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Legal and compliance analysis of the E-wallet currency in

Belgium

Authors: Hugo Wanner Organisation: Fairfin/Limburg.net

Introduction This guidance document describes the impact of relevant laws and regulations in Belgium on the E-portemonnee (E-wallet) community currency. Legal and compliance issues with regard to the relevant in-country laws and regulations are analyzed so that future currency projects can benefit from this knowledge and avoid risks at implementation.

This document is part of a wider package of legal and compliance documents that can be found on the Community Currency Knowledge Gateway at http://community-currency.info/en/find/cc-toolkits/legal-and-compliance/

 

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Disclaimer

This document only offers an overview of the legal landscape that this complementary currency operates within and nothing contained in this document should be considered legal advice.

This report has been compiled and verified by Qoin as part of the Community Currencies in Action (CCIA) collaboration project. CCIA is a transnational partnership project designing, developing and implementing community currencies across northwest Europe. The partnership provides a rigorously tested package of support structures to facilitate the development of currency initiatives across NWE, promoting them as credible policy vehicles. Running from May 2012 to June 2015, CCIA is part-funded through the INTERREG IVB North West Europe Programme, a financial instrument of the European Union’s Cohesion Policy ‒ Investing in Opportunities.

Find out more about CCIA on our website: www.communitycurrenciesinaction.eu

 

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Introduction This guidance document describes the impact of relevant laws and regulations in Belgium on the E-portemonnee (E-wallet) community currency. Legal and compliance issues with regard to the relevant in-country laws and regulations are analyzed so that future currency projects can benefit from this knowledge and avoid risks at implementation. Each chapter is divided in main and sub legal topics. An explanation is given for each main and sub topic. For each legal topic a description is given about how its relevant to the E-wallet currency project. Legal Topics Preliminary note on Limburg.net: The e-wallet developed in 2005 from an experiment in One municipality (Overpelt) focusing on only one specific action, namely the promotion of reusable bottles. At first the inhabitants could collect points when showing ‘good behaviour’, that is deliver proof of the use of glass bottels (Supermarket cash receipts etc.) These points could at that time be exchanged at the municipal service for energy saving light bulbs. So at this time the system had no perspective of being a currency. Afterward the e-wallet emerged pace by pace: from a paper card to a digital card; This card used a similar format as the eID that was introduced a few years later by the federal government. The ‘actions’ were broadened with other actions for the environment, and new possibilities to get some ecologically friendly items at de municipal counter. And the point-system was rebranded ‘e-wallet’. In fact the system remained the same but of course the name made clear reference of the concept ‘money’. However, until recent no specific questions arose from the point of view of legislation. With the start of the CCIA project the legal aspects were introduced, to inform Limburg.net about the possible risks and to investigate whether specific action should be taken to cover these risks. The basis to do this preliminary research was the experience of other CC initiatives in Belgium: the LETS movement, the local currency in Ghent (Toreke). 1. Taxation Tax authorities and regulators can consider community currencies to be a means by which individuals and companies can more easily escape the tax implications of the transactions that they engage in. It is therefore vital that any community currency seeks to mitigate these legitimate concerns by addressing the impact on VAT, Corporation tax and Income tax of individuals and companies using the scheme. For example, in the Netherlands a ruling has been obtained from the tax authorities that currency earned through social currency schemes are not taxed up to the equivalent of a maximum annual remuneration of volunteers up to €1500. However the situation varies in the different NWE countries and for some similar policies are yet to be. A further challenge is designing a calculation model which allows for computing equivalent legal tenders for currencies that are circulated on a completely different basis such as ‘hours’. To maintain the integrity of the community currency programs CCIA will do an in-depth risk analysis to understand how to mitigate the possibility of users avoiding paying all the tax due to the authorities. An initial assessment is, that social currencies (e.g. Timebanking, loyalty schemes etc.), due to their relatively limited scale in terms of individual balances and individual earnings, and spending opportunities, in general have a low risk of tax avoidance by users. For currencies in the professional/b2b mutual credit and legal backed tender, where the potential risks are higher, measures have already been implemented to verify the identity of participants when they enter the scheme. 1.1 Value Added Tax (VAT)

