Ten things you need to know about the speculation tax

Keytrade Bank gathered the most frequently asked questions about the speculation tax.

• 1. What is the speculation tax?

  The speculation tax is part of a group of fiscal measures being introduced by the Belgian government on 1 January 2016 (the so-called "tax shift").
  It is a tax of 33% on the gains realised by any investor who sells certain stock exchange listed financial instruments within six months after purchasing them. No retroactive effect will be applied. The speculation tax will not apply to securities purchased before 1 January 2016.

• 2. What kinds of transfers does the speculation tax apply to?

  The speculation tax will apply to gains realised at the disposal of listed shares, listed options, listed warrants or other listed financial instruments based on shares within six months of acquisition. The listing means that the shares, options, warrants or other financial instruments are admitted to trading on a Belgian or foreign regulated market.
  
  Important note on listed options : because of legal inconsistencies, Keytrade Bank will not apply speculation tax on transactions in listed options as of 1 January 2016. It cannot be excluded that a so-called repair-law will be voted in the coming months to clarify how listed options should be treated. Retro-active application of the tax, at source, on transactions in listed options would be excluded by definition. However, it is possible that the tax authorities require that the tax payer declares the realised gains on transactions in listed options on their personal income tax return.
  
  The payment of receipt of the option premium related to transactions in listed options does not lead to the application of the speculation tax. However, if you acquire shares as a result of an exercise/assignment of an option contract, this leads to a speculation tax if those shares are sold, with a realised gain, within 6 months of receipt of such shares.
  
  The speculation tax will apply to sales transactions occurring within six months of acquisition (purchase). Shares received as a gift that are sold within six months from the original purchase will also be subject to the speculation tax. If you receive shares as part of an inheritance and these are sold within six months, then they will be outside the scope of the speculation tax.

• 3. Who is subject to the speculation tax?

  The speculation tax will apply to all individuals / natural persons, joint ownerships (including civil partnerships without legal personality), associations without legal form, joint ownerships and investment clubs.
  
  It concerns:
  
  - Belgian residents/natural persons who are subject to Belgian taxation for natural persons
  
  - Natural persons subject to the tax on non-residents/natural persons in Belgium
  
  In practice this means that Keytrade Bank will treat the category of non-residents/natural persons in the same way for the speculation tax as for the Belgian withholding tax regime. For example, a Belgian retiree receiving a Belgian pension, but resident in France, will be subject to the speculation tax. Non-residents/natural persons who are not subject to the tax on non-residents/natural persons in Belgium will not be subject to the speculation tax (for example, a French citizen, employed in Belgium as European civil servant, with fiscal residency in France).
  
  The following tax payers are not subject to the speculation tax:

  • Companies
  • Other legal entities that pay legal entities income tax (non-profit organizations, foundations, etc.)

  Residents of the Kingdom of Belgium who have a shares account overseas and who collect their income through an intermediary who is not resident in Belgium, must declare their income on their personal income tax returns.

• 4. Which financial instruments are subject to the speculation tax

  The following financial instruments fall within the scope of the speculation tax:

  • Shares listed on the stock exchange;
  • Stock exchange listed options where the underlying asset consists solely of one or more well defined stock exchange listed shares;
    
    Important note on listed options : because of legal inconsistencies, Keytrade Bank is not able to apply speculation tax on transactions in listed options as of 1 January 2016. It cannot be excluded that a so-called repair-law will be voted in the coming months to clarify how listed options should be treated. Retro-active application of the tax, at source, on transactions in listed options is excluded. However, it is possible that the tax authorities require that the tax payer declares the realised gains on transactions in listed options on his personal income tax return. The payment of receipt of the option premium related to transactions in listed options does not lead to the application of the speculation tax. However, if you acquire shares as a result of an exercise/assignment of an option contract, this leads to a speculation tax if those shares are sold, with a realised gain, within 6 months of receipt of such shares.
  • Stock exchange listed warrants where the underlying asset consists solely of one or more well defined exchange listed shares;
  • "Other stock exchange listed financial instruments" where the underlying asset consists solely of one or more well defined exchange listed shares. For "other financial instruments" you should be thinking of instruments by means of which the investor, with or without leverage, invests in the change in value of an underlying asset that solely consists of one or more well defined shares (for example, certain structured products, turbos, speeders, sprinters and futures).

  The following financial instruments don't fall within the scope of the speculation tax (non-exhaustive list):

  • Funds¹
  • Stock exchange listed funds (also known as ETFs or trackers)
  • Bonds
  • Forex transactions, including transactions on precious metals, and Forward Outrights
  • Futures on indices, commodities (including gold and silver), bonds and forex pairs
  • CFDs (on individual stocks, indices and ETF's)
  • Convertible bonds
  • Shares, options and warrants awarded by an employer to its members of staff
  • Shares in companies not listed on any stock exchange
  • Structured products, Turbos and Sprinters of which the underlying asset consists of a stock index or commodity

• 5. How will the speculation tax be calculated?

