The tax authorities consider in their administrative comments that:
« The management of a private patrimony is in fact distinguished from the exercise of a lucrative occupation or speculation, both by the nature of the property – immovables, portfolio securities, movable objects (all property of which a private patrimony is normally composed) – and by the nature of the acts performed in relation to this property: these are the acts that a good father of the family performs, not only for the current management, but also for the fruition, the realization and the reinvestment of elements of a patrimony, that is to say, assets that he has acquired by inheritance, donation or by personal savings, or in reinvestment of alienated assets. ».
This position has also been confirmed on several occasions by the Advance Rulings Service (AD No. 2015.057 of March 10, 2015, AD No. 2015.250 of June 23, 2015).
Here again, the administrative commentary on the IRC sheds light:
Number 90/5.6: “Speculation” can be described as a transaction involving many risks and where there is a possibility of making a large profit or, where appropriate, a large loss, due to price increases or decreases occurring.
Clearly, the intention to buy for resale is a key factor retained by the administration:
Number 90/5.7 of the Income Tax Code Commentary:
1° The notion of “speculation” within the meaning of art. 67, 1°, CIR (currently art. 90, 1°, CIR 92) must be assessed according to the intention that each investor, administrator of a private patrimony, has to make his investments bear fruit; it can, consequently, be defined as an intentional purchase with a view to reselling with a profit within a more or less long period of time (Brussels, 28.4.1976 and Cass., 18.5.1977, Dochy Pierre, Bull. 572, p. 591) .
2° Speculation consists, among other things, in the purchase of goods at the risk of incurring a loss, but in the hope of making a profit following an increase in their market value (Cass., 15.5.1987, Succession Geldhof, Bull. 675, p. 1483).
3° Speculation within the meaning of art. 67, 1°, CIR (currently art. 90, 1°, CIR 92) consists in particular in the purchase of goods involving a risk of loss but carried out in the hope of making a profit by resale as a result of an increase in the market price, without it being necessary for this resale to take place within a short period of time after the purchase (Cass., 6.5.1988, D.C.D., Bull. 679, p. 115).
Each case is different and the SDA makes a decision after a thorough analysis of the specifics of the situations submitted to it. The elements that have tipped the capital gains realized in the context of the normal management of a private asset include: the absence of a loan taken out to acquire the crypto-currencies, the fact that the taxpayers do not engage in mining, the crypto-currencies were kept for a long time before being sold, the limited share of the crypto-currencies in the taxpayers’ movable assets…
The task of the administration, which has the burden of proof of the existence of taxable income, will be delicate when the taxpayer has only invested funds that he already had (inheritance, donation, reinvestment of assets forming part of his private patrimony) as opposed to resorting to borrowing to acquire the assets.
The “buy and hold” strategy adopted by the investors is also a decisive element allowing the SDA to conclude that the capital gains realized are not taxable.
The taxation of miscellaneous income is easier when the administration can show that at the time of acquisition the taxpayer did not really intend to keep the property, but to make a profit, in particular because a short period of time elapses between the acquisition and the resale of the property and the capital gain is considerable.
This means, on the other hand, that the profit made from the sale of assets is taxable when this profit is the result of a profit-making operation included in a series of operations targeted at the taxpayer’s professional activity.
Indeed, such transactions are not the result of a routine management as a good father, for example of a portfolio of shares.
This obligatory interdependence between the commercial activity and the financial result for the benefit of the private patrimony takes the management of the assets of a patrimony out of the category of a normal management of private patrimony.
The same applies when the administration notes the unusual nature and/or complexity of the acts performed
If it is considered that the transaction is not part of the normal management of private assets, the tax rate applicable to the capital gain is 33% according to article 171, 1°, a), of the CIR (plus the municipal surcharges).
Finally, let’s mention a very interesting case law which considers in a benevolent way the efforts and means of the taxpayer to manage his assets:
Ҥ4. complex set-up of companies by an artist Рsale of shares
An artist has transferred his copyright “on works produced and to be produced”, as well as the litigious claims he holds against SABAM, SACEM and EMI, to a commercial company, which he had set up for 4,000,000 BEF (100,000.00 €) in 1978. Over the years, numerous transfers, takeovers and buyouts between various companies followed one another. All the assets held through these companies are finally transformed into cash within one of them. In 1996, the artist sold the shares he held in this company for an amount of nearly 111,000,000 BEF (approximately 2,750,000.00 €).
The administration considers, in particular in view of the complexity of the operation carried out, that the capital gain realized by the artist at the time of the sale of his shares, of the order of 107,000,000 BEF (2,650,000.00 €), exceeds the limits of the management of private assets. The tax authorities tax this capital gain as miscellaneous income on the basis of article 90, 1° CIR 92, at a rate of 33%, increased by a tax increase of 50% for the intention to evade the tax.
The Court recalls that the assessment of the criteria defining the “normal” management of private assets is a question of fact. It considers that in this case, the complexity of the operations was necessitated by the fact that the taxpayer pursued other objectives than profit alone: to ensure the continuity of the exploitation of his works, to avoid any dispute between his heirs, to continue to ensure the management of his patrimony during his lifetime and to reduce the important debts he had contracted.
The use of professional advisors to achieve these goals, and to solve problems as large, diverse and complex as those he faced, is deemed by the Tribunal to “reflect a conscientious and prudent attitude” and not to be “different from that of a good family man in the same situation”. Accordingly, both the assessment and the increments are disgorged in full .”
Read: FreDerik FoGli–Taxation of capital gains and the limits of the management of private assets–Patrimoine et œuvres d’art – Questions choisies – 1re édition 2016 – Larcier – P. 322 and the case law cited: Civ . Brussels, 10 October 2008, Rôle n° 2004/7683/A, available on www .fiscalnet .be.
