As part of the 'tax shift', the government decided to introduce a speculation tax in October with effect from 1 January 2016. The arrangements are still being finalised and some last-minute changes are still being made. The draft law has been adopted by the Federal Parliament.
We will summarise what the speculation tax will mean for you.
What does this speculation tax entail?
Speculation tax is a tax on gains made within six months following the acquisition of certain investments, known as 'speculative gains'. The rate for this tax will be 33%.
The tax does not apply to assets that were already in your possession prior to 1 January 2016.
Who does it apply to?
Speculation tax only applies to individuals subject to personal income tax or non-residents' tax in Belgium It does not apply to companies and entities taxed as legal entities (e.g. not-for-profit organisations).
The tax will be collected by the Belgian financial intermediary when the gains are paid in Belgium. Taxpayers with a custody account abroad must declare the gains themselves on their tax return.
Which products does it apply to?
The new measure only applies to the following securities:
- Listed shares and depositary receipts
- Options, warrants and other financial instruments relating specifically to one or more specified listed shares or depositary receipts (e.g. turbos, sprinters, speeders, etc.)
Note that the market on which the securities are traded makes no difference: speculation tax applies to both Belgian and foreign securities.
To which products does speculation tax not apply?
There are also many securities to which speculation tax does not apply: bonds, investment funds, trackers (ETFs), shares in regulated real estate companies (RRECs such as Cofinimmo, Befimmo, etc.). Speculation tax does not apply to options, turbos, sprinters and speeders on commodities, currency, ETFS, etc.
Shares acquired through employee stock option schemes are expressly excluded from this new measure.
How is the speculation tax calculated?
The speculation tax is calculated according to the LIFO principle (last in, first out). When calculating the tax, it is assumed that the last investment bought is the first to be sold.
Losses are only tax-deductible under certain circumstances: if you sell securities that you bought in the last six months in several tranches, then – according to the LIFO principle – both gains and losses are taken into account. Since they have to relate to the same security, losses on a different security cannot be included.
Any gain on a sale is always calculated in the original currency. This means that any foreign exchange gains or losses during the period that you had the securities in your portfolio are disregarded. Dividends paid are not considered as a gain.
Some special cases
- shares that you inherit are exempt
- however, shares acquired as a gift are subject to speculation tax if the person to whom they are given sells the shares, in which case the holding period and purchase value are based on the purchase by the giver.
- the tax also applies to shares acquired by subscribing to an IPO
As well as introducing the speculation tax, the government also has decided to raise withholding tax from 25% to 27% (for dividends, interest on bonds, savings certificates, time deposit accounts, etc.) for income assigned or payable on or after 1 January 2016.