No capital gains tax in Belgium? Is that really true?

Yes, under certain conditions. But that's not the only reason why some consider Belgium a legal "tax haven."

For a start-up hotspot with a booming open economy, advanced infrastructure, and countless envelope-pushing industries, Belgium doesn't seem like the kind of place Al Capone would go to avoid paying taxes.

And it isn't.

Tax havens are often associated with shady multi-millionaires looking to pull a fast one on the government by hiding assets and evading taxes.

The truth is, it's perfectly legal to benefit from Belgium's favorable tax regime and minimize your taxes with a legitimate, in-depth, and optimized tax strategy.

Ready to see what all the fuss is about?

Read on to find out the capital gains tax rate in Belgium and how you can benefit.

If You Didn't Know Already.

For tax purposes, a capital gain (or loss) means the positive (or negative) difference between:

  • The sale price minus disposal costs of the asset
  • and
  • The original acquisition or investment price after depreciation and write-off tax deductions

Here's a quick rundown of capital gains taxes (CGTs):

  • Capital gains tax is the tax levied on profits from selling or disposing of an asset (short or long term) with an increased value.
  • A deductible capital loss is also possible when a taxable asset is sold for a value lower than its original purchase price.
  • Generally speaking, capital gains tax is only applicable to real estate, stocks, investments, and movable assets.

So, when and how are capital gains taxed in Belgium?

Capital Gains Tax: Belgium's Approach

The Belgian tax regime differentiates between capital gains realized by a company and an individual in their personal or professional capacity.

The rules also vary for resident and non-resident individuals or companies.

Belgian residents (of any nationality) are taxed on their worldwide income, while non-residents are taxed only on income sourced in Belgium.

Belgium's Capital Gains Tax Exemption

Generally, capital gains realized by a private individual are not subject to tax, provided such gains:

Fall within the scope of "normal management" of personal assets

In broad terms, "normal management" means managing a private asset by taking actions a "prudent man" would typically carry out to maximize the asset's value.

Such assets generally mean movable goods, immovable property, and portfolio values acquired through personal savings, inheritance, as a gift, or from the reinvestment of alienated property.

Of course, the definition of "normal" vs. "abnormal" or speculative isn't always so cut-and-dry, so CGT may still apply in some cases.

Do not form part of a business activity

In Belgium, capital gains realized outside the scope of your professional activities don't count as "professional income."

Although no CGT applies, such capital gains qualify as "miscellaneous income," typically taxed at a flat rate of 16.5%.

If you realize capital gains with a speculative intention (i.e., not in the course of "normal" asset management), then a 33% flat tax rate still applies.

For tax purposes, it's crucial to distinguish between a "speculative intention" and investment in the course of "normal" asset management when realizing capital gains.

Still, it's not always easy and sometimes open to interpretation, especially by the tax authorities.

Consider factors like:

  • The nature of the asset
  • Holding period
  • Level of risk

For example, buying a property with the intention to rent it out is a long-term investment decision.

A prudent decision to later sell the property for a profit can be considered "normal management" of your estate, along with the resulting capital gain realized from the sale.

However, if you purchase multiple units with minimal down payments to resell them quickly for a profit, your intention would likely be regarded as "speculative."

In the finance world, "speculative trading" is considered the act of concluding a financial transaction with a significant risk of decreasing in value, offset by the possibility of a substantial gain.

A speculative investor is typically focused on generating a profit (or realizing a capital gain) based on market value fluctuations instead of long-term investing.

A speculative intention often holds the prospect of a substantial gain. Without such a prospect, the risk wouldn't be justified. As such, this kind of investment decision is seldom made during the normal, prudent, management of one's wealth.

Currency speculation is another example. If you buy foreign currency solely for the purpose of selling it at an appreciated rate, your intention would be considered "speculative."

In contrast, if you bought foreign currency to finance a foreign investment or pay for an import, that would likely be considered as actions pertaining to the normal management of your assets.

