One of the measures announced by the newly formed government (“the Vivaldi coalition”) is the taxation of the major financial transactions (“MFTT”). Although only the main principles of this tax are known at this stage, the purpose would be to tax high net worth individuals. The impact of the tax is estimated between 150 to 300 million EUR, which would serve to refinance the health care system.
It is important to note that this specific tax was not included in the coalition agreement, which only mentioned the general objective of ensuring the ability to pay principle while respecting entrepreneurship. Indeed, the coalition agreement limited the introduction of new taxes to green taxes and taxes only applicable to the most wealthy to the exclusion of general capital gains taxes or taxation on the basis of security accounts.
Main features
The MFTT would be withheld upon the execution of transactions exceeding EUR 1 million. It is likely that Belgian financial institutions would be responsible for reporting and paying the MFTT when intervening in the transaction. In the absence of a Belgian intermediary (e.g. when the transaction is executed by a foreign financial institution), it would have to be determined whether the responsibility to report and pay the tax would be borne by the natural person itself, as is the case with the current Financial Transaction Tax (“taxe sur les opérations de bourse or “TOB”/beurstaks” – FTT).
Furthermore, to respect the commitment not to burden entrepreneurs, shares of small or medium enterprises (SMEs) and all kinds of nominal shares would be excluded from the scope of the MFTT. As a reminder, the exclusion of nominal shares from the scope of the tax on securities accounts was one of the arguments that the Constitutional Court relied on to annul this tax, introduced by the previous government (read our newsflash here in this respect). Careful consideration should therefore be given to the securities in scope of the MFTT, as the modalities of this tax could form the basis of an infringement procedure in front of the Constitutional Court.
There is no indication at this stage on the manner in which the MFTT would be introduced. One possibility would be to amend the current TOB/beurstaks, which applies when a Belgian or foreign professional intermediary intervenes in the entering into or execution of a transaction, to provide for higher rates on transactions reaching a certain threshold and/or to remove the current ceilings.
What does this mean for you?
As only the main features of the MFTT are currently known, it is difficult to assess the impact of the MFTT at this stage. The implementation and the exact scope of the MFTT are still to be determined and should be closely followed, as they could have a major impact on financial institutions and the natural persons ultimately targeted. The interaction between the MFTT and the current FTT (TOB/beurstaks) or the contemplated FTT discussed at the level of the European Union should also be addressed.
