Belgian ISF - Subscription tax on securities accounts

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While France has just abolished its solidarity wealth-tax and replaced it with a tax on real estate assets, thus restricting its scope of application, Belgium has recently introduced a tax on securities accounts. It can be perceived by some as a Belgian equivalent to the “ISF” (French wealth tax). Many tax exiles who left France for Belgium are therefore considering relocating back to France, depending on their bottom-line impact. They are now facing a dilemma: on the one hand living in a country that is taxing their heritage and on the other hand living in a country taxing where financial income will become taxable.

Under the pressure of the IMF and Europe, Belgium has decided to tax the wealthiest taxpayers with securities accounts worth more than € 500,000 at a rate of 0.15%. The measure applies to natural persons and is expecting to bring more than € 250 million to the State's annual budget. Its scope extends to bonds, cash certificates, shares, SICAVs or investment fund units, tracker funds, share certificates as well as warrants. The tax excludes pension savings funds, options, shares of approved cooperative companies and registered shares that are not considered as securities accounts.

The deduction of the tax falls under the responsibility of the financial intermediaries as they must directly withhold the tax at source on the account(s) of their customers on or before the 30th of October each year. The financial institution then has the obligation to pay the due taxes over to authorities on or before the following 20th  of December. It should be noted that for accounts exceeding €500,000 financial intermediaries must directly collect the tax due.  For accounts lower than €500,000 individual customers have the option to fulfill the tax obligation themselves. If however the client has more than one account and the sum of all accounts is in excess of €500,000 the tax liability will still crystalize.

With regards to security accounts that have more than one account holder the financial institution will split the tax liability equally amongst all account holders. An average calculation of 4 reference periods: end of December, end of March, end of June and end of September. In the case that all account holders are not equally weighted in the securities account a declaration needs to be submitted to adjust the liabilities according to % holdings.  Taxpayers may subsequently request an adjustment of the tax calculation and if the deduction exceeds the amount actually owed, they should request a refund.

It is important to note that this tax has shortcomings, particularly concerning the securities falling within its scope. Thus, if taxpayers decide to opt for registered securities, they will be excluded from their scope. The Belgian tax authorities implement control measures: each taxpayer has to declare the number of securities accounts he owns or co-owns (both in Belgium and abroad). In addition, they must indicate the number of securities accounts for which the tax has been withheld at source by the financial institution.

In addition, Belgian financial intermediaries must indicate to the Central Contact Point (which depends on the National Bank of Belgium) the information relating to the number of accounts for which the tax has been retained by them. The purpose of this measure is to dissuade taxpayers who try to evade the tax by splitting their securities accounts so as to avoid exceeding the threshold of € 500,000 with the same financial institution, which would then have to automatically apply the tax. As for the sanctions, they are of two types: first, an increase of the tax from 10 to 200% and second, a fine of 750 € to 2,500 €, in case of non-communication to the tax administration by the taxpayer of the compulsory information for the collection of this tax.

This tax appears for many taxpayers as discriminatory and has already been the subject of four actions for annulment. For example, the law firm Rivus brought an appeal raising the difference in treatment between an investor with € 499,999 on his securities account and another with € 500,000, which would constitute an obstacle to the free movement of capital.

The Author

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Inès Aït-Mansour, is consultant at ADWAY (member of Groupe Square), currently on secondment in Brussels for Initio.