Equity remuneration: the expertise of Degroof Petercam

Dimitri Wintmolders - Professional Wealth

Shares can be an attractive part of a salary package. Remember to consider tax and inheritance issues if you receive these shares in a foreign account.

Most of Degroof Petercam's clients are executives in international organizations. Remuneration in the form of shares in the company they work for is often part of the salary package. In some cases, the value of these shares is not negligible. Compensation in the form of stock options or other forms of long-term incentives can, over the years, lead to an accumulated position that represents a multiple of the base salary.

What is the benefit for the company to use this form of remuneration?

That is the opportunity to align the interests of the company and the executive and create a form of retention. Another important element for this target group is the restrictions that often exist on the performance of the job, whether internal or market related. Such an award under certain conditions (such as a two- or three-year blocking period) creates a bond between the executive and the company.

How does this work if the employer is a Belgian listed company?

Generally, he pays the shares to a Belgian bank or stockbroker. They will deduct the withholding tax, the tax on stock exchange transactions (TOB), and pass it on to the tax authorities.

What about shares in foreign companies listed on the stock exchange?

The financial institution that oversees distribution is usually based in the company's home country. Multinationals often choose to work globally with a single broker, in practice often American or British brokers. However, they do not take into account the typical Belgian obligations for taxpayers in Belgium. As a result, the various Belgian taxes are not withheld upstream.

To avoid this situation, there are two solutions: keep your account abroad and handle the administrative formalities yourself, or transfer your securities to a Belgian securities account.

Placing your securities in a foreign account has some disadvantages, such as having to arrange the TOB yourself, i.e. fill out and send documents every time you buy or sell securities. In addition, you must verify that the withholding tax has been properly withheld.

What happens in the event of death?

A foreign securities account can lead to unpleasant surprises upon death: the foreign bank will not simply transfer the securities if the relatives show up with a certificate of Belgian ownership. In practice, chances are that the bank is not aware of the procedures in place in Belgium, and refuses to release the securities because its country's legislation requires it to do so.

What are the advantages of transferring securities to a Belgian securities account?

If you transfer your securities to a Belgian securities account, the bank will automatically deduct the TOB and any withholding tax due. Transferring the position from abroad to a "holding account" is often a first step that takes much of the administration out of the client's hands. The bank then takes on the entire administrative burden, giving you greater peace of mind.

Degroof Petercam offers specific expertise to private individuals who receive shares as remuneration, whether it involves the transfer of shares to a Belgian securities account or advice on managing a large number of shares. But our Professional Wealth team is also at your disposal to guide you in general wealth planning.

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