Capital gains on shares realised by individuals: current (often favorable) tax regime remains unchanged

The recently introduced new corporate income tax on certain capital gains on shares (cf. our e-zine of 14 March 2013), does not change the current tax regime of capital gains on shares applying to individuals.

Capital gains on shares realised in the course of a professional activity are in principle taxed as ordinary business income at the normal (progressive) tax rates. It should however be noted that the tax administration in principle mainly applies this provision in case of the granting of shares as an (additional) form of remuneration or as a supplementary professional profit. In this respect, the tax authorities have only in a very few cases tried to tax an individual on capital gains on shares which he/she already had owned over a relatively long period, even if those shares represent the capital of a company in which the person is professionally active, for example as CEO or manager.

The general tax regime applying on capital gains realised in a private environment or context, is that such gains remain entirely exempted if they result from "normal operations of management of private capital" (Art. 90, 1° and 9°, first indent ITC).

The law does not define, nor does it provide for any criteria to determine what is meant by "normal operations". Case law seems to attach great importance to a number of criteria used to determine whether an operation falls within the scope of "normal operations": importance of the operation, repeated character (or not), financing method, etc.

There is however an exception to the rule that capital gains realised in the private sphere in principle benefit from a full tax exemption. This is the case for capital gains realised on shares representing a "substantial shareholding"- i.e. more than 25% of the share capital - in a Belgian company, and which shares are transferred to an acquirer outside the European Economic Area (Art. 90, 9°, second indent ITC). Such gains are taxed at 16.5%.

Capital gains falling outside the scope of "normal operations" are taxed as "speculative gains" at the separate rate of 33%.

An exception to this rule exists as well, in particular for so-called "exchange gains", realised through a merger, demerger or contribution of shares in a Belgian or an intra-European company and provided certain conditions are met (inter alia, the transaction does not have tax fraud or tax evasion as its main objective). Such capital gains are fully exempt, although only temporarily (as long as the taxpayer keeps the shares in his/her possession).