Pursuant to the Act of 14 December 2005, all bearer shares, for both listed and unlisted companies, must be recorded in the issuer's shareholders' register or deposited in a securities account with a financial institution by 31 December 2013.
All bearer securities that have not been converted by this date will automatically be converted into dematerialised form or, if the company's articles of association do not allow for this possibility, into registered form.
The purpose of this newsflash is to draw your attention to the tax on the conversion of bearer securities, a key measure in the Belgian government's 2012 budget. Since 1st January 2012, a new 1% tax has been applicable to the conversion of bearer shares. Effective 1st January 2013, the tax is now 2%.
The conditions for application of the tax are only briefly described in the Code of Miscellaneous Duties and Taxes. Thus, many questions still arise concerning the practical implementation of the tax by issuers and financial institutions. Indeed, one year after adoption of the act, the tax administration's long-awaited circular has yet to be published.
In the absence of an administrative circular, the Dmat Task Force, a working and research group composed of representatives from major players in business and financial circles, published its Best Practices on 2 January 2013.
The Best Practices explain practical issues regarding the tax on the conversion of bearer securities, including:
- When is the tax due? The tax is due at the time of recordation of the bearer securities in a securities account or in the company's shareholders' register.
- Who is responsible for paying the tax? The tax must be paid by the professional intermediary (if the securities are booked on a securities account) or the issuer of the bearer securities (if recorded in a register).
- On what basis is the tax calculated and who is responsible for determining the value of the securities? In principle, the tax is calculated on the basis of the value of the securities. The valuation method varies depending on the type of securities (listed shares, debt securities, shares in investment funds, etc). The issuer is responsible for determining the value of the securities when the securities are brought to be recorded in the shareholders' register. If the securities are booked on a securities account, the person depositing the securities is responsible for determining their value.
The Best Practices also answer practical questions, such as who is responsible for filing the tax return, the tax office to which the tax should be paid, and the penalties for non-payment.
The Best Practices also cover specific cases, such as:
- In cases where dematerialized securities are not provided for in the company's articles of association, the tax will still be levied at the time of depositing the bearer shares with a professional intermediary or with the issuer, even if conversion occurs later.
- If it is not possible to determine the value of bearer securities at the time of deposit, the tax will be calculated and levied when the value of the securities can effectively be determined.
Ultimately, the Best Practices provide much-needed clarification and will help all players in the field implement the tax in practice.
This is also a good opportunity to remind the holders of bearer securities that if their securities are not deposited before 31 December 2013, they will automatically be converted into dematerialized form and sold by the issuer. As from 2015, the proceeds from the sale of bearer securities will be deposited with the Deposit and Consignment Fund. After 2015, the holders of bearer securities may contact the Deposit and Consignment Fund to recover the proceeds from the sale of their securities. However, it should be noted that an additional penalty of 10% of the proceeds will be applied for each additional year of delay.
In conclusion, act before 31 December 2013!
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.