Read this if you are planing to invest in neighbouring countries

Corporate taxation

Due to a recent ruling by the Court of Cassation, Luxembourgers who have a securities account in Belgium must henceforth also pay the Securities tax.

The Securities tax of 0.15 percent applies to Belgians who hold a securities account in Belgium or abroad with more than 1 million euros. Foreigners who hold such a securities account in Belgium are also subject to the Securities tax. Although there is one exception to the latter: if the double taxation treaty restricts Belgium’s power to levy, Belgium may not apply the Securities tax.

So far, fiscals assumed that the latter exception applied to Luxembourgers because the Securities tax could be considered a wealth tax. The double taxation treaty between Belgium and Luxembourg grants the power to levy taxes on capital exclusively to the state of residence. This means that only Luxembourg, and not Belgium, can apply a tax on the assets of Luxembourgers.

Two recent judgments of the Court of Cassation, concerning the annual tax on Luxembourg Collective Investment Undertakings, challenge that reasoning. ‘In its judgment of 25 March 2022, the French-speaking Chamber of the Court of Cassation ruled that the annual tax is not a wealth tax. The Dutch-speaking Chamber ruled on 21 April 2022 that the tax is an asset tax, but that it falls outside the double tax treaty between Luxembourg and Belgium because it is not included in the exhaustive list, ” says Denis-Emmanuel Philippe, lawyer at Bloom.

‘These statements are also relevant for the Securities tax, as the annual tax on collective investment undertakings is very similar to the Securities tax. They are both called ‘subscription fees’, ” says Philippe. “With that ruling, Luxembourgers come into the sights of the Securities tax.’

Inquiries to the Tax Administration show that the tax authorities come to the same point of view. ‘The Court of Cassation has ruled in both cases that the annual tax on collective investment undertakings does not fall within the scope of the double taxation treaty with Luxembourg. From this, according to the administration, it can be concluded that Luxembourg residents cannot rely on Article 22 (‘tax on capital’) of that treaty in order to be exempted from the annual tax on securities accounts. Residents of Luxembourg will therefore have to pay the tax if it is legally due, ” says Francis Adyns, the spokesman for the Federal Public Service Finance.

It is difficult to estimate exactly how many Luxembourgers are involved. According to Philippe, it is clear that the tax authorities can now also apply the Securities tax to Luxembourg companies with Belgian accounts. ‘For example, Luxembourg holding companies (the Soparfi or Société de Participations Financières) with a securities account in Belgium can come into view. Portfolios of securities held by Luxembourg insurance institutions with Belgian banks in the context of tak23 products may also be subject to the application of the tax, ” says Philippe.