1. Increase of withholding tax on dividend and interest

The Belgian federal government has announced that the rate of withholding tax on dividend and interest will, in principle, be increased from 25% up to 27%.

The most important exception to this is that interest on savings accounts will, subject to certain conditions, be exempt up to 1.880 euros. Above that amount, interest on savings accounts remains subject to a reduced rate of 15%.

The final text of the law, anticipated for end 2015, should enter into force on 1 January 2016.

  1. Introduction of a speculation-tax

A limited “speculation-tax” of 33% is also expected to be introduced on capital gains made on quoted shares sold within 6 months of their date of acquisition.

According to the latest information, this speculation-tax will contain the following.

The “speculation-tax” will apply to capital gains on quoted shares, options, warrants and other quoted financial instruments that exclusively contain one or more quoted shares (including turbos, speeders, sprinters and futures).

Capital gains on investment funds are exempted from “speculation-tax”.

Capital gains on shares or options granted by an employer’s option plan and capital gains made upon a forced transaction are excluded.

To compute the holding period of six months, the most recent shares will be deemed to be sold first.

The capital gain will be calculated in the original currency.

In principle, capital losses are not deductible. However, the minister of Finance is willing to accept de deduction of capital losses from capital gains made on the same share(s) within a period of 6 months.

Example

50 shares are bought at a rate of 10 units per share on 1 January 2016, and 25 shares are bought at a rate of 7 units per share on 5 March 2016.

A sale of 60 shares, at a rate of 9 units, on 14 April 2016 will be treated as follows:

The most recent shares are deemed to be sold first:

  • There is a capital gain of 2 units per share on 25 shares: total capital gain: 50.
  • There is a capital loss of 1 unit per share on 35 shares: total capital loss: 35.
  • Tax base: 50 – 35 = 15.

One cannot avoid the “speculation-tax” by means of a donation. Under a donation, the beneficiary will be deemed to have acquired the shares on the same date as they were purchased by the donor.

Example

If 50 shares, bought at a rate of 10 units per share on the 1 January 2016, are donated to a family member on 5 March 2016, and subsequently sold within six months of 1 January 2016 at a rate exceeding 10 units per share, speculation-tax will be due by the recipient of the donation.

Belgian banks will retain any speculation tax due by way of withholding tax. If the Belgian bank is not able to calculate the capital gain (for lack of a purchase price), it should withhold tax on the entire selling price. We, therefore, advise clients, when switching banks, to inform the new Belgian bank(s) of the purchase price of target shares, in order to avoid deduction of withholding tax on the full sale price. Excessive withholding tax can be reclaimed in an income tax return.

Targeted capital gains on shares held by foreign banks, should be declared in the income tax return.

The law is expected to be approved before the end of the year and will be applicable on shares acquired as of 1 January 2016.