Federal negotiations – imminent impact for investors

As part of the ongoing tax negotiations, major reforms are being considered, which are likely to have a significant impact on investors.

1. Financial capital gains tax

A general tax of 5% on capital gains on financial instruments, including crypto-assets, is expected to come into force soon. This measure constitutes a significant change in the Belgian tax landscape, which until now has been known for the exemption of capital gains in the context of "normal" asset management.

This tax would not apply retroactively, thus guaranteeing an exemption for all historical capital gains realized before its entry into force. In addition, capital losses on this type of asset would be deductible in the year in which they were realised, although there is no provision for the possibility of carrying it forward to subsequent years. The tax would be accompanied by a corrective mechanism that takes inflation into account.

To protect the most modest investors, a basic exemption of 6,000 EUR is envisaged, although this amount remains subject to negotiation. For taxpayers with a substantial shareholding in companies not listed on the stock exchange (less than 5% shareholding), a higher basic exemption, of up to 5 million EUR, will be introduced.

2. Tax on securities accounts

At the same time, the annual tax on securities accounts will be increased. The rate applied will increase from 0.15% to 0.25% for accounts with assets exceeding one million euros. This measure is part of a desire to strengthen the contribution of the highest wealth, while responding to the recurrent criticism of tax evasion associated with this tax. It would also be considered to establish a presumption of tax abuse in certain cases (splitting of securities accounts and conversion of taxable securities into registered securities).

3. Participation exemption regime

The Participation exemption regime, which aims to avoid double taxation of dividends distributed between companies, will undergo a notable structural overhaul. The deduction previously provided will be replaced by a full exemption, thus simplifying the declarative and control mechanisms. However, the conditions for eligibility for the regime will be tightened: to benefit from it, the minimum participation threshold will be raised from 2.5 million to 4 million euros. There is also talk of a financial immobilisation condition, but only if the parent company and the subsidiary are large enterprises (more than 250 employees).

4. Liquidation reserve

The liquidation reserve regime, designed to allow companies to build up a reserve from their after-tax profits, is also evolving. The minimum holding period to benefit from the reduced withholding tax rate will be reduced from five to three years. However, this greater flexibility will be accompanied by an adjustment of the rate: the withholding tax applicable after three years will increase from 5% to 6.5%. The effective cost will therefore increase from 13.64% to 15%. This modification aims for a gradual alignment with the VVPRbis regime, while remaining attractive for companies unable to benefit fromthe VVPRbis. 

5. Exit tax 

Finally, the exit tax regime will see its scope significantly extended. In addition to the corporate tax currently applicable in the event of a cross-border transfer of the registered office, an additional tax will be levied at the shareholder level. Shareholders will now be liable for a withholding tax on dividends due to be distributed on the occasion of the company's emigration. This measure, which strengthens the fight against the erosion of tax bases, is presented as a response to practices aimed at avoiding national taxation by relocating companies to more favourable jurisdictions. 

6. Other measures 

The "super-note" also proposes other reforms, for example: 

• The gradual increase in the tax-exempt portion of personal income tax for income from work (and not from unemployment, for example) and the abolition of the special social security contribution (CSSS).
•  The setting of a "plane" tax of a single amount of 5 euros per person and per ticket, regardless of the destination.
• The modification of a withholding tax rate applicable under the copyright tax regime from 15 to 20% and, at the same time, an extension of the regime to digital professions.
• The regime applicable to "SICAV RDT" will not undergo any changes for the time being. However, during the distribution of the “SICAV RDT” in favour of shareholder companies, the offsetting of the withholding tax against corporate tax will be subject to a minimum remuneration condition for these companies. 

7. Overall impact and outlook

The introduction of a general tax of 5% on capital gains is a major change for the Belgian tax system. This measure reflects a desire to tax high wealth more while protecting small investors, but their complexity could create challenges in their application.

The increase in the tax on securities accounts on the one hand, and the increase in the flat-rate portion exempt from personal income tax on the other, also seem to constitute a further step towards the taxation of assets and at the same time the reduction of taxation on labour.

The other measures are political compromises and an attempt to make ends meet.

We invite you to anticipate these developments and consult our experts to assess their impact on your investments and tax obligations.