
That is not the end of the story
If you bring back a large sum money to Belgium, you are well advised to tell your bank.
Transferring large sums of money can trigger the AML (anti money laundering) processes set up by your bank.
Banks have an obligation to identify and verify the identity of their customers (that is “KYC” – know your client) and to carry out a customer due diligence (CDD) to assess the customer’s data for the potential risk that they might be laundering money or financing terrorism. They are also obliged to monitor and control the people involved in money transfers. It is a major crime for a bank to mediate payments sent to a sanctioned or banned person and uncontrolled transactions result in severe administrative fines.
Banks must also monitor all deposits and other transactions to ensure they are not part of a money laundering scheme. This includes verifying the origin of large sums of money and reporting large cash transactions. Banks have automated processes to screen transactions in the light of their AML policies.
When these screening processes find suspicious activity, the bank reports these to the Financial Intelligence Processing Unit (CTIF-CFI) but they are not allowed to tell their customer.
The CTIF-CFI processes suspicious financial transactions reported by the banks and where the matter is serious or urgent, CTIF-CFI may freeze a transaction, and stop the execution of a transaction for a maximum of five working days from the time of notification.
If that is the case, it may seem to you that the money you transferred to Belgium has disappeared. It has not really but it will not hit your account.
If the review of the information reveals a serious indication that the customer has been laundering money or financing terrorism, this information is forwarded to the Public Prosecutor or to the Federal Public Prosecutor.
To avoid such freezing order, it is advisable to advise your bank of the pending arrival or large amounts of money and to give them explanations and documents about the origin of the funds: the proof that you received an inheritance, the proof that you sold the farm or that you sold your shares.