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Capital gains tax on certain funds
Which financial instruments come in scope for this tax? This tax is applicable on funds constituted under Belgian or European law (investment company or common investment fund) of which over 10% (from 2013 until end 2017 this was 25% and before 2013 this was 40%) is invested directly or indirectly in fixed interest products (bonds, linear bonds, deposit certificates, money market instruments, deposits, etc.). Initially it was only European accumulating funds which had a European passport (UCITS IV Directive 2009/65/EC) and non-European funds which were taken into consideration for levying of the tax. The law of 30 July 2013 extends the tax to the European funds without European passport from 1 July 2013. The funds concerned are bond funds, money market funds, mixed funds with over 10% in fixed interest products (= defensive mixed and most neutral mixed) and most (structured) funds with capital protection. The percentage of the fund invested in fixed interest products as well as the fund type (capitalisation or distribution) can be found in the prospectus of the fund in question (see Transaction Site under the "Documents" tab of a specific fund).
How will I know whether the fund in my portfolio is affected by this tax? You can find this information on the Transaction Site under the "Tariff structure" tab of a specific fund (on the condition that the management company of the fund delivers this information).
Which funds are not subject to the capital gains tax? You do not pay any capital gains tax on the following funds: all equity funds; all real estate funds; all mixed funds with less than 10% fixed interest products; all distribution funds (funds which pay out a dividend) if the statutes expressly state that the complete net yield of the fund is paid out to the fund investor.
Are distribution funds (funds which pay out a dividend) subject to capital gains tax? The legislator has stipulated that distribution funds are not subject to capital gains tax on the condition that the statutes or the fund regulations expressly cover the annual payment of the complete net yield of the fund.
What is taxed? It involves a withholding tax of 30% on the surplus value from the fixed interest part (the interest) of the fund which invests over 25% in fixed interest stocks (bonds, etc.) on the repayment of the share certificates of the fund concerned. There is repayment of share certificates in the following four situations (= taxable transactions): on the withdrawal of the investor (this is the situation in which the fund purchases the share certificates or the investor sells the share certificates); on settlement of the fund; on the maturity date of the fund; on certain transfers under valuable consideration of shares.
How is the taxable base calculated? The calculation of the capital gains tax is a complex exercise and it differs according to whether a fund with or without European passport is involved. In both cases the capital gains tax is calculated over the period during which the recipient of interest was the holder of share certificates of the fund subject to (a) and (b) below. If the recipient has received these share certificates as a gift, this period is extended by the period for which the giver was the holder of the share certificates. There are two possibilities for the calculation of the tax (subject to (1) and (2) below). The fund issuer may provide the so-called TIS values (Taxable Income per Share) and the TIS value on the day of sale is reduced by the TIS value of purchase. If the difference is positive then 30% withholding tax is deducted on that difference. In many cases the TIS values are not available. In that case, the flat-rate approach is used, based on the added value, multiplied by the percentage of interest bearing products in the fund (the so-called "asset test"). If the purchase or investment value is not known, the taxable amount is equivalent to the amount received during the transaction (e.g. the sale) multiplied by the percentage of the asset test. The taxable base is limited to the added value realised by the investor.
- For funds with a European passport investigations go back to 1 July 2005 for the determination of the added value if the share certificates were obtained before 1 July 2005 or the date of acquisition cannot be proven. If the fund was thus purchased or obtained as a gift before 1 July 2005, then the added value built up before 1 July 2005 will not be taxed.
- For funds without a European passport, the investigation to determine the added value goes back to 1 July 2008 if the share certificates were obtained before 1 July 2008 or the date of acquisition cannot be proven. For calculation of the taxable base for the share certificates which were held from 1 July 2008 (or later date of acquisition) to 1 July 2013, a flat-rate calculation is used. This flat-rate calculation method is based on an (imaginary) annual profit of 3% on the net asset value of the share certificate at the moment of acquisition, multiplied by the percentage of the asset test on 30 June 2013. For the holding period after 1 July 2013 the "normal" calculation rules are used (see 2 and 3 above).
What are the transitional measures regarding the taxable transactions on funds without European passport in the period from 1 July up to and including 30 November 2013? As the change in legislation for extension of the capital gains tax was only made clear in a circular of 25 October 2013, this tax will have to be collected retroactively for the taxable transactions since 1 August 2013 up to and including 30 November 2013. As far as the taxable transactions carried out in the month of July 2013 are concerned, the person liable to taxation must guarantee declaration of the taxable portion in their declaration for personal income tax (income year 2013 - assessment year 2014).
To whom does the tax apply? The tax is (only) applicable to investors subject to Belgian personal income tax. Legal entities and non-residents are thus not subject to this tax.
Examples of the calculation of the capital gains tax on sale of the share certificates of a fund Example 1 : sale of a fund without European passport acquired before 01/07/2013 Basic data: Purchase date: 15/09/2010 NAV of purchase: EUR 100 Asset test on 30/06/2013: 90% Holding period prior to 01/07/2013: 1,019 days TIS on 01/07/2013: 0 NAV on 01/07/2013: 145EUR Date of sale: 08/11/2013 NAV of sale: EUR 150 TIS on sale: 5 Asset test on sale: 85% Calculation of the tax: Taxable lump base for the period before 01/07/2013EUR 100 x 3% x 1019/365 x 90% = EUR 7.54 Taxable base for the period from 01/07/2013: 5 (TIS on sale) ? 0 (TIS on 01/07/2013) = 5 Total taxable base: EUR 7.54 + EUR 5 = EUR 12.54 Added value attained: EUR 50 (= maximum taxable base) Capital gains tax: EUR 12.54 x 30% = EUR 3.76 If the TIS values are not available, then the asset test need to be used for the calculation of the taxable base: Taxable lump base for the period before 01/07/2013EUR 100 x 3% x 1019/365 x 90% = EUR 7.54 Taxable base for the period from 01/07/2013: (150 ? 145) x 85% = EUR 4.25 Total taxable base: EUR 7.54 + EUR 4.25 = EUR 11.79 Added value attained: EUR 50 (= maximum taxable base) Capital gains tax: EUR 11.79 x 30% = EUR 3.54 Example 2 : sale of a fund without European passport acquired after 01/07/2013 (same calculation rules applicable to funds with European passport) Purchase date: 01/09/2013 NAV of purchase: EUR 100 TIS on purchase: 45 Date of sale: 30/06/2014 NAV of sale: EUR 108 TIS on sale: 55 Asset test on sale: 37% TIS differential: 55 ? 45 = 10 Added value attained: 108 ? 100 = EUR 8 (= maximum taxable base) Taxable base: 8 (TIS differential > added value) Capital gains tax: EUR 8 x 30% = EUR 2.4 If the TIS values are not available, then the asset test need to be used for the calculation of the taxable base: Taxable base: (108 - 100) x 37% = EUR 2.96 Capital gains tax: EUR 2.96 x 30% = EUR 0.89
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