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End of futures for retail investors in Belgium ?
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End of futures for retail investors in Belgium ?

  #11 (permalink)
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The issue that you are looking at here is that any type of short-term trading is generally (based on my experience) treated as income (if you make profits). Usually all the expenses related to that type of income are deductible from that type of income - if a retailer sells clothes below his cost-price he should be allowed to write that off against his income. If you are short-term trading, you are generally viewed the same - this means your profits (after deduction of losses and other trading-related expenses) are considered to be income and are taxed as such. This is really one of the underlying principles of taxation, i.e. you cannot tax someone on income while ignoring his costs - In a Western country, I think that any law that is contradictory to this could be taken to a higher court.

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  #12 (permalink)
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Fat Tails View Post
Speculation tax

A ‘speculation tax’ will be introduced on capital gains realized by private individuals on shares in listed companies sold within 6 months from their acquisition. The government specified that the capital losses on such shares will be deductible from the speculation tax base. The tax should apply at the rate of 25% on the net gains realized as from 2016.


Quoting Fat Tails since he actually provided the text I linked to earlier. I bolded two sections, but both of those bolded sections show that you are allowed to deduct your losses and thus will not be taxed on them.

In any case, if they apply the 25% to futures and other derivatives as well, it may actually be to your benefit. Don't know what tax rate was payable in Belgium before this on futures, but a 25% flat tax could cause a reduction in taxes payable if the income from futures / other derivatives was regarded as income previously.

In my case, being taxed like this would reduce the tax rate on short-term equity trades from 40% to 25%.

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  #13 (permalink)
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The new speculation tax will be applicable on profits generated within 6 months for transactions on stocks, warrants and options.
If you do 5 trades :
trade A : profit 10.000 : < 6 months
trade B : profit 20.000 : < 6 months
trade C : loss 20.000 : < 6 months
trade D : profit 10.000 : 11 months
trade E : loss 20.000 : 10 months

you would have made a net profit of : 0 €
however you would have to pay a speculation tax of : 9.999 € (33% op 30.000 (A+B))

but NOT on futures, convertible bonds, turbos and sprinters.

Will some of the option investors look at trading futures ?


Last edited by rleplae; October 16th, 2015 at 09:49 AM.
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  #14 (permalink)
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Google translated copy from the La Libre.be website:


Quoting 
BELGIAN politics, the federal government reached an agreement on the tax on stock market speculation. It is planned to tax up to 33% capital gains tax if the sale of the action comes less than six months after its acquisition.

All Belgian taxpayers (whether Belgian or foreign) are affected by this tax, with the exception of Belgian companies. Either natural persons only, since companies already have a special system of taxation of capital gains speculative.

We speak here only of listed companies shares traded. No way to extend the reach of the law to the tax on capital gains from unlisted companies. The mutual funds, options and bonds are excluded from the scope of the law.

Capital losses, they are not deductible.

Johan Van Overtveldt, Minister of Finance, will provide details shortly.

Read elsewhere on the website that it is a carbon-copy of the Luxembourg law, but whoever said that was high. You are allowed to offset losses in Luxembourg on your stock trades.

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  #15 (permalink)
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quickly auto translated :


Quoting 
The decision of the government to Michel also derivatives such as options subject to the speculation tax, means nothing less than the death knell for the private option trading on the Brussels stock exchange. "This is a heavy blow," said a Brussels options trade


The inner cabinet of the government-Michel arrived Friday morning along with the agenda the speculation tax. That was last week reached an agreement, but the last loose ends had to be tied together.
What was already clear is that individuals who sell shares within six months pay 33 percent on capital gains. Capital losses can not be charged.
The question that is made manifest or derivative products would come under the tax. There has now been decided that speculation tax will be applied to shares, options and warrants. But it will not apply to futures, convertible bonds, nor apparently turbochargers and sprinters, some derivatives with which the gain or loss from equity to be strengthened.
The government stop has everything defined as precisely as possible, so that no new derivatives can be 'invented', merely to get slicing underneath the speculation tax.

Deathblow
Options, financial instruments that have a share as underlying, are by definition short-term instruments with a maturity of one year. Often they are used to hedge the risk of an existing equity portfolio. That these instruments are also subject to speculation tax, means nothing less than the death knell for the private option trading in Brussels. That market had been difficult because the Belgian hard to persuade to trade options. After all, they require the necessary financial baggage. Recent tried Euronext Brussels with his current Spotlight options blowing in the private market or a new life. "The Belgian options market has thus almost no added value more retail investors, it sounds when one of the last Brussels market makers. These are professional traders who see to it that there still is a liquid market. "If we bijken options trader our options, but there is no doubt that this is a heavy blow for us."


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  #16 (permalink)
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rleplae View Post
The new speculation tax will be applicable on profits generated within 6 months for transactions on stocks, warrants and options.
If you do 5 trades :
trade A : profit 10.000 : < 6 months
trade B : profit 20.000 : < 6 months
trade C : loss 20.000 : < 6 months
trade D : profit 10.000 : 11 months
trade E : loss 20.000 : 10 months

you would have made a net profit of : 0 €
however you would have to pay a speculation tax of : 9.999 € (33% op 30.000 (A+B))

but NOT on futures, convertible bonds, turbos and sprinters.

Will some of the option investors look at trading futures ?

Out of curiosity, is there a higher court where this can be contested? The mere fact that you are not allowed to offset losses on a trading business could present a major headache to this law if it were to go to a higher court.

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  #17 (permalink)
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grausch View Post
Out of curiosity, is there a higher court where this can be contested? The mere fact that you are not allowed to offset losses on a trading business could present a major headache to this law if it were to go to a higher court.

This is only applicable on private persons, not on a company.

If you have a trading business, then that is another tax law that would be applicable (if you do it incorporated)
not sure if you do it as a business for your own...

No other country has a situation where you get taxed on only the profitable trades and not on the net result.

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  #18 (permalink)
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rleplae View Post
This is only applicable on private persons, not on a company.

If you have a trading business, then that is another tax law that would be applicable (if you do it incorporated)
not sure if you do it as a business for your own...

You could incorporate, but somehow you need to get the money back into your pocket. It is usually not my preferred option because it adds overheads and there are usually better loopholes to use, i.e. in my case hold stocks for 6 months or longer and use puts to lock in gains. At least I can offset the cost of my puts against short-term gains, but the Belgian situation looks to be different. You are not able to offset the cost of your puts against anything, so it will definitely impact portfolio performance.

In this case incorporating into a company might be a better option and then you need to find an optimum mix of salary and dividends in order to legally minimise the total tax burden. In this month, I will realise gains of 2.5% and losses of 1.4% (pre-open). Paying 40% tax on net gains will leave my portfolio ahead 0.6%. Don't think incorporating would be worth it in this case. Under the Belgian law, I will be ahead by 0.1%. However, I trade very infrequently - if I was trading at the same rate as 2 years ago, I would be paying a ton in taxes and my porfolio would be down a lot just due to the fact my losses are not deductible.


rleplae View Post
No other country has a situation where you get taxed on only the profitable trades and not on the net result.

Don't know EU legal structures at all, but I was curious if the EU Court could overturn such a law if there was a legal challenge to it.

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  #19 (permalink)
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Uncertainty continues...

Some derivatives could become in scope...
Not yet 100% sure that futures are out of scope

The law makers are still 'thinking' about it

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  #20 (permalink)
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It has been clarified that this tax is now also applicable on futures.

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