The tax you don’t know you have to pay
The tax on stock exchange transactions (Taxe sur les Opérations boursières/Taks op Beursverrichtingen in short “TOB), also called the stock exchange tax, is one of the least known taxes in Belgium even if it has been in existence for over a century.
Initially, when the stock exchange tax was introduced in 1913, it was only due by actual stockbrokers. They paid the tax by affixing a stamp to the listing of the stock exchange order and its duplicate. They separated the two and cut the stamp in half. The listing was sent to the tax authorities and they kept the duplicate with the other half of the stamp to prove that the tax was paid. That was also how you paid traffic fines, until 2006.
Licking stamps is old fashioned and labour intensive. In the 80ies, stockbrokers and banks were allowed to pay the stock exchange tax in cash. However, the stock exchange tax remained a tax that was due by the few (the banks and the stockbrokers) and in fact paid by the many (their clients).
The tax was only due on stock exchange transactions (sales and purchases) on a secondary market (‘the stock exchange’), through a Belgium-based professional intermediary (a bank, a stockbroker or a trading platform) who carries out a stock exchange transaction with certain financial instruments, irrespective of whether the client is a Belgian resident or not.
Only investors who worked with a Belgian financial intermediary were paying the complex stock exchange tax, but it was the bank or stockbroker who had to work out the tax rate, declare and pay the tax on behalf of the investor.
Because it was easy to avoid the stock exchange tax by placing sales and purchase orders with an overseas bank or trade platform, the scope of the tax has been expanded in 2017 to include transactions on overseas bank accounts or online trading platforms. Since the Belgian legislator cannot impose a tax on foreign intermediaries, he put the burden of declaring and paying the stock exchange tax on the investor himself.
However, the legislation on the stock exchange tax is extremely complex and requires a lot of administration.
This extension of the stock exchange tax has been contested before the Constitutional Court; the court has referred a preliminary question to the European Court of Justice (case C-725/18), but the case has been dismissed.
The tax is still due when an investor (even foreign investors) places a purchase or sales order with a Belgian bank or stockbroker. When a Belgian resident investor buys or sells financial instruments via an overseas bank, stockbroker or trading platform or on an overseas securities account, he has to declare and pay the tax.
The tax is only due on financial instruments that, by their nature, can be traded on the stock exchange, These can be :
- stocks and stock share certificates;
- bonds;
- shares in SICAV- investment companies (only when they are sold);
- units in mutual investment funds (only when they are sold);
- cash bonds;
- trackers (‘exchange traded funds’) on certain financial instruments, for Belgian residents or for non-residents
The tax is not due on (stock) options, swaps, futures or CFDs (“contracts for difference”).
The rate varies depending on the nature of the instrument, and the tax is payable by the buyer and the seller at each transaction assuming they are Belgian residents. The tax is charged at 0.35% on the sale or purchase of shares (limited at €1,600 per transaction), 0.12% on bonds and units of mutual funds (max. €1,300) and 1.32% on the sale of accumulation mutual funds (capped at €4,000). The schedule below gives an overview of the tax that is due in specific situations.
The rate also varies depending on the nature of the transaction. E.g. the tax is not due when a distribution fund issues new units or redeems its units, but the sale or purchase of such units on the secondary market is taxed at 0.12% (max. €1,300).
Belgian residents who must pay the stock exchange tax must file a tax return and pay the tax at the latest on the last working day of the second month following the purchase or sale. This means that an investor who buys and sells every month must only file six times a year. The investor can only be exempted from these obligations if he can demonstrate that the (overseas) intermediary has fulfilled these obligations. However, this rarely happens in practice.
The tax is rather low (usually 0.35% for stocks, a rate of 0.12% for bonds, and 1.32% on the redemption of capitalisation or accumulation SICAVs). However, the penalty for not filing may be quite high:
- A fine for late filing of €50 per week with a maximum of €2,600 (52 weeks; keep in mind that a return must be filed every two months when there has been a sale or a purchase of targeted financial instruments).
