New annual tax on securities accounts
Since 26 February 2021, the new annual tax on securities accounts (TACT/JTER) has been applicable. The new tax is derived from the previous 2018 tax on securities that was overturned by the Constitutional Court not so long ago. What exactly is changing?
Coralie Chantraine, Junior Consultant, Bruno Orban, Senior Manager BDO Tax
Subscription tax or wealth tax?
The TACT/JTER is proposed as an annual subscription tax for holding a securities account with a financial intermediary, regardless of the holder (natural person or legal entity, with the exception of financial institutions and investment firms). It is therefore not, as originally announced by the government, a wealth tax on the largest movable assets. The tax has a purely budgetary objective and should contribute, above all, to the financing of the social security systems, which are under severe pressure during the pandemic crisis.
The TACT/JTER is very similar to the tax on securities accounts that was overturned. But there are also notable differences.
Which securities accounts are targeted?
The previous tax concerned natural persons with a securities account. The TACT/JTER only takes into account the existence of the securities account itself. The capacity of the holder and the number of holders or their rights in the securities account (full ownership, usufruct, bare ownership) are of no importance.
Thus, the TACT/JTER applies to both natural persons and legal entities (companies, non-profit organisations, universities, hospitals, authorities, intermunicipal companies). However, an exemption applies for credit institutions, investment firms, listed companies, collective investment undertakings, insurance companies and pension institutions. Provided, however, that the securities accounts are held for their own account. In other words: “without a third party […] having a direct or indirect right of action linked to the value of the securities account held.”
“You do not have to pay the TACT/JTER if the average value of the securities account is less than EUR 1,000,000.”
In the context of fiscal transparency, the securities accounts held by the capital structures targeted by the so-called Cayman tax (e.g. a trust, foreign foundation, BVI company) are also subject to the TACT/JTER. In other words, they are considered to be securities accounts of the Belgian founders, partners or beneficiaries of those entities. Moreover, the tax also applies to securities accounts held by insurance companies that sell insurance investment products in Belgium, such as branch 23 life insurance contracts.
In short, you cannot escape the TACT/JTER by transferring your securities portfolio to a foreign capital structure that falls under the Cayman tax, or to a branch 23 life insurance contract.
Threshold of EUR 500,000 or EUR 1,000,000?
The previous tax concerned securities accounts with a consolidated average value of EUR 500,000, calculated per holder: that is, the value of all of the securities accounts of the same taxpayer had to be added up to calculate the threshold of EUR 500,000. The TACT/JTER targets each securities account separately of which the average value is more than EUR 1,000,000. If the average value of the financial instruments in a securities account does not exceed the threshold of EUR 1,000,000, then you do not have to pay the TACT/JTER.
All financial instruments deposited in a securities account are taxable (shares, bonds, investment funds, exchange-traded funds, or ETFs and derivatives such as turbos, options, speeders and trackers). Registered securities and permanent cash balances separate from the securities account are exempt.
How is the tax calculated?
The TACT/JTER is levied at the rate of 0.15% on the average value of the securities account calculated over a period of 12 months (from 1 October to 30 September of the following year), insofar as this average value exceeds EUR 1,000,000.
The threshold of EUR 1,000,000 is determined separately for each securities account, without it being necessary to consolidate all securities accounts belonging to the same holder, nor to distribute the value of a securities account among multiple co-holders. Indeed, such a calculation could cause unjustified discrimination between taxpayers, as the example below demonstrates.
Mr A and Mrs B, holders of a joint securities account with an average value of EUR 1,500,000, have to pay the TACT/JTER. But Mr C, who has 3 separate securities accounts, with an average value of EUR 500,000 per securities account, does not have to pay TACT/JTER. This is not equal treatment.
Escaping the new tax?
Specific transactions or operations with the aim of escaping the TACT/JTER or reducing the taxable base can be challenged by the tax authorities by means of additional ‘anti-abuse provisions’.
On the one hand, the law provides an anti-abuse provision whereby splitting a securities account into multiple securities accounts (so as to remain below the EUR 1,000,000 threshold) or converting dematerialised financial instruments into registered securities cannot be deployed against the tax authorities. This provision is applied retroactively until 30 October 2020 – the date on which the tax was first reported in the media (as per a notice published on 4 November 2020 in the Belgian Official Gazette). In this way, the government is seeking to prevent taxpayers from trying to escape the tax before it actually comes into effect.
On the other hand, the law contains a general ‘anti-abuse provision’ to prevent taxpayers from trying to reduce the taxable base of a securities account. For example, by using alternative investment techniques or resources. Examples include: subscribing to new securities through another account, investing in insurance products, or transferring the securities account abroad.
“If the financial institution (Belgium or foreign) pays the TACT/JTER, the holder of the securities account is exempted.”
Belgian and foreign securities accounts?
The new TACT/JTER, of course, relates to securities accounts opened with Belgian or foreign financial institutions. If the securities account is opened in Belgium, the Belgian financial institution will be responsible for levying, declaring and paying the TACT/JTER.
For foreign securities accounts, these obligations are incumbent on the Belgian holder, unless he or she can demonstrate that the TACT/JTER was paid and declared by the foreign financial institution. Thus, the payment of the TACT/JTER by a Belgian or foreign financial institution exempts the holder of the securities account.
Tax applicable as from 2021
The first reference period for the application of the TACT/JTER runs from 26 February 2021 to 30 September 2021, inclusive. For the years to come, the TACT/JTER will be calculated on the basis of the average value of the securities account between 1 October and 30 September of the following year.
The withholding of the tax on securities accounts held in Belgium will be made by the financial institutions during the 4th quarter of 2021. For securities accounts held abroad, for which the foreign institutions do not play the role of payment agent, holders will have to submit their own declaration via the electronic platform ‘MyMinFin’ by 30 June 2022 and pay the tax before 31 August 2022.