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Belgium's Q&A Clarifies Savings Taxation Plans

by Ulrika Lomas, Tax-News.com, Brussels

25 December 2013


The Belgian Finance Ministry has published a series of questions and answers, clarifying Finance Minister Koen Geens's proposal to reform the taxation of savings in Belgium.

Taxpayers in Belgium are currently exempt from withholding tax for the first tranche of interest income earned from savings accounts, up to a maximum of EUR1,880 (USD2,572). However, this tax perk is only applicable to "classic" savings accounts, taxed at 15 percent, and not to other savings products.

In view of the fact that savers are not fully benefiting from the tax break at the moment, and given that traditional savings accounts do not serve the real economy, Finance Minister Geens has put forward the idea of extending the tax advantage to include other types of savings products, such as bonds and shares.

Income from these products is subject to withholding tax at a higher rate of 25 percent. The introduction of a tax-free allowance would be of significant benefit to these savers, representing a potential extra tax reduction, as well as benefiting the economy, the Ministry said.

According to the Finance Ministry, the National Bank and the International Monetary Fund (IMF) have both advocated that the scope of the tax shelter be expanded to include other products. Taxpayers would be able to opt to save in ways that would better finance the economy, on an equal tax footing, while at the same time taking advantage of greater tax relief, the Ministry explained.

Discussions on reform of savings taxation have been ongoing in Belgium for a number of years now, with the need to encourage savings widely recognized. Indeed, Finance Minister Geens has made clear that the plans should not be further delayed. On December 16, the IMF underscored the importance of making progress on the issue.

Finance Minister Geens aims to ensure that the existing tax benefit remains in place, although extending to other savings products from 2015 (applicable from the 2016 tax year). For existing savings accounts, the tax advantage is retained at source, while for new products, the tax break will be recovered via the submission of a tax return.

Concluding, the Finance Ministry cited a number of examples, highlighting the benefits for those opting to save using alternative types of savings products. The EUR1,880 tax-free allowance would provide traditional savers with tax relief of EUR282 (15 percent tax), rising to EUR470 for alternative savings products (25 percent rate of tax), representing an additional saving of EUR188.

TAGS: individuals | Finance | tax | Belgium | interest | tax rates | withholding tax | tax breaks | tax reform | individual income tax | Tax

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