Court of Cassation ruled on the exclusion of a normal management of private assets for the miscellaneous tax

On 27 April 2017, the Belgian Court of Cassation (Hof van Cassatie/Cour de Cassation) rendered a decision (Case No. F.15.0120.F/1) on the scope of the miscellaneous tax (33%) on occasional or speculative profits not realized within the limits of the normal management of a private estate (article 90, 1° of the Belgian Income Tax Code 1992).

(a) Facts. The taxpayer realized a gain on shares, which the Belgium tax administration taxed as miscellaneous income at 33%.

Before the courts of first instance and appeal, the taxpayer apparently invoked the well-established arguments that there is no taxable basis because the sale price corresponds to the market value of the shares and that the Belgian tax administration did not prove that a sale under “normal” conditions would have been excluded or would have resulted in a lower price.

The Court of Brussels ruled in favour of the taxpayer, stating that for the application of article 90, 1° of the Belgian Income Tax Code 1992 it does not make a difference whether the benefits or profits are derived from a speculative transaction or an abnormal transaction. If the transactions are market conform, then the gain is not taxable.

(b) Issue. Given this decision, the Belgian tax administration requested the court of Cassation to examine whether the decision is inconformity with the law.

(c) Decision. The Court of Cassation overturned the decision of the Brussels’ court of appeal. The distinction between speculative transactions and abnormal transaction is relevant. The court seems to rule that, as far as speculative transactions are concerned, the market conformity of the transactions is not relevant for the notions of “normal” or “abnormal” and thus whether the exclusion of the normal management of private assets applies.

Note: In 2016, Belgium introduced a separate speculative tax of 33% on capital gains realized by individuals on quoted shares and certain derivatives, which it abolished in 2017.

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