 

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Limburg.net has a mixed statute vis a vis the VAT. For some activities they are subject of the VAT, and for others they are not. The activity of the e-wallet is not creating extra value. Items bought in € will be exchanged for points with the customers, the points being earned through specific activities (e.g. sticker on the letter box) with no € value. Nor is Limburg.net ‘selling’ these these items to its customers. The items leaving the company are no part of the turnover. VAT i s only applicable if the aim of the transaction is to make a profit. Reference: BTW wetboek. Wet van 03.07.1969 Wetboek van de BTW (B.S. 01.08.2012) Artikels 4 – 8 bis All items bought for e-portemonnee are a cost for Limburg.net. VAT cannot be recovered. These cost resort under the chapter of ‘informing and sensibilizing the general public’ and no sales are connected to it. 1.2 Corporation tax Until fiscal year 2014 Limburg.net was not subject to corporation tax. From 2015 onward tax regulations are being reformed by the government. Most inter municipal organisations are also subject to corporation tax. For Limburg.net this is now being studied, and a ruling is asked to remain under the actual situation (taxation for moral persons – rechtspersonenbelasting) since profit is not a goal. For professionals or corporations accepting the points (mostly in the form of vouchers) these ‘sales’ are part of the turnover and must be registered as such. The general answer is that any commercial organization will be subject to income tax or corporation tax (vennootschapsbelasting), their legal form (company, self employed or NGO does not matter). The type of activity, and the currency used does not matter. Currencies that are convertible will be taken into account in accordance with their exchange rate. Specific rules and procedures to be followed. For complementary currencies that are not convertible we have no cases or examples that show how tax authorities will handle this. Before starting taxable activities in non convertible currencies it is advised to inform with the tax authorities. The possibility also exists to come to an agreement in advance or ruling with the tax authorities, that normally is good for 5 years. Info RFA. Links to original law texts and contact details regulatory authorities relevant for this sub topic: [ Wetboek van inkomstenbelasting (WIB) http://ccff02.minfin.fgov.be/KMWeb/changeLanguage.do?language=en_UK, Vennootschapsbelasting 1.3 Income tax Limburg.net not being a physical person, income tax does not apply. See above corporate tax. One can put forward this questions for the persons earning the points. For the e-wallet, the answer is that the activities of inhabitants within this framework is not considered a professional activity, nor an activity to realize profitsIt will be seen as the normal conduct of a person in administering his or her possessions, or as a voluntary activity.

 

