Tax on securities accounts: updated overview double tax treaties

On 5 September 2022, the Belgian tax administration published an updated version of the overview of the double taxation treaties (“DTTs”) concluded by Belgium relevant for Belgian securities accounts held by a non-resident (see annex to the FAQs regarding the tax on securities accounts (hereinafter “TOSA”). This updated version has been published in furtherance to two recent decisions of the Supreme Court.

On 25 March 2022 and 21 April 2022, the Supreme Court rendered two judgments on the question as to whether the annual tax on collective investment undertakings (also referred to as the “Net Asset Tax” (hereinafter “NAT”)) falls within the scope of the DTT between Belgium and Luxembourg. These judgements are relevant for the TOSA in the sense that the tax administration has applied the same line of thinking for the TOSA.

Background

The TOSA is applicable to securities accounts held in Belgium, even if they are held by non-resident accountholders.

Both the legislator (cf. the parliamentary works) and the tax administration (cf. FAQs) had acknowledged the possible effects of DTTs as a result of which non-resident accountholders would not be subject to the TOSA. A prerequisite of the latter is that the DTT also covers capital tax and allocates the power to tax (elements of) the capital exclusively to the state of residence and not to Belgium.

In an annex to the FAQs, an overview was included, which classified investor jurisdictions according to whether the TOSA could be levied in Belgium or not. This classification was made based on an analysis of whether the DTT covers capital tax or not. For instance, the DTT with Luxembourg could be found on this overview as a DTT preventing the application of the TOSA as the DTT covers capital tax.

Supreme Court’s judgments

Two recent judgments of the Supreme Court regarding the NAT have called the abovementioned position into question.

1. The Supreme Court has decided on 25 March 2022 that the Belgian NAT does not qualify as a tax on capital for purposes of the DTT between Belgium and Luxembourg. The DTT with Luxembourg exhaustively lists the taxes to which it applies and does not include the NAT. Hence, no treaty protection could be claimed based on this treaty. According to the Supreme Court, the tax base of the NAT is not the capital of a UCI, but the outstanding amount of savings collected in Belgium.
   
   
2. However, in its second decision dated 21 April 2022, the Supreme Court held that that the DTT between Belgium and the Netherlands is different from the DTT between Belgium and Luxembourg as regards the wording of the provision governing the scope of application. The treaty with the Netherlands only contains an illustrative list of taxes to which it applies and not an exhaustive list. Hence, the Court ruled that the NAT does qualify as a capital tax for purposes of the DTT between Belgium and the Netherlands.

In practice, the question arose whether the tax administration will apply the same line of thinking to the TOSA given that the NAT and the TOSA share some (similar) features.

Consequences

As it could be expected, following those judgments, the overview of the DTTs concluded by Belgium regarding Belgian securities accounts held by a non-resident has been updated. Based on the updated overview, the DTT with Luxembourg would no longer prevent Belgium to levy the TOSA on the basis that the DTT with Luxembourg exhaustively lists the taxes to which it applies, which do not cover the TOSA; moreover, the TOSA is also not a tax which can be considered as an identical or substantially similar tax to the taxes mentioned on the exhaustive list in the DTT. This holds true not only with respect to the DTT with Luxembourg but also with respect to similar DTTs providing for an exhaustive list of in-scope taxes such as the DTT with Austria and Sweden.

Actions to be taken

Given the upcoming closing of the current reference period (i.e., 30 September 2022), intermediaries and non-resident taxpayers should revisit their TOSA (compliance) obligations/position against the updated overview of the DTTs concluded by Belgium relevant for Belgian securities accounts held by a non-resident

Please note that the domestic legislation with respect to the TOSA provides for a number of exclusions, which could be available to non-residents holding securities accounts with a Belgian intermediary. Please do not hesitate to contact us to assess your position.