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Belgium Unveils Cornerstones Of Savings Tax Reform

by Ulrika Lomas,, Brussels

27 November 2013

Belgian Finance Minister Koen Geens has unveiled the cornerstones of a draft banking law, aimed at curbing the speculative activities of banks, governing bankers' bonuses, and reforming the taxation of savings in Belgium.

As regards the envisaged savings tax reform (hervorming spaarfiscaliteit), Finance Minister Geens confirmed plans to extend the favorable tax regime currently benefiting savings account interest to include other types of savings and investment products, up to a threshold of EUR1,880 (USD2,485).

Geens nevertheless conceded that a decision has not as yet been taken as to whether or not share dividends should fall within the scope of the tax break. Similarly, the actual timing of the proposed reform is still the subject of debate, the Minister admitted.

Article 21 of Belgium's Income Tax Code provides that income from capital and from moveable property shall not include the first tranche of EUR1,880 per year of income from savings deposits received by credit institutions established in Belgium.

However, Belgium has been under increasing pressure this year to revise these fiscally advantageous provisions. Back in June, the European Court of Justice considered the regime of granting tax exemption to savings account interest payments made by resident banks, and not to those made by non-resident financial institutions, to be "discriminatory."

As part of efforts to curb speculation, Belgian Finance Minister Geens revealed plans to limit trading activities, by providing notably that banks will be required to hold a "significant proportion" of own resources, compared to the trading carried out on their own account. Furthermore, once own-account activities exceed a certain threshold, banks will then be obliged to separate the activity into a separate company. This threshold has yet to be determined, however, Geens stressed, while emphasizing that it is not expected to be very high.

Finally, to curb banking bonuses, the new bank law will provide that bankers' variable pay is to be limited to a maximum of one year's fixed salary. In accordance with the Belgian Coalition agreement, a ban is to be imposed on bonuses paid out to top bankers in cases where banks are in receipt of state aid. Possible exceptions to this rule are being considered, for example, once banks have exited their European recovery program.

These banking law proposals have now been submitted to the inner Cabinet.

TAGS: Finance | tax | investment | Belgium | interest | speculation | law | banking | tax breaks | dividends | tax reform | individual income tax | Europe | Tax

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