March 2, 2021
Having been the subject of numerous articles in the Belgian press and a critical opinion from the Belgian Council of State (i.e. Conseil d’Etat), a second version of the draft bill introducing an annual tax on securities accounts was introduced in January 2021 and voted at the Belgian Chamber 11 February.
This new annual tax seems to share a few similarities with its predecessor (abolished by the Belgian Constitutional Court on 17 October 2019) but is still considered “innovative” in nature given its impact on branch 23 insurance investments. As stated in the parliamentary works, “This annual tax on securities accounts should not be confused with the annulled tax on securities accounts(…) The aim (…) is (…) to introduce a new tax, based on a new set of principles”.
The various questions addressed below will best explain what will henceforth be known as the TSA 2.0.
- Why this tax? Historically the TSA 2.0. has been presented as a solidarity contribution for the purpose of “supporting the new healthcare needs arising out of the global pandemic”. The TSA 2.0. “has a purely budgetary purpose and aims to provide a visible contribution to maintaining social security which, at crucial times, has protected the population of our Country in terms of health and income.”
- Scope of the tax? Securities accounts and, more specifically, “accounts to which financial instruments can be credited or from which financial instruments can be debited irrespective of whether they are held in undivided or divided ownership”, the value of which exceeds one million euros. In terms of insurance policies with underlying investments, it will not be the policy itself which will be tested at the limit of one million euros, but the securities account held by the insurer, i.e. the latter’s portfolio (generally exceeding one million euros).
- Who does it affect? The holders of a securities account. This includes both Belgian residents who hold Belgian or foreign securities accounts as well as Belgian non-residents who hold a Belgian securities account. Two new elements should be noted here:
- The absence of distinction between natural person/legal person holders (except for exemption detailed in article 176/2, 6° of the Belgian CDTD)
- The assimilation of the holding of a securities account with that of a branch 23 insurance policy with underlying investments (“securities accounts held by insurance institutions within the framework of branch 23 insurance concluded with a holder are within the scope of application”). As branch 23 investment insurance is held by the insurance company, it is the latter which is henceforth liable for the TSA 2.0. This possibility is expressly confirmed by the draft bill: “the notion of liable party concerns, depending on the case, the Belgian intermediary, the representative responsible referred to in article 201/9/1 or the holder”.
- Period of application? It is an annual tax with a reference period of 12 months, taking effect on 1 October and ending on 30 September of the following calendar year.
- Interest rate applied? 0.15% on the whole of the securities account.
- Are (Belgian) clients holding a OneLife policy affected? NO. Since The OneLife Company SA is an insurance company based in Luxembourg, it is not part of the scope of application of the TSA 2.0. since it uses a custodian bank based outside Belgium. It should be noted that a rigorous analysis of the Belgo-Luxembourg Double Taxation Convention leads us to conclude that the TSA 2.0 would not apply either should a Belgian custodian bank be involved.
A rush to Luxembourg? The explanation of the reasons for the draft bill refers thereto: “the transfer of an existing securities account or of a branch 23 insurance policy to a branch 23 insurance policy concluded with an insurance company based outside Belgium, in order to evade the tax” may qualify as tax abusive. We stress that the burden of proof lies with the tax administration and that contrary argument may easily be provided by the taxpayer, due in particular to the many advantages proposed by Luxembourg such as the wide range of classes of underlying assets available in the policy, the protection of the policyholder’s assets (Triangle of Security and Super Privilege) or the international wealth planning expertise that the companies are able to provide to their clients.
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