Key ministers in the federal government reached agreement on a new capital gains tax early this morning. After more than 12 hours of negotiations a deal was struck.
What exactly is a capital gains tax?
When you invest your money in shares or other securities, you do so with the intention of making a certain profit or capital gain over time. A capital gains tax literally does what the word says: levies a tax on a piece of that profit.
The new capital gains tax, called 'solidarity contribution' in the government coalition agreement, will be 10 per cent.
It only targets future capital gains, i.e. not past gains. Those capital gains must also be ‘realised’. In human language: as long as you do not sell, you do not pay this tax.
The tax is levied on ‘financial assets, including crypto investments’. 'Financial assets' usually means stocks, bonds, trackers, mutual funds and savings and investment insurance contracts.
An exit tax, requiring taxpayers who emigrate to report on their financial assets and capital gains for another two years is being introduced. In this way, the government hopes to avoid taxpayers moving abroad at the last minute to avoid paying tax on certain capital gains.
If you make a loss (or “capital loss”) on certain investments, you are allowed to deduct that loss within a certain year from the gains that other stocks have made. You cannot carry forward that capital loss to subsequent years.
Capital gains tax does not apply to gains up to 10,000 euros per person per year. By the way, that exemption will be indexed annually, so will become higher over time.
For investors who do not pass the 10,000-euro threshold for capital gains tax, the exemption from capital gains tax will increase by 1,000 euros a year for five years, i.e. up to a maximum of 15,000 euros (irrespective of indexation in the coming years).
Government party CD&V calculates that as a result, if you include an annual indexation of 2 per cent, the full exemption could reach almost 20,000 euros by 2044.
Tax-deductible pension savings and employee group insurance gains will not be affected by the capital gains tax. The existing tax of 8 per cent on the amount you accumulated through pension savings, collected at age 60, will remain.
The so-called ‘Reynders tax’, the tax of 30 per cent on all income and capital gains from the sale of investment funds that include a large share of bonds, will continue to exist. However, that tax will only be levied on dividends, while the capital gains tax will tax the profit.
For people who own more than 20 per cent of a company's shares, there is an exemption of 1 million euros. Capital gains between 1 and 2.5 million euros are taxed at 1.25 per cent, those between 2.5 and 5 million euros at 2.5 per cent and those between 5 and 10 million euros at 5 per cent. Only from a profit of 10 million euros or more will you pay the ‘full’ capital gains tax of 10 per cent.