Viewing posts categorised under: Equities

HOW TO INVEST – Shares, Equities and Branch 23

By Spectrum IFA
This article is published on: 7th April 2021

07.04.21

This is the third and final in a series of articles where I have talked about holding stock options, vesting those options and holding them in a tax efficient manner. In this article, I will discuss the importance of de-risking and diversifying your portfolio, and finally how useful a Branch 23 solution is in mitigating against US Estate Tax on shares if you hold them.

WHY WOULD I WANT TO DE-RISK MY HOLDING?
I wrote in more detail about the effect of risk on your portfolio here. However, to explain briefly, it is considered risky, in investment terms, if you hold too much of one particular share or asset or if it makes up 100% of your investment strategy. Some people are perfectly comfortable with being exposed to this level of risk. Other people are less so. If you have 180,000€ in one particular share or equity, and that was all you had, then it might be a good idea to de-risk yourself and reduce the possibility of losing some, if not all of your investment due to market volatility.

WHAT IS THE ALTERNATIVE?
There are some alternatives available and they all centre on diversifying your holdings. If you have shares in a company, whether it be a start-up or a multinational organisation, you could benefit from diversification to insure against significant loss.

At Spectrum, we favour the multi-asset approach to investing for our clients. These investment vehicles allow our clients access to multiple funds, asset classes and locations through a single fund that is managed and monitored by dedicated specialists and experts on the investor’s behalf. This type of fund can increase the potential for diversification and reduce the level of risk.

CAN I BE LIABLE TO US ESTATE TAX HOLDING SHARES?
Yes, you can. If you are a non-US person (neither a US citizen, US green card holder, or a long-term US resident) with US situs assets (including, but not limited to, real

property located in the US, shares of US publicly traded companies, shares of US private companies) you will be liable to US estate tax where the value of said assets is greater than $60,000. The tax rate ranges from 18% to 40%.

A Branch 23 solution could reduce or eliminate any US estate tax for non-US persons which would ordinarily be required upon your death if your US situs assets are worth more than $60,000. Whilst within the solution, there are generally no US income tax or capital gains tax implications for a non-US person. This means that you can hold the shares (should you wish to) for as long as you want, safe in the knowledge that when you pass away, your beneficiaries will not have to pay potentially significant tax liabilities.

Please note that US tax can be extremely complicated and it is advised that you also speak to a US tax specialist to ensure that you are in line with US tax rules.

Contact me to discuss this in more detail at emeka.ajogbe@spectrum-ifa.com or +32 494 90 71 72.

HOW TO INVEST – Stocks – They Don’t Have to be Taxing

By Spectrum IFA
This article is published on: 24th March 2021

24.03.21

In my previous article, I described what stock options are and how they can be utilised by both companies and individuals to create wealth. Now, I will look at some of the tax liabilities that you may be subject to and how you may be able to mitigate them when you decide to take up your option to purchase the stock. I will be focussing on the Belgian market, but we are also able to help if you are based in other countries, so do not hesitate to contact us with a specific enquiry.

HOW DO I ENSURE I AM NOT TAXED ON MY STOCK OPTIONS?
Short answer? You cannot. If the option is quoted on a stock exchange, the amount to be taxed is calculated on the basis of its closing price on the day immediately prior to the offer date. If the option is not quoted, then the amount to be taxed is 18% of the underlying share multiplied by the number of option rights held. As with all tax due in Belgium, these need to be reported to the tax authority.

WHAT WILL I BE TAXED AFTER I DECIDE TO TAKE UP MY OPTION?
At the time of writing, the Belgian rate of tax on stocks, shares and equities is 30% on the dividend income received; this tax is known as Withholding Tax. Companies that are established in Belgium are obligated to withhold this tax from investment income received.

If the dividends received into a Belgian bank account are coming from a foreign company, then the bank is obligated to apply the withholding tax. In addition, a withholding tax set at the rate set by the country the dividends are coming from must also be applied. This can be reduced if Belgium has a double taxation treaty with said country.

Let’s look at a quick example. A popular country of origin for stocks, shares or equities is the US. The US can charge a withholding tax of 30% on top of the Belgian withholding tax. Belgium retains a double taxation treaty with the US. This subsequently reduces the US withholding tax by up to half, whilst the Belgian withholding tax remains. On top of this, on January 1, 2018 the Belgian government introduced a withholding tax exemption threshold of up to €800 on dividends to encourage people to invest.

HOW DO I HOLD MY VESTED STOCK IN A TAX EFFICIENT MANNER?
I wrote an article on Branch 23, an investment bond solution available in Belgium for investors who wish to invest in a tax compliant way and also plan for inheritance and estate tax planning. Your stock, shares and equities can be held within this solution and you would not be liable to withholding tax on your investments for as long as you hold the bond. You will pay 2% Insurance Premium Tax when you initially invest and that covers your taxation liability (including Withholding Tax and Social Insurance Contribution that can add up to 59.58%) for however long you hold the bond.

To understand more how I can help you manage your stocks and shares/equities that you have accumulated in a more tax efficient manner, please contact me at emeka.ajogbe@spectrum-ifa.com or +32 494 90 71 72.