Belgian Constitutional court’s decisions on the Single Banking Tax and the Tax on Securities Accounts

On 27 October 2022, the Belgian Constitutional court rendered its decision on the annual tax on credit institutions commonly referred to as the “Single Banking Tax” (see link herewith FR / NL ) and on the Tax on Securities Accounts (see link herewith NL/ FR).

Single Banking Tax

Several requests for a preliminary ruling were brought before the Constitutional Court by the Dutch and French-speaking chambers of the Tribunal of First Instance of Brussels to test the conformity of the Single Banking Tax with the general principle of non-retroactive application of law (in conjunction with the constitutional principle of non-discrimination). The Court ruled that the  provisions applicable to tax year 2016 are retroactive and cannot be justified by the realization of a general interest objective.  

The new Single Banking Tax was implemented by the Law of 3 August 2016 (published in the Belgian Official Gazette on 11 August 2016) and replaced the existing annual taxes on credit establishments provided by the Inheritance Tax Code and the Code for Miscellaneous Taxes and Rights, the specific corporate income tax deduction limitation applying to credit establishments and the Financial Stability Contribution. The tax of 0,13231% is due on the average amount reported under the section “debts towards clients” on line 229 of the “Schema A”.

The Law of 3 August 2016 provides that the tax is due on 1 January, and for the first time on 1 January 2016. Moreover, the transitional measures provide that, for the determination of the tax due for tax year 2016, the “debts towards clients” reported on line 229 of the “Schema A” (territorial version) as per 31 December 2015 constitutes the taxable basis. Furthermore, for tax year 2016, the tax should be paid no later than 15 November 2016 (instead of 1 July as from tax year 2017) and could be reduced by the annual taxes on credit establishments provided by the Inheritance Tax Code and the Code for Miscellaneous Taxes and Rights as well as the Financial Stability Contribution, already paid for 2016 by the credit establishments.

As the tax is due on 1 January 2016, the court considered that the taxable event should definitively be completed on that date at the very latest and not on the date the law entered into force. Hence the court concluded that the measures were retroactive and did not even examine whether the tax was a new tax or an amendment to an existing tax or whether it was a direct or indirect tax. Moreover, neither the Parliamentary Works nor the Memorandum of the Councils of the Ministers  justified in any way why the objectives of the Single Banking Tax would require a retroactive application of the law of 3 August 2016 for tax year 2016.

The Tribunal of First Instance of Brussels will now take into consideration this decision to render its judgments in the pending cases.

Other taxpayers may need to assess available options to recuperate the Single Banking Tax for tax year 2016.

Tax on Securities Accounts

Not less than seven appeals relying on multiple grounds for the partial or complete annulment of the Law of 17 February 2021 introducing a new Tax on Securities Accounts were brought before the Constitutional court. In its decision, the court however only annulled (i) the specific anti-abuse rules and (ii) the retroactive effect of the general anti-abuse rule so that the latter only applies as from the entry into force of the Law on 26 February 2021 instead of 30 November 2020 as provided by the Law.

The Tax on Securities Accounts is an annual tax of 0,15% on the holding of a securities account with an average value exceeding EUR 1 Million.

The law provided for two specific (irrefutable) anti-abuse rules and one general (refutable) anti-abuse rule: 

• The splitting of a securities account into several accounts held with the same intermediary with the goal of bringing the individual securities accounts below the EUR 1 Million threshold (first specific and irrefutable anti-abuse rule). 

• The conversion of taxable financial instruments held on a securities account into registered financial instruments not held in a securities account (second specific and irrefutable anti-abuse rule).

• The taxpayer operates (legal) actions with which it places himself in a situation contrary to the objectives of the law and is not able to demonstrate that there were other qualifying and sufficiently important reasons for its actions other than avoiding the tax (general refutable anti-abuse rule similar to the general anti-abuse rules existing in other codes).

To prevent any action from taxpayers to avoid the tax as from the announcement of its introduction, all these anti-abuse rules were applicable as from the 30 October 2020 corresponding to the date from which the decision to introduce the new tax was widely covered by the press and a notice in the Belgian Gazette was published.   

The Constitutional court annulled the two specific and irrefutable anti-abuse rules completely so that the latter cannot be invoked anymore by the tax authorities. This annulment should be seen as a relief for Belgian intermediaries, which were struggling with the practical implications of these irrefutable anti-abuse rules.

However, the refutable general anti-abuse rule remains valid but only as from 26 February 2021.

All other grounds were rejected by the Constitutional Court, which means that all other provisions of the Law introducing the Tax on Securities Accounts remain fully applicable.

Please do not hesitate to contact our dedicated team if you want to discuss in more detail about the consequences of these arrests.