October 29, 2020
19:54
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Faster than expected, Minister of Finance Vincent Van Peteghem puts his bill for the ‘strong shoulder tax’ on the government table. Companies with a securities account of more than 1 million euros are also targeted, SMEs are not.
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To come up with a proposal for a form of government tax that does not discourage entrepreneurship against the budget control of March 2021: Van Peteghem received this assignment from the seven parties that joined the De Croo government on 1 October. The whole thing was bathed in confusion. According to the socialists, people should be targeted with more than 1 million euros, the liberals previously suggested a tax on securities accounts of more than 1 million.
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Registered shares remain excluded. This means that managers or shareholders of an SME do not come into the picture.
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CD&V minister Van Peteghem did not waste any time. And he chose the second option. In recent weeks, his cabinet has been silently commemorating the securities tax of the Michel government, which the Constitutional Court previously overturned. The speed cannot be seen in isolation from the corona crisis, which is raging. The proceeds from the tax – 250 to 300 million – must go to the healthcare sector. The child will probably also receive the name ‘solidarity contribution’.
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How does the tax work exactly?
The Van Peteghem cabinet does not wish to speak of a repair of the securities tax. Instead of a tax on the holders of a securities account, it becomes a subscription tax on the securities account itself. Whoever holds the trading account no longer matters. In concrete terms, this means that not only natural persons with a securities account of more than 1 million are targeted, but also companies. The target group is thus expanded considerably.
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According to government sources, this mainly targets large holding companies and certain Luxembourg vehicles where the super-rich keep their securities accounts. Because it is also new that legal constructions abroad are also included in the target group. For those constructions, the contribution is therefore on top of the Cayman tax. In addition, the government is responding to the Constitutional Court’s criticism that too many products were exempted. The old securities tax only included shares, bonds, investment funds, warrants, savings certificates, shares in investment funds and investment companies (sicavs, sicafi …) and so on. Derivatives, turbos and real estate certificates are now also coming into the picture.
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Who does not pay the tax?
It is remarkable that the registered shares remain exempt. According to the government, this meets the sentence in the coalition agreement that the tax should not discourage entrepreneurship. Most managers or shareholders of SMEs and family businesses do not have their shares in a securities account, but in a share register. Investment companies that invest in companies through securities accounts do come into the picture.
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The question remains whether that distinction between companies with a securities account and entrepreneurs with registered shares will survive the test of the Constitutional Court. The government assumes that this is not a problem, because no more people are targeted, but bills. ‘It is striking that the term’ strong shoulders ‘has disappeared from the texts,’ says tax lawyer Denis-Emmanuel Philippe. By removing that criterion, one can justify the difference between registered shares and securities accounts. In professional jargon we call this a legal pirouette. ‘
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What are the amounts?
The rate remains the same: 0.15 percent. The threshold is new. With the first securities tax, only bills over 500,000 euros were targeted. These are now bills of more than 1 million euros. Anyone who has exactly 1 million euros in their account pays 1,500 euros.
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The Van Peteghem cabinet disputes that working with a threshold was a reason for annulment in the first securities tax. Because it is no longer taxed on holders, accounts are no longer counted. Anyone who had three accounts with 200,000 euros each under the old regime was taxed. Anyone who has six accounts with 200,000 each under the new regime does not.
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Isn’t that going to be an escape route?
Difficult. The Van Peteghem cabinet has adopted the anti-abuse provision from the Income Tax Code. That is, the account holder must demonstrate that he has arguments other than tax avoidance when splitting an account or reducing the amount on it. The financial institutions are made partly responsible.
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Will the tax really come?
Van Peteghem has drawn up his bill in close consultation with Prime Minister Alexander De Croo (Open VLD). An agreement has not yet been reached in the government, but the tax may now be brought to the cabinet on Friday or this weekend. That the texts were leaked on Thursday afternoon is not a good sign. So there may still be a delay.
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Is it legal now?
According to the Van Peteghem cabinet, the criticism of the Constitutional Court has been met. According to Philippe, the 1 million threshold remains a risk. “If one no longer speaks of a tax on the strong shoulders, the question is whether the Constitutional Court will not regard that amount as arbitrary.” According to Philippe, the possible yield is much higher than what the government itself indicates. “I think this could bring in up to 600-700 million.”
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