In our Newsflash of 14 December 2015, we announced that the Belgian federal government was planning to introduce a speculation-tax.
This speculation-tax has been introduced by a law of 26 December 2015. In principle, it covers capital gains realized on the resale of quoted shares, options, warrants and other financial instruments within six months of the date of their acquisition (as from 1 January 2016).
Essentially, the final law is a copy of the draft law, as summarized in our Newsflash of 14 December 2015.
The main points are:
- The taxable capital gain will be calculated on the basis of a LIFO (Last in First Out)-method.The most recent shares will be deemed to have been sold first.
Example:
You buy 100 shares of X on 1 February 2016 for 5.000 euro (50 euro per share) with payment of a transaction tax of 0,27% or 13,50 euro.
You buy 100 shares of X on 1 March 2016 for 5.500 euro (55 euro per share) with payment of a transaction tax of 0,27% or 14,85 euro.
You sell 150 shares of X on 1 June 2016 for 9.000 euro (60 euro per share) with payment of a transaction tax of 0,27% or 24,30 euro.
The taxable capital gain is the difference between:
9.000 – 24,30 = 8.975,70 euro; and
5.500 + 14,85 + 2.500 + 6,75 = 8.021,60 euro
or 954,10 euro.
- Capital losses are not deductible, unless they are incurred by successive acquisitions of quoted shares, options, warrants or other financial instruments with identical ISIN-code within six months before the resale. Those capital losses can be set off against the capital gain made on the resale.
Example:
You buy 100 shares of X on 1 February 2016 for 5.000 euro (50 euro per share) with payment of a transaction tax of 0,27% or 13,50 euro.
You buy 100 shares of X on 1 March 2016 for 6.000 euro (60 euro per share) with payment of a transaction tax of 0,27% or 16,20 euro.
You sell 150 shares of X on 1 June 2016 for 8.250 euro (55 euro per share) with payment of a transaction tax of 0,27% or 22,28 euro.
The most recent shares are deemed to be sold first. Abstracting the transaction tax, the capital gain will be calculated as follows: 5 euro loss on 100 units (-500 euro) + 5 euro gain on 50 units (250 euro).
There is no taxable capital gain.
The final law differs from the draft law / press communiqués on the following points:
- In a draft of the law, it was stipulated that excess payment of withholding tax could be reclaimed in the income tax return. This provision has been removed in the final law (yet kept in the explanatory memorandum).A Belgian bank should be informed of the purchase price to avoid paying excess withholding tax. Belgian banks retain the speculation-tax due by way of withholding tax. In principle the bank withholds tax on the capital gain that is made (less the transaction tax). If the Belgian bank is not able to calculate the capital gain (for lack of information about the purchase price), it will withhold tax on the entire sale price (less the transaction tax).
- Although the cabinet of the minister of Finance, Johan van Overtveldt, announced in November 2015 that the capital gain would have to be calculated in the original currency, no such provision has been included in the final law.
- The exceptions were enlarged. In addition to investments received as part of a professional activity, which were taxed as a professional income on their acquisition, capital gains made on shares allocated to a taxpayer at the initiative of an issuer and not at the taxpayer’s choice, are now exempt from speculation-tax.
- Furthermore, in the event of a merger, an exchange of shares will be exempt from speculation-tax. In early February, this exemption was confirmed, in so far as a shareholder of Delhaize is not required to pay speculation-tax when he exchanges his Delhaize shares for those of Alhold. Speculation-tax will, however, be due on any capital gains realized on the sale of the shares of Ahold within six months of the acquisition date of the Delhaize shares.
It will be interesting to see to what extent the speculation-tax will be adjusted/ clarified in the future, as a result of uncertainties that raised in practice, including the following:
- There is no uniform approach by banks with regard to the withholding of tax on capital gains realized on quoted options.
- Capital increases and initial public offerings give cause to discussions.