  The speculation tax is to be calculated on the difference between the gross price of transfer/sale and the gross price of acquisition/purchase.
  The stock exchange tax collected at source (TOB) is to be added to the gross cost of acquisition/purchase. The stock exchange tax collected at source (TOB) is to be deducted from the gross cost of acquisition/purchase. Other costs, such as transaction costs and foreign taxes will not be taken into account for the calculation of the speculation tax. If several transactions were carried out during the period of six months, the principle of last-in first-out (LIFO) will be applied. This means that the shares bought last are taken first for the calculation of the speculation tax. The determination of the taxable base is to be done per security with the same ISIN code. For calculating the taxable base using the LIFO method, both realised gains and losses will be taken into account, provided the transactions were performed for the same security (same ISIN code) and within the period of six months after acquisition/purchase, and they relate to one single disposal (sell) transaction. For transactions in foreign currencies, the gain will first be calculated in the local currency of the transaction. The gain in the local currency for the transaction will then be converted to EUR based on the exchange rate on the date of transfer/sale.
  
  Given that transfers of shares from Bank A to Bank B also fall within the scope of the speculation tax, it is important that a chronological transaction record is kept for these transfers and given to the receiving bank, showing the purchase prices and purchase dates. In any case, without this information the receiving bank is unable to calculate the speculation tax in the event of a sale within six months. If this information is not available then the receiving bank will be required to calculate the speculation tax on the entire sales proceeds at the time of the sale. The taxpayer will then be able to ask for a refund of the difference in his personal tax return after providing the necessary documentary proof to the tax authorities.
  We therefore recommend that from 1 January 2016 onwards, you provide Keytrade Bank with the necessary proof of purchase price and purchase date for all securities you want to transfer to the Keytrade Bank.

• 6. Can corporate actions have any impact on the speculation tax?

  Financial instruments falling within the scope of the speculation tax that are acquired or disposed of as part of a corporate action can be subject to the speculation tax in some specific cases. Keytrade Bank will apply the following general rules to apply the speculation tax in the event of a corporate action taking place on a financial instrument that is in scope:
  
  - Are subject to speculation tax : all acquisitions (mandatory or voluntary) done ?for burdensome consideration? (free translation of ?à titre onéreux?) as well as all voluntary disposals (sells)
  
  - Are not subject to speculation tax : all mandatory disposals (sells) such as for example in the case of a squeeze out ; all acquisitions that do not take place ?for burdensome consideration? (?à titre onéreux?) such as for example in the case of a receipt of bonus shares.

• 7. How will the speculation tax be collected?

  For transactions via Belgian financial intermediaries the speculation tax is to be collected by means of a new taxation at source. So this means deduction at source by the financial intermediary, similar to the rules for withholding tax on dividends. The speculation tax will be owed by the last financial intermediary, similar to what applies for capital gain tax on certain funds (we also refer to the FAQ Capital gain tax on certain funds: https://www.keytradebank.be/en/support/faq/ .)
  For transactions where no Belgian financial intermediary is involved, there will be a requirement to declare realised gains on personal tax returns.

• 8. Will Keytrade Bank deduct the speculation tax from 1 January 2016?

  Keytrade Bank is getting everything prepared to be able to deduct the speculation tax at source as soon as possible, for the scope that is currently known. Given that the introduction of fully automated handling of the speculation tax in our systems will require some time, we will, during the first weeks of 2016, deduct the speculation tax separately, and a posteriori, until we have been able to integrate the new law into our IT systems. After the transition period, we will then probably process the speculation tax on the day following the transaction date (for European stock exchanges) or on the second day after the transaction date (for the American stock exchanges).
  
  Because of the large number of aspects where there is still legal uncertainty at present, we cannot preclude the possibility that there may be transactions where initially Keytrade Bank does not deduct speculation tax, and where an adjustment will be needed at a later stage (retroactively).
  
  Considering the legal inconsistencies related to transactions in listed options, Keytrade Bank will not apply the speculation tax on this type of transactions from 1 January 2016 onwards.

• 9. Are realised losses deductible?

  For calculating the taxable base using the LIFO method, both realised gains and losses will be taken into account, provided the transactions were performed for the same security (same ISIN code) and within the period of six months after acquisition/purchase and provided it relates to one single disposal (sell) transaction. The total net result can never be lower than zero, and no loss at all can be deducted or repaid from positive results on other transactions carried out by the taxpayer.

• 10. Are there plans for different countries to exchange data with each other in relation to the speculation tax?

  The automatic exchange of data based on the Common Reporting Standard (CRS) is expected to start from 1 January 2017 on the basis of financial transactions carried out from 1 January 2016. In this way, the Belgian tax authorities will receive the necessary information from participating countries about Belgian tax residents who carry out financial transactions with financial institutions who are not based in Belgium.