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Short Info TC - 3.2017

04/10/2017

The end of the year promises to be ... hot !

It won’t have escaped your notice that the [Belgian] government wants to continue with its reforms. In the context of these reforms, alterations to corporation tax and tax on savings have been a hot topic in recent weeks. 

We are discussing this topic in this newsletter.  Whether an opportunity or a fiscal shock, these reforms will not be benign. We must anticipate their impact and be able to benefit from their positive outcomes.

We are entirely at your disposal to discuss the impact of the measures described in this newsletter but also to propose adjustments to your personal situation.  

Reversal of Court of Cassation case-law: the QFIE shall apply to income from French movable property

When a Belgian resident receives income from French movable property (mainly dividends and interest), they are subject to a withholding tax in France, limited to 15%. They must declare  this net income in their Belgian personal income tax declaration which  leads to an additional 30% tax. The tax burden on the taxpayer is rising to 40.5% overall.

Under old Belgian legislation, the individual taxpayer could allocate the withholding tax paid abroad on such income from movable property to the Belgian tax due (currently 30%). This mechanism is called ’quotité forfaitaire d’impôt étranger  [foreign tax credit] or QFIE. This option was abolished by the law of 7 December 1988. This abrogation led to numerous legal proceedings between the tax authority and Belgian taxpayers, the latter considering that, despite its being abolished, the QFIE remained applicable in accordance with double taxation conventions concluded by Belgium. The tax authority and the courts have systematically rejected  appeals brought by Belgian taxpayers.

New budgetary measures for 2018:a Belgian wealth tax?

At the end of July 2017, the Belgian government announced a series of measures to structurally reform Belgian taxation. The focus of these reforms is the need to improve companies’ competitiveness, as well as social cohesion.

In this context, we had already been notified of the reorganisation of corporate tax and the continuation of the tax shift.  What we were more eager to know was how the reforms would be understood from a budgetary point of view and as such who would be the victim of this.

Subject to the omnibus bill which will be debated in the coming weeks, below you will find the main tax measures that have been announced and that could affect you:

Subscription tax on securities accounts greater than 500,000.00 euros

Securities accounts for which the capital exceeds the threshold of 500,000.00 euros will carry a subscription tax of 0.15%, applied from the 1st euro.  To determine whether the threshold has been exceeded, an average valuation will be done for a given year. 

This measure will affect, a priori, Belgian accounts as well as foreign ones, while the threshold will be set by taking into account all of the securities accounts held by a taxpayer.

Pension funds and life insurance contracts are excluded from the subscription tax.  Registered and unquoted shares will not be taken into account when the threshold is assessed. This is the same with shares held directly by the company in which there is capital participation.

Increase in the TOB [Belgian stock exchange tax

Following the extension of the tax to foreign transactions made by a Belgian taxpayer,  the rates will be increased on 1st January 2018:

Income on regulated savings accounts

Today, income from savings in regulated savings accounts is exempt up to the first 1,880.00 euros received.  This exemption will be reduced by half (i.e. 940.00 euros). The withholding tax rate remains unchanged at 15%.

Dividends

The first 627 euros of dividend income received by the taxpayer will be exempt from tax with a view to encouraging investment (sic)!

Tax on savings

The so-called Reynders tax was created for taxing capital gains achieved on the shares of a UCITS (e.g. SICAVs) investing more than 25% of its assets in debts. This taxation has increased due to the fact that the 25% percentage has been abolished. Consequently, the capital gains generated in the context of capitalising investments would be taxed at the de facto rate of 30%.

Other measures, including the extension of the Belgian Cayman tax, have been announced with no further details.

Recently, in a judgment of 16 June 2017, the Court of Cassation reversed its case-law regarding the application of the QFIE (Foreign Tax Credit) in the presence of income from French movable property. According to the Court, the primacy of international law and the double taxation convention concluded with France compels the Belgian tax authority to allow Belgian residents to apply the QFIE, despite the abrogation of the mechanism.

Consequences

The Court of Cassation judgment means that taxpayers who, in the past, received income from French movable property that was subject to a withholding tax in France and a tax in Belgium, have a new means of appealing.

For the 2015 tax year, if the six-month period starting from the date on the tax assessment notice sent to the taxpayer has not expired, the law provides the option of bringing a claim for the contribution registered for the purpose of applying the QFIE.

For previous tax years (and for the 2015 tax year if the six-month period mentioned above has expired), an ex officio detaxation could be requested due to a  (prohibited) double taxation. A period of five years would be consequently opened allowing the tax established in 2013 to be contested.

Contact us

Avenue du dirigeable 8

1170 Brussels

Uitbreidingstaat 60-62

2600 Berchem

Tel.:  +32-2-675 50 05
Fax.: +32-2-675 38 88

info@taxconsult.be

What about income from movable property in other countries?

The Court of Cassation judgment shall only apply to income from French movable property. It can only be transposed to income from movable property in other countries if the applicable double taxation convention compels Belgium to grant the application of a QFIE, despite its abrogation.

In view of this, it would seem to be accepted that the result of the judgment discussed shall apply to income originating in Italy, Hungary, Israel, Ivory Coast, Japan, Ireland, Tunisia and Australia.

 

Type of fund

2017

2017 ceilings

2018

2018 ceilings

Bonds

0.09%

1,300.00 euros

0.12%

1,300.00 euros

Shares

0.27%

1,600.00 euros

0.35%

1,600.00 euros

Capitalising SICAVS

1.32%

4,000.00 euros

1.32%

4,000.00 euros