Belgian stock exchange tax on transactions abroad compatible with EU freedoms
The Court of Justice of the European Union (hereafter: CJEU) has ruled in its judgment of 30 January 2020 (C-725/18) that the recent expansion of Belgian stock exchange tax to transactions through a foreign intermediary is compatible with European law, i.e. freedom of capital movement and freedom of services pursuant to the Treaty on the Functioning of the European Union (TFEU) as well as their equivalents under the European Economic Area Agreement (EEA). 
As of 1 January 2017, the scope of Belgian stock exchange tax was broadened to cover also transactions that are carried out (directly or indirectly) on behalf of Belgian tax residents via a foreign intermediary or (e.g. internet) trading platform. Shortly after, several actions for annulment were brought before the Belgian Constitutional Court against this scope extension, arguing with Belgian constitutional law and European law. Specifically, it was pointed out that it can be more expensive and administratively burdensome for a Belgian tax resident to invest via a foreign intermediary. Unlike transactions carried out via an intermediary established in Belgium, for transactions via a foreign intermediary Belgian investors are left to deal with the complex declaration and payment obligations under threat of substantial fines – unless the foreign intermediary takes care of it (to which there is no obligation). This situation raised concerns that, among other things, an unlawful restriction to the freedom of services (Art. 56 TFEU) and the freedom of capital movements (Art. 63 TFEU) exists. Before issuing its own judgment, the Belgian Constitutional Court submitted preliminary questions with the CJEU.
Decision of the CJEU
To start with, the CJEU now held that analysis of the freedom of services (Article 56 TFEU) took priority over the freedom of capital movements (Art. 63 TFEU), and that the Belgian tax rules lead to a difference in treatment, which may indeed discourage Belgian residents from using the services of a foreign intermediary, as it makes it more difficult for non-Belgian service providers to offer their services to Belgian residents.
However, the CJEU considered this restriction on the free movement of services as justified by the overriding aims of the Belgian rules, namely ensuring effective tax collection and fiscal supervision and preventing the avoidance of stock exchange tax. In the justification analysis, the court pointed out that proportionality is observed by the Belgian rules, referring inter alia to the possibility of foreign intermediaries to appoint a Belgian fiscal representative or mandatary established in Belgium, who (like a Belgian intermediary) can fulfill all the stock exchange tax formalities, meaning that Belgian investors do not have to do report nor pay the tax themselves. The CJEU does not see any infringement of Article 56 TFEU, as that the Belgian rules offer investors and said foreign intermediaries facilities, both with regard to the reporting obligations linked to this tax and its payment, which limit this restriction to what is necessary to achieve the legitimate objectives pursued by that regulation. According to the CJEU, the Belgian tax rules are thus compatible with the freedom of services and the free movement of capital under European law.
The CJEU ruling is in line with our expectations. After all, the extension of the scope was precisely intended to create a level playing field for Belgian residents whether investing via a (securities account with a) Belgian intermediary (e.g. a bank) or via a foreign intermediary. However, this is not the end of the story, yet. The Belgian Constitutional Court still has to rule on the case and to assess, among other things, whether the regulation is also compatible with the Belgian constitutional principle of equality.