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On 2 November 2020, the Council of Ministers approved draft legislation to introduce an annual levy of 0.15% on securities accounts valued at more than EUR 1 million. What would this (new) levy actually involve, and how would it differ from the one introduced in 2018 (and cancelled in late 2019)?
The adoption of this draft legislation would reflect the governmental agreement targeting a “fair contribution from individuals with the greatest ability to pay, while respecting entrepreneurship.” The text will be submitted to the Council of State. And given recent “comments” and criticism, the chances are that this draft will be revised further. This is why it seems premature to be drawing any conclusions and planning any action on the basis of the current wording.
What would this new levy involve?
The legislator has stated that this new levy is a subscription tax, in the sense that its deduction is linked to use of a securities account regardless of taxpayers’ financial standing. The rate of this new levy is kept at 0.15% per annum, but will apply only to securities accounts holding financial instruments of which the total value averages EUR minimum 1 million or more (compared with EUR 500,000 under the previous legislature).
Who will be liable for this levy, and which types of securities are concerned?
The levy concerns not only securities accounts held by individuals, but now applies also to those opened on behalf of legal entities without any concern for the place in which the holders live. Securities accounts held by Belgian residents abroad would also be concerned. The levy’s extension would also affect securities accounts opened on behalf of legal arrangements, parent company arrangements or chain arrangements with regard to Cayman Islands tax on founders living in Belgium. In a major change from the first version of the levy, it should also be noted that securities accounts held by insurance institutions in relation to branch 23 life insurance will also fall within the scope.
To summarise, securities accounts held by the following are therefore concerned:
- legal entities (businesses);
- legal arrangements concerned by the Cayman Islands tax;
- insurance companies within the framework of branch 23 life insurance.
Which securities and financial products would be concerned by this levy?
Unlike the initial version, version 2.0 of the levy would now concern all financial products held in a securities account, with no exceptions.
These would therefore include:
In all likelihood, the scope of this levy will also be extended to cash held in a securities account. However, registered shares held in a shareholders’ register will remain outside the scope, “out of respect for entrepreneurship”, according to the Finance Minister.
How are securities valued?
As with the first version of the levy, the valuation of assets deposited in an account would be equal to the average value calculated at certain reference points. In principle, there would always be four of these: 31 December, 31 March, 30 June and 30 September.
However, in contrast to the previous system, no additional reference point is added when the account is opened or closed.
Does the same go for a securities account held jointly?
The levy is applied to all securities account without any “breakdown” according to the number of account holders, or for any division of usufruct and bare ownership of the account. In concrete terms, this means that a securities account containing securities worth more than EUR 1 million would be liable for this levy regardless of the number of holders. This absence of any breakdown tallies with the Finance Minister saying that it is the securities account’s use as an investment vehicle that is being targeted, rather than each taxpayer’s financial standing.
How will the levy actually be paid?
- In the case of an account in Belgium: Belgian banks will calculate, value, deduct and pay the levy.
- In the case of an account abroad: the securities account holder will be responsible for declaring the value and paying the levy where no Belgian intermediary is involved, unless they can prove that the levy has already been deducted and paid by a third party (e.g. the foreign financial institution).
Are anti-abuse measures planned?
In Belgium, all tax laws systematically include new anti-abuse measures. That also goes for this levy. Under the draft legislation, new anti-abuse measures will be adopted to tackle the following situations:
- the division of securities accounts whereby securities are moved between accounts held with the same financial intermediary or to accounts held with another financial intermediary to prevent the total value of securities in an account from exceeding EUR 1 million;
- the conversion of equities, bonds or other taxable financial instruments into registered shares, so that they are no longer held in a securities account, in order to avoid the levy.
When will this levy start to apply?
We do not yet have specific information about the date on which this new levy enters into force, but the speed with which the legislation has been drafted indicates the government’s wish to see it implemented quickly.
How could the income derived from this new levy be used?
The governmental agreement reached on 30 September targeted “a fair contribution from individuals with the greatest ability to pay, while respecting entrepreneurship. This tax would reflect the efforts needed to tackle the current health crisis and medical needs.”
Situation as at 11/11/2020