The Program Law of December 25, 2016, published in the Belgian Official Gazette on December 29, 2016, has extended the existing Belgian tax on stock exchange transactions (hereafter “TSET”).
From now on, certain stock exchange transactions, entered into or carried out by intermediaries established outside Belgium, are also targeted by the Belgian TSET. In addition, the limit of the TSET has been doubled.
1. Old legislation applicable up to and including December 31, 2016
Up to and including December 31, 2016, Belgium applied the TSET only to stock exchange transactions entered into or carried out in Belgium.
If a Belgian resident directly or indirectly addressed an intermediary established outside Belgium, i.e. a foreign bank or a foreign investment manager, the transactions were entered into and carried out abroad, so no TSET was due in Belgium.
The law introduced certain limits on the TSET due that were, depending on the underlying financial instrument, determined to a maximum of 2.000 EUR.
The TSET due needed to be paid within a certain term by the Belgian intermediary on behalf of the Belgian resident who ordered the transaction (hereafter “the ordering client”). The declaration regarding the TSET needed to be submitted by the Belgian intermediary as well.
The TSET due could be described as follows:
|Underlying stock||Tax rate||Limit|
|Capitalizing shares||1,32%||2.000 EUR|
2. New legislation applicable as from January 1, 2017
As from January 1, 2017, stock exchange transactions entered into and carried out by foreign intermediaries, by order of Belgian residents, are also targeted by the Belgian TSET.
2.1. Extended scope
Stock exchange transactions entered into or carried out by an intermediary established abroad are considered to be entered into or carried out in Belgium if the order to this transaction was directly or indirectly given by:
- Either a natural person having its habitual residence in Belgium;
- Either a legal entity on behalf of its registered office or establishment in Belgium.
In addition, the new legislation has doubled the limits of the TSET, determined to a maximum of 4.000 EUR per transaction. The rates of the TSET have not been adjusted:
|Underlying stock||Tax rate||Limit|
|Capitalizing shares||1,32%||4.000 EUR|
2.2. Payment of the TSET and reporting obligation
The TSET due needs to be paid on an account of the competent Belgian tax administration. A declaration needs to be submitted regarding the TSET due.
If the TSET is not paid within the deadline, interests become due. Fines are due if the declaration was submitted late. The new legislation reduces the applicable fines up to and including December 31, 2017.
Belgian intermediaries still need to pay the TSET due on behalf of the ordering clients. They still need to submit a declaration on behalf of the ordering clients. When the transaction is carried out through a Belgian intermediary, the TSET is payable on the last working day of the month following the transaction.
Intermediaries established abroad can request that the Belgian Minister of Finance recognize a liable representative, in order to take over the obligation to pay the TSET on behalf of the ordering clients. Intermediaries established abroad are not obligated to do so. If no liable representative of the foreign intermediary has been recognised, the ordering client has the obligation to pay the TSET due and to submit a declaration.
If the ordering client is the person liable for the payment of the tax, the TSET needs to be paid on the last working day of the second month following the month in which the transaction was entered into or carried out. It can be argued that this term also applies when the ordering client enters into a transaction through an intermediary established outside Belgium and this foreign intermediary has a recognised liable representative that pays the tax on behalf of the ordering client.
In any event, all intermediaries have the obligation to provide the ordering client with a list including, amongst others, the amount of the transaction and the amount of the TSET due.
2.3. Entering into force
The new legislation of December 25, 2016 has been published in the Belgian Official Gazette on December 29, 2016. The legislation entered into force on January 1, 2017 and is applicable on transactions that are carried out as from January 1, 2017.
The form regarding the declaration still needs to be determined through a Royal Decree.