What?
Capital gains on shares realized by private individuals are as a rule exempt from income tax in Belgium, provided that such gains stem from the normal management of one's private estate (the latter requirement giving rise to a number of disputes in practice). That will now change, however, since the new Belgian government announced that it will introduce a general capital gains tax on financial assets.
| Taxpayer: |
Private individuals
(individuals realising capital gains in the context of their profession will remain subject to professional income tax) |
| Tax base: |
Capital gains on financial assets (such as shares, bonds, crypto assets), but the precise computation of the capital gain (e.g., FIFO, LIFO) still needs to be confirmed; capital losses on such assets can be offset against capital gains realized within the year (without carry-forward of any excess capital loss) |
| Tax rate: |
10% (with reduced progressive tax rates from 1.25% to 10% for substantial shareholdings) – 10,000 EUR on an annual basis will be exempt to protect small investors (subject to indexation) |
Shareholders with a share participation of 20% or more will benefit from the following reduced progressive tax rates on their capital gains (irrespective of whether shares are listed or not)2:
| Amount of capital gain |
Tax rate |
| Up to 1 million EUR |
Exempt |
| 1 million EUR – 2.5 million EUR |
1.25% |
| 2.5 million EUR – 5 million EUR |
2.5% |
| 5 million EUR – 10 million EUR |
5% |
| Above 10 million EUR |
10% |
Importantly, the tax will only target gains that accrue as of the date of entry into force of the new tax measure (i.e., only future gains are targeted and historic accrued gains remain exempt).
When?
It is expected that this measure will be enacted in the course of 2025 with entry into force of the measures as of 1 January 2026 but the exact timing remains to be confirmed.
Outstanding questions and concerns
Since it is still early days, many questions and some concerns remain regarding this new regime, by way of example:
- Computation of the gain: how will the gain be computed (for instance based on a FIFO or LIFO method or on an average value)? Which costs will be considered tax deductible? What "acquisition value" will be taken into account: is it in all cases the actual value on the moment the measure enters into force or would there be a reference period during which the highest value or an average value during that period is taken into account?
- Additional exemptions/progressive tax rates: will additional exemptions or reduced progressive tax rates be introduced, e.g., in case the shares were held for more than 10 years and/or in case the taxpayer holds a participation of just below 20% (to mitigate the hard cut-off effect)? Will there be special consideration for capital gains realised on shares acquired through long term incentive plans (e.g., an exemption or a beneficial rate)?
- Cumulation with and spillover risk into other pre-existing capital gain tax regimes: there are various specific regimes that already tax capital gains on financial assets:
- Capital gains on shares are currently already subject to 33% in case of speculation or an abnormal management of a private estate (increased with communal surcharges).
- Capital gains on share participations of 25% or more in domestic companies in case of disposal of shares to a legal entity established outside the EEA are subject to 16.5% (increased with communal surcharges).
- Capital gains on shares or units in collective investment companies that invest for more than 10% in. debt-related instruments are subject to 30% on the interest component.
The question is hence whether these regimes will take precedence over the new capital gains tax or whether the government will do away with some of these regimes in an attempt to simplify matters.
If these regimes remain fully applicable, an increase in disputes can be expected since the tax authorities will have more visibility on capital gains realised. Whereas there is so far no reporting obligation for capital gains that are deemed exempt if realised in the context of the normal management of a person's estate, there will be a reporting obligation in the context of the new 10% capital gains tax, which can lead to disputes on whether such capital gain is caught or not by the higher rates applicable under the aforementioned capital gain tax regimes.
Although the main features of this new capital gain tax are now known, it is also clear that crucial questions and concerns still need to be duly addressed when this announced measure is implemented in law (expected later this year). We will continue to monitor the situation. In the meantime, please reach out to your regular contact at Baker McKenzie if you have any questions or comments.
1 Note that there are other relevant tax measures mentioned which can be relevant for a private wealth practice, such as an exit tax in the hands of Belgian tax residents shareholders upon the transfer of seat of a Belgian tax resident company.
2 There is currently some discussion as to what the applicable regime will be for shareholders with a substantial share participation of less than 20%.
