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Belgium : tax haven for high net worth individuals ?

FinPlan vzw Financial One 2003. May 14, 2003 Luxembourg. Belgium : tax haven for high net worth individuals ?. Marc Vandendijk Rue E. Cavell, 66 International Tax lawyer B – 1180 Brussels Vandendijk & Partners Tel. : +32 2 343 33 45

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Belgium : tax haven for high net worth individuals ?

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  1. FinPlan vzw Financial One 2003 May 14, 2003 Luxembourg Belgium : tax haven for high net worth individuals ? Marc Vandendijk Rue E. Cavell, 66 International Tax lawyer B – 1180 Brussels Vandendijk & Partners Tel. : +32 2 343 33 45 Marc.Vandendijk@vandendijk-taxlaw.be Fax : +32 2 343 41 45 Vandendijk & Partners

  2. Tax aspects of investment possibilities for Belgian residents Overview : • No capital tax • No capital gain tax • Taxation of investment income at low flat rates : 15 % or 25% • Network of Double tax treaties Vandendijk & Partners

  3. Tax aspects of investment possibilities for Belgian residents Overview : • Shares : dividends + capital gains • Bonds, … : interests • Growth funds : SICAV’s + BEVEK’s • Life insurance contracts • Personal investment company/Holding company Vandendijk & Partners

  4. Tax aspects of investment possibilities for Belgian residents • Shares A. Dividend income  Belgian dividends from Belgian source or from foreign source, but collected by an intermediary (f.e. bank) established in Belgium.  Foreign dividends Vandendijk & Partners

  5. Tax aspects of investment possibilities for Belgian residents • Belgian dividends : - Withholding tax at source : 25% - no obligation to declare the dividend income in annual tax return - shares issued as from 1 January 1994 to the public or registered shares or deposited in open custody from the issuing date : 15% Vandendijk & Partners

  6. Tax aspects of investment possibilities for Belgian residents • Foreign dividends : - obligation to declare the dividend income in the annual tax return; - Flat tax rate of 25% + municipal surcharge - Foreign withholding tax at source can not be set off against the Belgian tax Vandendijk & Partners

  7. Tax aspects of investment possibilities for Belgian residents B. Capital gains realised on the transfer of shares  Principle : tax exempted  Exceptions : 1° speculative transactions (33%) 2° Transfer of shares of a Belgian company in which the transferor (+ family) holds a participation of at least 25% to a non- Belgian company ( 16.5% + municipal surcharge) Vandendijk & Partners

  8. Tax aspects of investment possibilities for Belgian residents • Non-Belgian bonus shares and stock dividends  not taxable • Liquidation bonus : 10% (since 2002) Vandendijk & Partners

  9. Tax aspects of investment possibilities for Belgian residents II. Bonds, .. • Interest income - withholding tax : 15% - contract prior to March 1st,1990 : 25% - Foreign interest income : obligation to declare in the annual tax return (+ municipal surcharge) Vandendijk & Partners

  10. Tax aspects of investment possibilities for Belgian residents III. Growth funds • SICAV • particular holding company under the laws of Luxembourg; • principle of the tax exempted capital gains at the moment of purchase by the Sicav of its proper shares or sale of shares. Vandendijk & Partners

  11. Tax aspect of investment possibilities for Belgian residents • SICAV • the return is treated for tax purposes as income from bonds (interest), if at the moment of the public offer in Belgium (i) the interest rate or the amount of the reimbursement is determined and, (ii) contracted for no longer than 8 years Vandendijk & Partners

  12. Tax aspect of investment possibilities for Belgian residents III. Growth funds • BEVEK • Belgian investment companies with a variable capital; • principle of the tax exempted capital gains • return of the BEVEK is taxed at 15% under certain conditions (cf. SICAV) Vandendijk & Partners

  13. Tax aspects of investment possibilities for Belgian residents IV. Life insurance contracts (branch 21) • individual life insurance contract with a guaranteed return (actually 3.25%); • principle of the tax-free capital gains; Vandendijk & Partners

  14. Tax aspects of investment possibilities for Belgian residents IV. Life insurance contracts (branch 21) • The guaranteed return is taxable at 15%, unless : - the policyholder is the sole beneficiary of the contract and the advantage is stipulated inter vivos for himself and the contract provides for a capital of at leatst 130% of the paid up premiums - the contract is concluded for a term of more than 8 years and no payments are made within the 8 years Vandendijk & Partners

  15. Tax aspect of investment possibilities for Belgian residents IV. Unit linked life insurance (branch 23) • in principle the return is tax exempted; • However if the interest rate, the term or the amount is determined, the return will be treated as interest. The return will be tax exempted under the same conditions as for branch 21 life insurance contracts. Vandendijk & Partners

  16. Tax aspect of investment possibilities for Belgian residents V. Personal investment / holding company • established outside Belgium, f.e. low tax jurisdictions; • Anti-avoidance rule of article 344 § 2 Belgian income Tax code -> alternative : acquisition of an existing foreign investment company (founded before March 27, 1992) Vandendijk & Partners

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