The Council of Ministers has approved the preliminary text of a bill preliminary draft law introducing an annual tax on securities or brokerage accounts. The government announced this new tax in a notice published in the Belgian State Gazette of 4 November 2020, to prevent any attempts to evade the tax.
It is a tax that closely resembles the tax on securities accounts, which the Constitutional Court found to be discriminatory in several respects, given the legislator’s objective of pursuing a fair tax policy by taxing the most fortunate. The Constitutional Court annulled this tax in its decision of 17 October 2019 (No. 138/2019), but only for the future.
The legislator still wants to pursue the same goal of « asking for a fair contribution from individuals with the greatest capacity to contribute, while respecting entrepreneurship. » That is why it will be sold as a solidarity tax to pay for the healthcare in these covid times.
Who?
The new tax is only due on securities accounts on which financial instruments with an average value of more than € 1 million are held instead of € 500,000 in the past. However, the tax is no longer due per taxpayer, but per securities account of more than € 1 million.
What is new is that the new tax on securities accounts is no longer due only by individuals, but also by legal entities and trust companies holding a securities account of more than one million euros.
However, securities accounts held by financial undertakings (credit institutions, insurance companies, investment companies, brokerage firms, pension institutions, …) or by collective investment undertakings are exempt because they hold these securities accounts for their own professional activity.
The tax on securities accounts 2020 also applies to securities accounts in legal arrangements targeted by the Cayman tax (e.g. trusts). The founder of the legal arrangement and, after his death, his heirs will be deemed to hold the securities account in the legal arrangement themselves.
Non-residents (individuals and legal entities) who have a securities account in Belgium are also subject to the tax. However, the double taxation treaty between Belgium and their state of residence may provide that only the state of residence may tax the taxpayer’s wealth.
Securities accounts
The securities accounts referred to are all accounts with an average value in excess of € 1 million, regardless of the nature of the financial instruments on the account.
All financial instruments held on a securities account are covered, including turbos, speeders and trackers that were exempt from the former tax on securities accounts.
The securities accounts referred to are all accounts with an average value in excess of € 1 million, regardless of the nature of the financial instruments on the account.
All financial instruments held on a securities account are covered, including turbos, speeders and trackers that were exempt from the former tax on securities accounts.
If the securities account has several accountholders or is held by bare owners and life tenants (usufruct), the value of the account must no longer be split per holder. If the value of the account exceeds EUR 1 million, the tax is due.
If a person has several accounts of less than one million euros, the tax will not be due even if the total value of all accounts exceeds one million euros. The government states that it does not fear the splitting of securities accounts for the simple reason that securities transfers have a cost and that certain less liquid or exotic investments may not be accepted by other banks.
However, there is an anti-abuse provision that came into force on 30 October 2020 which will make artificial splits into different securities accounts not enforceable against the tax authorities (see below).
According to the explanatory memorandum of the draft bill, securities accounts which are held by insurance institutions in connection with branch 23 insurance also fall within the scope of the securities account tax « since holding a portfolio by means of branch 23 insurance policy and an underlying securities account is fully equivalent to the direct holding of a securities account ».
The rate
The rate is again 0.15% and is calculated on the average value of the securities account.
The average value is calculated over a twelve-month period from 1 October to 30 September. The average value is calculated on the basis of the account value at 31 December, 31 March, 30 June and 30 September. In 2020, the starting date will not be 1 October, but the day on which the law comes into force.
Reporting and payment
The Belgian financial institutions are responsible for reporting and paying the tax on the securities accounts.
However, for securities accounts abroad, the holder of the securities account will be responsible for the declaration and payment of the tax unless he can prove that the tax has already been withheld and paid by a third party, i.e. the bank with which the securities account is held.
General anti-abuse rule
The government will introduce a general anti-abuse provision in the tax code, which comes into force retroactively to 30 October 2020, the date on which this tax was widely covered by the media. From that date, it can reasonably be assumed that the public was aware of the intention to tax securities accounts.
It is explained that the general anti-abuse provision is aimed at the following attempts to avoid the tax ;
- splitting a securities account into several accounts with the same financial institutions or other financial institutions to keep the account under €1 million euros;
- opening several securities accounts with the same or with another financial intermediary ;
- converting shares, bonds or other taxable financial instruments into registered securities so that they are no longer held in a securities account;
- putting a taxable securities accounts in an overseas entity or trust which transfers the securities to a foreign securities account;
- investing the assets from a securities accounts in a fund with registerd units.
Back to the Constitutional Court?
The text as it stands now is open to criticism, it does not meet the conditions of equal treatment : e.g. registered shares of a company still escape the tax, except if the company holds a securities account of its own, and individuals who owned three accounts of €500,000 escape the tax while their neighbour who has one account of €1.5 million does not.
Some non-profit organisations pay an annual 0.17% wealth tax ; they have a securities account in excess of €1 million, they pay a double wealth tax; and that can be said as well about insurance policies on which the insurance companies already pay an annual tax of 0.0925% of their mathematical reserves.
Insurance wrappers are said to be targeted, but we will have to see how they can be assimilated to brokerage accounts.
The text of the preliminary draft is now submitted to the Council of State, which must give its opinion on the draft text within thirty days, with a view to tabling it as soon as possible in Parliament.
This opinion will probably give indications as to the validity of the tax in the light of the principle of equality guaranteed by the Constitution and European legislation.
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