The annual tax on securities accounts
The ‘Law introducing an annual tax on securities accounts was published in the Belgian Official Gazette on 25 February 2021.
Below you will find a summary of this new tax, which came into force on 26 February 2021.
Who is subject to the tax?
The first tax on securities accounts (TER 1.0) only affected natural persons. The new tax goes much further, with legal entities (companies, non-profit organisations, foundations, etc.), incorporators of legal constructions, partnerships and communities of property also all being subject to the tax. In principle, it makes no difference whether the taxpayer is resident in Belgium or elsewhere.
Belgian residents are subject to the tax both in respect of securities accounts held with Belgian intermediaries and securities accounts held with foreign intermediaries. For non-residents, only securities accounts held with Belgian intermediaries are subject to the tax.
An exception is made for non-residents who are able to claim relief under a double taxation treaty in which the authority to levy taxes on assets has been assigned to the country of residence.
Certain companies are excluded for securities accounts held exclusively for their own account. These are ‘financial entities’ such as banks, listed companies, asset managers, funds and insurers.
To which securities does the tax apply?
TER 1.0 was limited in its scope. The new legislation means that all financial instruments held in a securities account will be subject to the tax. This means that instruments such as turbos and trackers also fall within the scope of the tax.
Cash held in a securities account will also be subject to the new tax. This does not include current accounts or other bank or payment accounts, but only cash amounts that are held temporarily in a securities account. Within KBC Bank, cash is not held in a securities account and therefore not in the scope of this new tax.
Registered securities which are not held in a securities account do not fall within the scope of the new tax.
The tax does not apply to investment-type insurance products. However, the intention of the legislator is also to tax securities accounts which are held by insurance companies in the context of Class 23 insurance policies. This is because the legislator argues that these securities accounts are not held ‘for own account’.
Based on current legislation, KBC currently does not see any impact of the new tax for the open class 23 funds.
The possible impact on structured class 23 funds (Life Multinvest) is currently being examined. We will inform you as soon as we have more information on this.
How is the tax calculated?
Only securities accounts with an average value of more than 1 million euros fall within the scope of the tax. It no longer matters how many account-holders there are for the securities account. To calculate the average value of the securities account, therefore, the total value is no longer divided by the number of account-holders. For example, a securities account with a value of 1.2 million euros and three account-holders will be subject to the tax.
To calculate the average value, ‘snapshots’ of the account will be taken every three months. For the first reference period, these snapshots will take place on 31 March, 30 June and 30 September. The first reference period runs from the day that the new law comes into force (26 February 2021) and ends on 30 September 2021. The second reference period begins on 1 October 2021.
In a small number of cases, however, the reference period will end earlier. This will happen, for example, when a securities account is closed or if the sole or last remaining holder of the custody account relocates to a country with which Belgium has concluded a double taxation treaty and the authority to levy tax on the assets is assigned to the country of residence.
X is holder of a securities account throughout the entire year 2021. On the reference dates, the following values are calculated:
31 March 2021: 2.3 million euros
30 June 2021: 1.7 million euros
30 September 2021: 1.9 million euros
The average value is: (2.3 + 1.7 + 1.9) / 3 = 1 966 666.67 million euros.
Under the new law, if the value is more than 1 million euros, a rate of 0.15% is applied to the average value of the securities account. In our example, therefore, tax of 2 950 euros is payable.
For securities accounts with a value not exceeding 1 015 228.43 euros, the tax is set at a maximum of 10% of the difference between the taxable base and 1 million euros.
A securities account with a value of 1 001 000 euros is subject to a tax of 100 euros rather than 1 501.50 euros.
Closing of a securities account
When closing a securities account which is in scope for the Tax on Securities Accounts, KBC Bank will calculate and charge the tax immediately as of April 1st 2021.
Who is responsible for collecting the tax?
For custody accounts held with Belgian intermediaries (such as banks), the intermediary will calculate and deduct the tax. In cases where the tax is not deducted by an intermediary, the account-holder(s) must themselves submit a tax return and pay the tax to the tax authorities.
An ‘opt-in procedure’ like the one which applied under TER 1.0, is no longer relevant. It is the securities account itself which is taxed, and no longer the account-holder; this also means that the account-holder no longer needs to combine the average values of different securities accounts to check whether the threshold of 1 million euros has been exceeded.
A statement was published in the Belgian Official Gazette on 4 November 2020 announcing the introduction of the tax on securities accounts. The statement also made reference to the general anti-abuse provision that is being introduced.
This provision stipulates that certain legal acts carried out by a taxpayer with a view to avoiding the tax are subject to rebuttable presumption and non-invocable vis-à-vis the tax authorities. The taxpayer must then provide counter-evidence in order to avoid this anti-abuse provision.
The statement provides a number of examples:
• The splitting of securities accounts;
• The transfer of securities from one securities account to another;
• The registering of certain securities.
The Explanatory Memorandum to the new law provides further examples of acts which the legislator will assume are intended solely for the purpose of avoiding the tax. If the tax authorities invoke this anti-abuse provision, the taxpayer can attempt to rebut the presumption.
The Minister has confirmed that it is not up to the financial intermediary to judge the intentions of its clients. The intermediary must however inform the client of this anti-abuse provisions and the fact that certain acts are not invocable vis-à-vis the tax authorities.
The anti-abuse provision comes into effect with retroactive force from 30 October 2020.
In addition to a general anti-abuse provisions, two specific situations are envisaged with a ‘non-rebuttable’ presumption of non-invocability. Specifically, these are as follows:
• The splitting of a custody account into several securities accounts held with the same intermediary
• The conversion of taxable financial instruments held in a securities account into registered financial instruments.
These are thus cases where the intention of the taxpayer is no longer relevant. As soon as these situations arise, they are deemed not to have taken place.
The Minister has declared that, with regard to the conversion of registered securities which falls within the scope of the specific anti-abuse provision, the value of the converted securities must be permanently added to the securities account for the purpose of the application of the tax.