Belgium: Capital gains on investment fund share dispositions, withholding tax

Belgium: Capital gains, withholding tax

Guidance from the tax administration updates the prior treatment concerning the withholding tax on interest and capital gains realized with respect to dispositions of shares of an investment fund when such shares were acquired either before 1 July 2005 or before 1 July 2008.

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Addendum in 2016

An addendum to a 2014 circular letter (AAFisc Nr. 33/2014 (20 August 2014)) was published in February 2016 regarding the withholding tax on interest and capital gains pursuant to article 19bis of the income tax law following the sale, redemption or liquidation of investment fund shares, when the shares were acquired before 1 July 2005 or 1 July 2008. 

The 2016 addendum provides that if the date of the acquisition and the acquisition value of the transferred fund shares can be substantiated by the transferee (recipient) of the shares, intermediary financial institutions are to consider the actual amount of capital gains received in order to determine the amount of withholding tax. In other words, the intermediary financial institutions must determine the difference between the net inventory value on the date of disposition and the acquisition value on the date when the fund shares were acquired.

Revised withholding tax rules

Intermediary financial institutions are no longer allowed to calculate the amount of capital gains on the basis of the net inventory value of the fund shares on the date of default—being either 1 July 2005 or 1 July 2008. This prior treatment was found to result in a greater amount of capital gains for withholding tax purposes, when compared to the amount of capital gains actual received. According to the 2014 circular letter, in such instances, a transferee could file a “protest letter” to claim a refund of the excessive amount of withholding tax. 

With the 2016 addendum, it is the responsibility of financial intermediary institutions to determine the withholding tax by taking into account the actual amount of capital gains received. If the financial intermediary institutions withhold an excessive amount of withholding tax, these institutions can—as well—file a protest letter for refund of the excess withholding tax.

 

Read a March 2016 report prepared by the KPMG member firm in Belgium: Annex to the circular letter of 20 August 2014 published regarding TIS taxation of shares of investment funds acquired before 1 July 2005 or before 1 July 2008 

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