Belgium introduced a tax incentive for pension saving in 1987. 18 years later, one and a half million tax payers are contributing to a pension savings account or insurance policy.
What you get with an insurance company is an individual life insurance. You save for a capital and the insurance company guarantees a return of between 2.5 and 3.25 percent. On top of that it normally pays a share of its profits as well if it has made a profit on its own investments.
When you invest in a pension savings fund, you invest in a diversified set of investments. Most funds invest about 70 percent in stock. If you invest for the long term and are not averse to some risk, a pension savings fund is certainly worthwhile. If not you should look at a pension savings insurance. Or you can look into one of the defensive savings funds (KBC or Dexia) that only invest a third in shares. (More …)
On 17 November 2005, the Belgian Prime Minister announced that Belgium would relax the three year holding condition for the “Risk Capital Deduction”.
Even before it enters into force in 2006, this deduction is already better known as the “Notional Interest Deduction” which better describes the method of exemption. Belgian companies will be entitled to a tax exemption calculated as a percentage of their equity (share capital plus retained earnings) . The percentage of the exemption is expected to be about 3.5 percent. At the same time the capital duty on contributions to a companyâ€™s share capital will be abolished.
One condition for the exemption though was that the company had to retain an amount equal to the amount of the exemption for a period of at least three years. That was an obstacle for many companies. When the condition is lifted, companies will be able to distribute the part of their profits that corresponds to this deduction.
The Risk Capital Deduction is already proving attractive, but the Prime Minister is already warning off taxpayers who are thinking of abusing the system.
The article can be found here.
Belgium is one of the few countries that still allow shares and bonds to be issued in the form of bearer securities. They helped create the myth of the Belgian dentist. For decades he has had a reputation internationally as the unsophisticated, reasonably well off investor with a predilection for bearer certificates.
As of 2008, Belgium will gradually do away with bearer securities over a period of five years. This legislation will have an effect for many companies. The Federation of Belgian Enterprises estimates that some 150,000 companies are concerned. They are public limited companies (société anonyme), the limited partnerships with shares (société en commandite par actions) or open-ended collective investment companies (société d'investissement à capital variable (SICAV). They will have to hold general shareholders' meetings to adopt their articles of association, and the financial sector will have to set up a working system of dematerialized securities. For the article click here
The Belgian tax authorities had never expressed an opinion on what the tax implications were of using a trust. Until now … In late 2004, Belgian tax authorities clarified their position on the gift tax and inheritance tax liability of discretionary trusts. The summary of that decision was published recently. (Read the Article)
The period 1955-2015 will go down in the history books as the golden age of solidarity between humans. Unfortunately, it is a period in the world history that will never be repeated.
Solidarity between workers is the basis of our social security system. Solidarity between those who can work and those who are too ill or too old to work. What you (and your employers) pay into the social security system today goes to the sick and the elderly now.
Social security is the opposite of occupational pension schemes for the private sector. The contributions you pay to your scheme are invested and capitalised. What you save now builds up the capital that will see you through your old age.
The money that the social security fund distributes today is the money it collects today. And where to get the money it will spend tomorrow is a problem for those that will be running the system then. When the first old age pension systems were set up, that was not really a problem. The chances of living until 65 were slim. And the chances of enjoying retirement benefits for a long period of time were even slimmer.
Things have changed. Only 40 percent of the population is working. Some 14 percent of the population between 20 and 59 is inactive and do not contribute to the social security system. And by 2015 one in five Belgians will be over 65. The conclusion is simple : fewer workers are paying the social security provisions for ever more retirees.
The pension question is (more or less)on the top of the political agenda in all European countries. In Belgium it has been kept on the back burner for far too long. We will have to work longer and early retirement will be discouraged. At the same time the government cannot afford to make the cost of employment more expensive for fear of losing jobs. The burden of financing the social security system will shift from employment income to other fiscal sources.
At the same time there will be bonuses for employees and self-employed who keep working until 65. If they do, they will be entitled to take up their occupational pensions and pay only 10 percent tax. And to encourage contributions to pension saving plans, the tax deduction will be raised.
However,when it announced that a tax would be levied on SICAVS, the government forgot that these were the preferential investment vehicle of small investors.
The solutions are not as bold as they could be ; the main problems are not tackled yet. Whether it is a question of "too little too late", only the future can show. In any event the trend is set.
from The Guide for Retirement Planning that came with your latest issue of the Bulletin. (Download …)