Stock exchange tax: no way to avoid it in 2017

Ariane Joris - Head of Estate Planning

The legislature took advantage of the entry into force of automatic information exchange between administrations to broaden the scope of the tax on stock exchange transactions (TOB). From now on, natural persons ordinarily resident in Belgium will have no way to avoid it.

As from 1 January 2017, natural persons ordinarily resident in Belgium and legal entities (registered office or place of business) established in Belgium will be unable to avoid the tax on stock exchange transactions (TOB) when transaction orders are given directly or indirectly to an intermediary established abroad. This concerns internet sites as well as banks established in another country.

Until now, the tax concerned only transactions carried out by a Belgian institution for a resident of Belgium.

Information exchange

The legislature opportunistically used the entry into force of the CRS measures [1] (automatic information exchange between the administrations of more than 150 countries) to expand the territorial scope of the TOB to transactions carried out by intermediaries located outside Belgium. Indeed, with the entry into force of the CRS, a considerable amount of information on its taxpayers’ foreign assets will be reported to the Belgian tax administration.

In practical terms, this means that from 1 January 2017, the tax will be due when a resident of Belgium buys or sells equities or bonds or sells capitalisation funds registered with the FSMA (Belgian oversight authority), regardless of where the principal’s assets are located.

An onerous obligation on the principal...

The measure is unique with respect to the taxable person: when the professional intermediary (e.g. the bank) is established abroad, it is the principal who is liable for the tax. The time limit for payment of the TOB is the last business day of the second month following the month during which the transaction was completed or executed.

Under the law, the tax is paid by remittance or transfer to the bank account of the competent tax office. On the date of payment, the taxable person must file with this office a declaration indicating the basis for collection and all the information necessary for its determination.

...but a simple solution for avoiding this charge

There is nevertheless a solution for avoiding all this red tape; if the principal can establish that the tax has been paid for him by the foreign intermediary, he will no longer be the direct taxable person. In this case, the cut-off date by which the foreign intermediary must pay the tax is the last business day of the month following the transaction.

The TOB version 2017 will doubtless create administrative headaches for residents of Belgium holding financial assets outside the country and whose foreign intermediary will not pay the tax. And the legislature has considerably toughened its enforcement mechanism. In addition to interest on overdue payments, there is also a fine of EUR 50 per week of delay (capped at 52 weeks) if the declaration is not filed within the prescribed time limit and a fine equal to five times the amount of tax eluded (with a minimum of EUR 1,000) when the order execution slip has not been delivered. A transitional scheme is in place for 2017.

All these implementing provisions will be detailed in a Royal Decree to be published in 2017.

Residents of Belgium who hold financial assets abroad are strongly advised to review these new provisions carefully. They should make sure that their financial institution is informed of the measures and able to comply, particularly when the institution does not have a place of business in Belgium.

[1] The common reporting standard is a new international standard for the automatic exchange of financial information, which came into effect on 1 January 2016 for nearly 100 countries, including Belgium and Luxembourg, and on 1 January 2017 for other signatories such as Switzerland.

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