- A fine for an incorrect or incomplete declaration equal to five times the tax with a minimum of €1,000.
- Interest for late payment at 7% per year from the day the tax should have been paid.
These penalties can end up being much higher than the stock exchange tax itself. For example, when buying a listed share for €1,000 on an overseas securities account, the stock exchange tax is €3,5 but the fine for failing to file can be as high as €2,500.
Four years later, many investors are still not aware of the existence of the stock exchange tax and their obligations and for most people analysing their investments and determining the actual tax rate can be quite daunting.
What can you do when you discover that you should have paid the stock exchange tax? Can these heavy fines be avoided if you acted in good faith? The law does not give a waiver of the fines or the interest for late filing when a taxpayer was in good faith and regularises the situation, declares and pays the tax.
In practice, however, it appears that – at this moment time – the tax authorities are still tolerant when a taxpayer who is in good faith, regularises his tax situation by submitting a tax return and paying the stock exchange tax due without being asked first by the administration. In that case, they will not charge the fines but only the interest for late payment. However, it is possible to request a waiver for the interest.
More detailed explanations can be found here.
| Buy Issue | Buy | Sell | Sell / Redeem | Max | ||
| BONDS – Government (State / Region /… Municipality) | 0% | 0,12% | 0,12% | 0% | 1,300 | |
| BONDS – issued by company | 0% | 0,12% | 0,12% | 0% | 1,300 | |
| SHARES – of listed companies | 0% | 0,35% | 0,35% | 0% | 1,600 | |
| SHARES – of SIR | 0% | 0,12% | 0,12% | 0% | 1,300 | |
| CERTIFICATES of shares issued by a Belgian resident | 0% | 0,12% | 0,12% | 0% | 1,300 | |
| CERTIFICATES of shares issued by a foreign resident | 0% | 0,35% | 0,35% | 0% | 1,600 | |
| CERTIFICATES of SIR | 0% | 0,35% | 0,35% | 0% | 1,600 | |
| CERTIFICATES of commodities | 0% | 0,35% | 0,35% | 0% | 1,600 | |
| WARRANTS | 0% | 0,35% | 0,35% | 0% | 1,600 | |
| Turbo’s / sprinters/ speeders | 0% | 0,35% | 0,35% | 0% | 1,600 | |
| OPTIONS | 0% | 0,00% | 0,00% | 0% | 0 | |
| STRUCTURED PRODUCTS / Notes | 0% | 0,35% | 0,35% | 0% | 1,600 | |
| • DISTRIBUTION units of an investment company (e.g. SICAF/SIR) | ||||||
| – registered with Financial Services and Markets Authority (FSMA) | 0% | 0,12% | 0,12% | 0% | 1,300 | |
| – registered within the Eureopan Economic Area (EEA) | 0% | 0,12% | 0,12% | 0% | 1,300 | |
| – not registered within the EEA | 0% | 0,35% | 0,35% | 0% | 1,600 | |
| • CAPITALISATION units of an investment company (such as SICAF / SICAV / Tracker ETF) | ||||||
| – registered with the FSMA | 0% | 1,32% | 1,32% | 1,32% | 4,000 | |
| – registered within the EEA | 0% | 0,12% | 0,12% | 0% | 1,300 | |
| – not registered within the EEA | 0% | 0,35% | 0,35% | 0% | 1,600 | |
| • MUTUAL FUNDS | ||||||
| – registered with the FSMA | 0% | 0,12% | 0,12% | 0% | 1,300 | |
| – registered within the EEA | 0% | 0,12% | 0,12% | 0% | 1,300 | |
| – not registered within the EEA | 0% | 0,35% | 0,35% | 0% | 1,600 | |
| Tracker ETC and ‘note’ ETN | 0% | 0,12% | 0,12% | 0% | 1,300 | |
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