Tax on capital gains in Belgium: a good idea?


The recent election of a new government in Belgium has raised some heated debates about the extension of the taxation on capital gains. Indeed the country has no specific tax legislation regarding those gains and has therefore often been perceived as a “tax haven” for foreign investors. Recently the introduction of such a tax has thus been put back on the table by the CD&V. Nevertheless the debate surrounding capital gain taxation hides another problem deeply anchored into the Belgian tax regime: the overall high tax burden on labor income. For many politicians, such as Kris Peeters, a tax shift is urgent. Before going further in the subject we will in the first part of this article highlight Belgium’s specific tax regime.

Tax regime one capital gains in Belgium:

In Belgium, capital gains realized by individuals are not taxable if the latter are not engaged in business activities. However some exemptions exist. Taxes depend on the type of asset on which the capital gain is realized, but also the selling time-frame. For example, a tax amounting to 33% is levied on speculative transactions and for undeveloped property sold within five years of acquisition. Corporate capital gains are taxed at 8% .

The current system is complicated as the tax administration can decide to not tax a capital gain because it believes that the investor has realized the transaction, originator of the gain, under due diligence. This term is nonetheless excessively narrow. Additionally it can be quite burdensome for the administration to verify when exactly an investor has acquired and sold an asset.

How much money would a tax on capital gains make?

According to some computation realized by the NBB, such a tax would theoretically allow the collection of €8,7 billion if computed on the entire financial property at a 25% rate. If one focuses attention on capital gains realized on shares, the number would be €5,2 billion. This accounts for more than 1,4% of the Belgian GDP. Nevertheless it assumes that the realization of all theoretical capital gains, which seems not to be credible because of the numerous tax exemptions in the Belgian legislation. Also it should be noted that, when looking at past experiences by the American and British government, such taxes are highly volatile. So the real potential of a tax on capital gains remains narrow.