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FAQs on implementation guidelines for new annual tax on securities accounts issued

Financial Services | FSI Tax alert

The Belgian tax authorities on 7 October 2021 issued administrative guidelines (Dutch French) in the format of frequently asked questions (FAQs) relating to the implementation guidelines for the new annual tax on securities accounts (TSA) introduced as from 26 February 2021.

The publication is of key practical importance given that the first reference period for the computation of the average value of the securities accounts ended on 30 September 2021. Belgian intermediaries and authorized representatives must provide an "overview" for that period (i.e., the account number of the securities account, the identity of the holder(s), the guidelines applied for the purpose of calculating the taxable base, and the dates of the reference period) to the securities accounts holders by 31 October 2021, leaving them limited time to adapt their IT systems, where necessary, on the basis of administrative clarifications and interpretations.

This alert examines the more significant positions adopted by the tax authorities in the FAQs. 

Hedging of share or stock option plans (FAQ 12)

It is confirmed that securities accounts used for hedging operations relating to share or stock option plans are within the scope of the TSA. 

Cash held in a sub-account of the securities account (FAQs 13 and 34)

A wide range of financial instruments, including securities, money market instruments, option contracts, hedging derivatives, emission allowances, and cash, are included to determine the value of the securities account and hence whether the EUR 1 million threshold is exceeded, resulting in the TSA becoming due. 

In this context, the issue of whether cash held in either EUR or foreign currency in a sub-account of the securities account should be included when determining the value of the securities account was addressed during the parliamentary discussions.

The minister of finance clarified during the discussions that the scope of the TSA did not include a cash account attached to a securities account or a cash sub-account operating separately and integrated into the securities account only as part of the reporting to clients; however, what constitutes a separate operation was not specifically addressed. 

The FAQs state that this operating autonomy suggests that the sub-account may be used for all operations that may be carried out through a current account. In other words, the sub-account must have the characteristics of a payment account so as not to be assimilated to the securities account.

In Deloitte Belgium’s view, this administrative interpretation may be contrary to the law since it implies a broadening of the definition of securities account, i.e., an account on which financial instruments can be credited or debited.

Scope of application and tax residency status of the account holder (FAQs 14, 15, 18, and 24)

Both residents and nonresidents are within the scope of the TSA; however, their tax residency status is decisive in assessing the scope of the application of the tax.

For Belgian tax residents, all securities accounts held with Belgian and foreign intermediaries are within the scope of the tax. For nonresidents, only securities accounts held with Belgian intermediaries are in scope. It is important to bear in mind that for some nonresidents, a double tax treaty concluded by Belgium with their country of residence may prevent Belgium from applying the TSA to a Belgian tax nonresident and this needs to be considered on a case-by-case basis.

Where there is a change of tax residency during the reference period, specific rules must be complied with, depending on the precise circumstances.

As soon as a securities account is held by a resident, whether or not as the sole account holder, the account is within the scope of the TSA. Where a securities account is jointly held by several holders, one holder can comply on behalf of all account holders with the tax payment and reporting obligations if these formalities are not dealt with by a Belgian intermediary or an authorized Belgian representative. All account holders are jointly liable for the tax. The deadline for filing the TSA return is the same as the deadline for the electronic filing of an individual income tax return by a taxpayer personally and not via a proxy holder (generally around mid-July following the end of the tax year). The TSA due must be paid by the account holder by 31 August of the year following the reference period.

Taxable financial instruments (FAQ 33)

To comply with the principle of equality and avoid discrimination between financial instruments, the tax authorities clarify in the FAQs that the TSA, an indirect tax, relates to the securities account itself, regardless of the nature of the instruments held within the account. Therefore, the administrative FAQ only defines the concept of “taxable financial instruments” through a number of illustrations that are not exhaustive. Moreover, the scope of the TSA is not limited to negotiable financial products registered on securities accounts, i.e., book-entry or fixed securities. Registered financial instruments or contracts relating to registered derivative instruments (including instruments that appear in securities accounts for information purposes, such as private contracts or gold) held in a securities account also are covered. This implies a very broad interpretation of financial instruments to be included when determining the taxable basis for the TSA.

Guidelines for valuation of financial instruments (FAQ 41)

The law introducing the (new) TSA does not contain explicit provisions for the valuation of financial instruments held within a securities account.

In the FAQs, the tax authorities adopt the same guidelines as applied in the context of the first version of the TSA, annulled by the Constitutional Court on 17 October 2019. A distinction must be made between listed and nonlisted financial instruments, with the value at the reference point determined as follows:

  • Publicly traded financial instruments: the closing price/quoted value of the financial instrument, i.e., the listing at the reference point or the last available listing;
  • Nonlisted mutual investment funds or investment companies: the latest publicly available net asset value at the reference point; and
  • Other nonlisted financial instruments:
    • The value at which the instrument is reported in the quarterly statement established in accordance with the intermediary's reporting obligation under the EU Markets in Financial Instruments Directive 2014/65/EU (MiFID II); or
    • The latest publicly available market value or, failing that, the best possible estimate of the value.

The tax authorities take a specific position on listed derivatives as the value of these instruments at the reference point may be positive or negative. Based on the FAQs, a negative value must be reduced to zero, unless the value of the derivatives as set out in the terms and conditions governing the issuance is likely to be negative at the time of exercise of the right or on its due date.

Liability for the TSA (FAQs 51, 55, 56, and 57)

In principle, the intermediary is responsible for the reporting and payment of the TSA.

The FAQ defines the “cascading” liability for TSA purposes as follows: 

  • The Belgian intermediary or authorized representative has primary responsibility for payment of the tax. In the absence of a representative, a foreign intermediary may pay the tax but has no legal obligation to do so.
  • Secondary responsibility for payment of the tax lies with the securities account holder, who is in principle the taxpayer but will be released from reporting and payment obligations where the account holder can prove that the tax has been reported and paid by an intermediary or by an authorized representative. When the account holder is the taxpayer (i.e., when the intermediary is not established in Belgium) the foreign intermediary is not obliged to provide any information with respect to its client so that the account holders themselves must determine the average value of the financial instruments subject to the TSA.

Scope of anti-abuse provisions (FAQs 94, 101, and 105)

The TSA is subject to two anti-abuse provisions. In the FAQs, the tax authorities clarify the application of the anti-abuse provisions to financial institutions. Intermediaries are covered by the anti-abuse provisions only with respect to their own actions, i.e., transactions carried out based on the initiative or the advice of the financial institution to help the securities account holder to avoid the tax. On the other hand, the securities account holder would be subject to the anti-abuse provisions if the account holder takes initiatives independently and gives instructions to the financial institution to avoid payment of the tax. In that respect, the tax authorities state that financial institutions are not responsible for assessing the nature or importance of a nontax motive confirmed by the account holder and that financial institutions should not disregard clear and contractually valid instructions from the account holder.

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