Tax on securities accounts – shedding more clarity
The Federal government has reached a consensus on the modalities relating to the tax on securities accounts announced in their recent
Summer Agreement.
1. Principle
The tax on securities accounts is a tax that will be levied if a ‘securities account’ has a value exceeding 500 000,00 EUR. In that case, you will pay a tax of 0,15% on the aggregate value of the account in question.
Both residents and non-residents will be subject to the tax on securities accounts. Securities held through a company will not be liable to this tax.
It would appear that the bank where the securities account are held, is liable for withholding of the tax and for transferring it to the Treasury. The bank will collect the tax annually on 1 October, on the basis of four measuring points, at the end of each quarter. The base reference period runs from 1 October thru’ 30 September. The tax is payable once the average value of the securities account at these four measuring points exceeds the threshold of 500 000,00 EUR.
If an account is held in joint ownership (e.g. in the case of a married couple), the value will be shared by the number of undivided owners. The bank should, in principle, assume that each undivided owner holds an equal share but that, at a later juncture (i.e. after withholding the tax), adjustments can be made to that amount by the tax authorities. Important: an account on which a right of usufruct was established, is not a joint ownership account.
In case when someone holds securities accounts at several different banks, the combined total of which exceeds the threshold of 500 000,00 EUR, the holder can notify the banks about this to withhold the tax on securities accounts correctly.
Last but not least, somebody with a foreign securities account at a bank that does not withhold the tax, must file a tax return in order to pay the tax.
2. Which products are being targeted?
The following securities are targeted:
- listed shares;
- treasury bonds (stock market-listed or otherwise);
- investment funds;
- deposit bonds; and
- warrants.
Falling, therefore, outside the scope of the tax:
- non-listed shares;
- registered shares;
- pension savings funds;
- leveraged stock exchange products;
- options; and
- life insurance.
3. Serious penalties
The Revenue has the authority to request information from the banks in order to check everything. It is still unclear whether the authority to request information is compatible with the current bank secrecy provisions.
Holders of securities accounts who, in bad faith, furnish no detail about their accounts or who did not file a tax return risk a fine of 750,00 EUR to 1 250,00 EUR. In such cases, the tax on securities accounts may be increased from 0,15% to 0,45%.
4. Still many questions and obstacles …
Do note that it is, at present, purely a political agreement that still needs to be implemented and enacted in legally binding terms. The definitive text of the Act will still have to be presented tot he Council of State and obtain consent of Parliament That could be a tricky journey as people are already talking of a possible violation of the constitutional principle of equality.
One wonders, for example, if no problems will arise in cases where a holder of a securities account worth 500 000,00 EUR is not liable to pay the tax on securities accounts whereas a holder of a securities account with a value of 500 000,01 EUR is liable and, moreover, on the full value. On this point, the Council of State could argue that the tax on securities accounts is only payable on the portion that exceeds this threshold.
In addition, it’s probable that people with a securities account that falls within the scope of the Act, will seek alternative investment products, such as the above-mentioned securities, but will also turn to savings deposits and/or real estate investments.
The legislator will also have to clarify the valuation of bonds in order to check whether the threshold of 500 000,00 EUR has been reached. The assumption, according to media, is that the bond price is decisive , but that might give a distorted picture of the actual value of the bond as the trade herein often takes place between banks, and not on the stock exchange, even though it is a stock-market listed bond.
A last fundamental ambiguity concerns the predicament of the bank where the securities account is held. What if there is no cash available in the account to pay the tax? Perhaps, in that case, the bank will be allowed to sell part of the portfolio (as is currently the case for pension savings products) unless, the account holder has a current account, at the same bank, for the specific purpose of debiting the tax.
We will just have to await the final wording of Act governing the tax on securities accounts.
The Government hopes that this wealth tax will generate 254 000 000,00 EUR in 2018. Time will tell whether this is realistic or not. Earlier examples such as the speculation tax and the transparency tax (“Cayman tax”) prove that investors are not unfamiliar with the principle of the least taxed option or to adapt their investment behaviour to suit the new fiscal conditions.
