Moving to Belgium can offer some significant opportunities for tax mitigation, but it is important to be aware of a range of local taxes. Ed Read Cutting, Director of The Fry Group’s Belgium Office, explains why an understanding of Belgian Stock Exchange Tax is particularly relevant for those with overseas investments.
Many expats living in Belgium hold retained investment portfolios, usually set up before moving. These take the form of directly held assets such as shares, bonds and collective investment funds (including ISAs in the UK) which are held on a platform or with an institution in the home country.
Whilst these investments may have been tax-efficient elsewhere, a common misconception is that they remain so after moving to Belgium. In fact, after becoming tax resident in Belgium some investments can attract a number of local taxes including Belgian Stock Exchange Tax.
Belgian Stock Exchange Tax (BSET) has been charged on certain financial assets for many years. The responsibility for charging and reporting the tax falls to the Belgian institutions to which the asset is connected. However, in 2017, BSET’s scope was widened to include equivalent assets held outside Belgium. This incorporates overseas financial intermediaries such as foreign banks, custodians, investment platforms or discretionary managers.
Since very few foreign institutions (the exception being a handful with a particularly large client base in Belgium) will handle this for clients, the onus for reporting and paying BSET in these circumstances usually falls to each individual investor.
Despite the requirement being introduced over three years ago, many Belgian taxpayers remain unaware of their obligations. It’s also worth noting that BSET will apply when reinvesting dividends, switching between funds and drawing a regular income stream by way of partial sales.
The current Stock Exchange Tax rates are as follows:
|Underlying stock||Tax rate||Tax Limit Per Transaction|
|Bonds||0.12% (on purchase & sale)||€ 1.300|
|Shares||0.35% (on purchase & sale)||€ 1.600|
|Shares in capitalisation funds||1.32% (on sale only)||€ 4.000|
Sadly, the tax reporting for individuals in this area is particularly onerous. Rather than using the annual Belgian Tax Return, a special Belgian Stock Exchange Tax Return is needed. The deadline for reporting and paying any tax due is 60 days after the end of the month in which the transaction took place, and a new Return is needed for each 60-day period when any transactions take place. Fines are imposed for late reporting.
EU officials and those with expatriate status are exempt, although these groups must comply with any relevant tax reporting requirements of their respective country of tax residency.
Other taxes which apply to directly held funds, shares or bonds (including ISAs for those who have previously been UK tax resident) are:
- 30% on dividend / interest income whether paid out or reinvested.
- 30% tax on the capital gain on sale of accumulating funds holding more than 10% of assets in fixed interest securities.
For Belgian residents it often far more attractive to hold investments within an insurance bond (known as a ‘Branch 23’ investment). Whilst a one-off Belgian Insurance Premium Tax of 2% is payable at outset, there is no direct tax liability in Belgium on any income or gains arising on the assets held within the bond, no Belgian Stock Exchange Tax is due on purchases or sales taking place within the bond and nor is any tax payable in Belgium upon taking withdrawals or upon full encashment.
The key benefits of this type of bond are:
- Virtually tax-free investment growth
- Tax-free withdrawals
- Simplified tax reporting
- Diversification with ease of administration
- Succession and estate planning opportunities
- Inheritance Tax planning opportunities
- Currency flexibility
- A cost-effective investment solution
If you are struggling with the tax reporting requirements of your investments, and would like to discuss using Branch 23 bonds, we can help. For a review of any aspect of your tax or investment planning whilst living in Belgium, please get in touch.
Ed Read Cutting, Director, The Fry Group Belgium
The above is based on current Belgian taxation, law and practice and our current interpretation and understanding of these, all of which may be subject to change.