In the shadow of corporate law, a striking leading role has been reserved for an apparently new player – the family office. But make no mistake: this is not a new legal medium, but the repackaging of a phenomenon that has existed for decades. In essence, a family office is nothing more or less than a holding company in which wealthy families structure their assets – consisting of participations, portfolio and investments. Usually, these assets are accrued as a result of a family business,  possibly following its sale. The profit is transferred to the holding company and reinvested. Today, this is increasingly done via private equity: families invest directly in companies, often without operational involvement, yet certainly with an economic impact.

The debate about the wealth tax has received a lot of attention in recent years. Too little, sometimes. But if you look further, you will notice that tax measures are currently being prepared that could gradually put a damper on this wealth tax. Not through an explicit capital tax, but through a technical intervention that will mainly affect family offices.

Until now, holding companies were exempt from corporate tax on the dividends they receive from their participations and the added value they realise on them. There was a logic behind this: ideally, in a chain of companies, the profit should be taxed only once, namely at the operating subsidiary’s level. Without this exemption, there would be economic overtaxation – a fiscal nightmare for every wealthy country.

This exemption applied to participations of 10 percent or more or participations with an acquisition value of 2.5 million euros, if the 10 percent limit was not reached. Whether the holding company was actively involved in the policy of the subsidiary, or merely acted as an investor, did not matter. But that is now changing. The government is raising the threshold from 2.5 to 4 million euros and is introducing an additional condition which only applies to companies categorised as ‘large’ for income tax purposes.

If there is no demonstrable operational involvement between the holding company and the company whose shares it holds, the exemption will be refused. The result? Dividends will be taxed again at 25 percent, on top of the 25 percent corporate tax already levied at the level of the operating company.

Anyone who thought that the wealth tax was an abstract debate about asset registers and flat-rate levies is mistaken. This measure targets family offices that invest their assets in, for example, stock exchange shares or in companies where they act solely as investors and lenders. This wealth tax strikes quietly but effectively at the heart of the investment assets of wealthy families. Those assets may certainly make a contribution.

However, let’s not forget that these holding companies are the engine of our economic ecosystem. They finance SMEs, invest in innovation and provide the capital injections that banks are often too reluctant to provide. Overtaxing their returns has a restraining effect and pushes investors towards less productive – and less Belgian – alternatives. The government would do well to keep its communication clear: the wealth tax is already here. It is technical and indirect, and will cost us much more than it brings in. It will dry up investment flows. And anyone who really believes in economic anchoring and family continuity understands that fiscal coherence is at least as important as fiscal justice.

The author is a founding partner at Tuerlinckx Tax Lawyers.

The text is a translation from the Dutch column.