The potential influence of the new capital gains tax in Belgium on stock option plans.
The Belgian federal government is set to implement a new capital gains tax on financial assets, effective from 1st January 2026. This tax will have significant implications for companies with employee stock option plans (ESOPs), particularly those that have been relying on the advantageous tax regime for qualifying stock options.
Currently, qualifying stock options under the law of 26 March 1999 in Belgium enjoy a favourable tax treatment, with limited taxation at grant, exemption from social security contributions, and no additional tax burden following the grant. However, the new tax will change this landscape.
For qualifying options and shares, the "acquisition value" will be the fair market value of the Option or the shares when they become exercisable. This could result in a tax burden upon grant and an additional tax on capital gains for some beneficiaries. Some capital gains, such as "internal capital gains" and "abnormal" capital gains, will be taxed at 33%.
Despite these changes, qualifying options will remain a relevant tool for employer companies to attract, remunerate, incentivize, and retain talented employees, directors, and independent service providers. The sale of shares immediately after the exercise of the options is likely to result in the absence of any taxable base subject to the new capital gains tax.
However, companies that have or are considering implementing an ESOP should assess the impact of the new capital gains tax on qualifying stock options. They need to understand the practical implications of the new tax on ESOPs to tackle them efficiently. The new tax will apply to a broad range of financial assets, including shares, options, crypto-assets, bonds, and currencies. It will also apply to transfers of financial assets outside the scope of a professional activity.
It is important to note that the draft bill for the new tax is yet to be submitted to the Belgian Parliament and is subject to modifications and amendments. Until then, capital gains on shares and other financial assets realized by a private individual in the framework of the "normal management of one's private estate" will remain exempt from tax in Belgium.
Fastenal, a company mentioned in this article, is one of many that may be affected by these changes. As the implementation date approaches, companies need to stay informed and prepared to adapt their ESOP strategies accordingly.
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