Capital Gains Tax on Immovable Property

Belgium's capital gains tax exemption applies to the sale of your private residence, as long as you've occupied it for 12 months, minimum.

Capital gains taxes on any other real estate (within the scope of the normal management of your private assets) are determined by the holding period of the property in question and whether it's land or a building:

  • Buildings sold within eight years of acquisition are subject to a 16.5% tax rate as well as local taxes. After that, the property becomes tax-free.
  • Unbuilt land sold within five years of acquisition is subject to a 33% flat tax rate plus local taxes. If a property is sold after five years, but within eight years, the rate is reduced to 16.5%. It also becomes tax-free after that.

Remember, costs incurred from buying or selling are deducted from the purchase price.

Belgium's tax rules also allow a 25% increase of the original sale price per a lump sum amount. An additional 5% on top of that for every year from acquisition until sale may also apply.

Real estate capital gains realized outside the scope of your normal management of private assets are subject to withholding tax of 30.28% of the gross sales price.

For non-residents, this constitutes the final tax and can't be declared in a non-resident tax return (natural persons).

Capital Gains Tax on Shares in Belgium: For Individuals

Capital gains derived from the sale of shares are tax-exempt as long as they're realized within the normal management of an individual's private estate.

However, the capital gains derived from a private individual's sales to a non-EEA or foreign company with substantial holdings in a Belgian company are still taxable.

Corporate Capital Gains Tax on Shares

In Belgium, corporate capital gains on shares (net) are also 100% tax-exempt as long as these conditions are met:

  • Subject-to-tax condition: The shares in question of which the dividends derive must fulfill the dividends-received deduction (DRD) conditions.
  • One-year holding period: The company must hold the shares for an uninterrupted period of at least one year.
  • Participation condition: An implied minimum participation threshold of at least 10% or an acquisition value of at least ?2.5 million in the share capital is required.

If any of the above conditions aren't fulfilled, corporate entities pay a 25% capital gains tax.

Capital Gains Tax on Shares for Non-Residents

.For non-residents in Belgium, capital gains are taxable on the sale of shares as proceeds or profits and must be declared as such in a non-resident tax return.

Suppose a non-resident's shares form part of business assets of a permanent establishment (PE) or fixed-base location in Belgium.

In that case, taxes are levied according to Belgium's agreement with the non-resident person's country of residence.

The capital gain is either taxable at a separate 16.5% rate or jointly, depending on when the shares are sold. That said, a capital gain is taxed jointly to the extent it matches up with a previous capital loss.

The bilateral agreement concluded between Belgium and a non-resident person's country of residence dictates which of the two countries have the right to tax capital gains.

It's typically the latter, but there are exceptions, so always consult the agreement.

For Belgian non-residents, foreign-sourced capital gains and investment income redeemed outside the country aren't subject to Belgium's capital gains tax rules.

Capital Gains Tax in Belgium: The Corporate Side

A company's capital gains realized on the disposal of its assets are subject to the standard corporate income tax rate (CIT) of 25%.

However, small and medium enterprises (SMEs) only pay 20% CGT on the first ?100,000 of taxable profit.

A deferred and spread tax regime may apply when certain conditions are met for capital gains realized:

  • From tangible fixed assets
  • Intangible assets

For example, CGT can be deferred if the entire sale proceeds amount is reinvested within a certain timeframe.

What About Capital Gains Tax on Stocks?

There's no capital gains tax on stocks in Belgium. Instead, all stock exchange transactions, including:

  • Sales and purchases of stocks and bonds
  • Capitalization shares from collective investment vehicles

are subject to a flat-rate tax of 0.12% to 1.32%, depending on the transaction type.

Gain an Edge With Belgium's Capital Gains Tax Rate

Whether you're a private individual, resident, non-resident, or a company, you may benefit from Belgium's capital gains tax.

Different rates apply to different circumstances, though. Make sure you understand all of the nuances to avoid mistakes and maximize the tax benefits.

With an optimized tax strategy, you can streamline and legally minimize your tax contributions. Feel free to learn more here.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.