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In the legislation (federal) to regulate voluntary activities, the possibility exists that a physical persons receives a compensation for costs incurred in the form of a lump sum. This sum is limited to max 30 € per day and 1300 € per fiscal year. Rewards in e-portemonnee are far below these amounts. Links to original law texts and contact details regulatory authorities relevant for this sub topic: Advice by some lawyers about this subject to the HUB, a service center in Brussels and linked to the HUB in UK. Unfortunately they stopped their activities and closed down. Text by Lets Vlaanderen on voluntary work with reference to legal topics. 2. Insurance Under this topic there are 2 sub-topics that will be investigated. Firstly the impact on volunteers engaging in work on behalf of the currency operator and related need for insurance. Secondly how the governance board will be indemnified against major risks. In some cities/municipalities citizens engaging in volunteer work are covered by a municipal (accident/disability) insurance policy. There are, however, many municipalities where this not the case. The CCIA partnership assessed this for all programs we develop, and, where necessary, negotiate favorable terms with insurance companies to provide coverage in the event no city-wide volunteer insurance exists. Companies, charities, foundations and other entities (either profit or non-profit) who seek to introduce a currency scheme will need to consider the issue of potential liability of governance board members in the case of default, bankruptcy or other eventualities. In some countries (e.g. NL), insurance products for this type of liability are available (as long as the liability is not a result of e.g. illicit activities). For insurance companies the risks involved in running a community currency scheme may not be straightforward to assess, which means a negotiation can be required to agree upon the appropriate insurance policy. 2.1 Volunteer insurance (accident/disability) Most activities in the e-wallet are behavior in the private sphere or a specific organized sphere. If one puts a sticker ‘no publicity’ on his/her letter box and falls, breaks a thumb, this is an accident in the private sphere: points will be earned, no insurance will interfere, unless the person has a private insurance. (Called ‘familiale verzekering’) If one undertakes a train ride, the used ticket will be exchangeable for points. Anything that happens or mishappens during the ride is covered by the transport company. If one joins or helps in an organized group activity (cleaning streets, information session on waste reduction) then the organization itself will be responsible for the insurance: Limburg.net or the NGO or the municipality. This will be covered by two common insurance products: insurance volunteers work (different formulas and different risks covered) and insurance for civil liability. (burgerlijke aansprakelijkheid). A third policy applies and is compulsory for any organization that is accessible for the general public: objective liability. (objectieve aansprakelijkheid), In the new law any owner of a place where a public activity can or will take place is subject to this extra insurance. (also referred to as Switel, the name of the hotel). So if no other person can be found liable for dammage, the last resort is the person who owns or rents the place.

 

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Links to original law texts and contact details regulatory authorities relevant for this sub topic: The federal law on volunteers work regulates the compulsory insurance for civil liability. (Wet 3 July 2005) http://www.belgium.be/nl/publicaties/publ_wet_vrijwilligerswerk.jsp?referer=tcm:117-16003-64 http://www.ejustice.just.fgov.be/cgi_loi/change_lg.pl?language=nl&la=N&table_name=wet&cn=2005070359 2.2 Liability of board Most larger organizations nowadays get such an insurance scheme for their board. However this is not compulsory. And these insurance policies or their proliferation in Belgium is a rather new phenomenon. Limburg.net has such an insurance policy with the same company (Ethias) for its board members. Links to original law texts and contact details regulatory authorities relevant for this sub topic: Wet op de vereniging zonder winstoogmerk (1921) en aansprakelijkheid van de bestuurders. 3. Labor law One of the main target groups for social currencies are vulnerable an excluded strata of society, such as people with disabilities, the unemployed and people in deprived communities generally. Many of the people that can be (re)engaged and could participate in a social currency scheme are recipients of government/municipal welfare or (unemployment) benefits. For them to safely participate it is important that a dialogue is started and rulings are obtained on the potential impact of participation in social currency schemes from the relevant national and local authorities in the countries in which we implement them. 3.1 Social security The reasoning to find out whether Social security is similar as above with the tax regulations. However, the law texts are indeed different and some distinctions will occur. The main question has to do with the ‘professional’ activity. If the work is considered to be a voluntary activity, no social security applies. If it is professional, then one of the two types of social insurance/security is necessary: the labors’ system or the self employed. The value or counter value in € paid to a voluntary worker may not exceed certain limits: +/- 30 € per day, max +/- 1.300 € per annum, these amounts are adapted to the index of consumer prices. This is independent of the currency type. Limburg.net undertakes only activities that can be considered volunteers work. In the near future (e.g. when the province of Limburg joins the system) extra attention will be paid to this question. The social security for laborours applies for any person working with a labour contract. The social security fors elf employed applies for any person carrying out a professional activity without having a labour contrat or statute for a public body. 3.2 Unemployment and disability benefits The general rule is that the unemployed, or sick or disabled persons need the approval of their agency or from the physician to take part in this voluntary work. For Limburg.net this

 

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could be the case with the action of cleaning the streets, however this is organized outside the normal working hours. This action is not yet part of the e-portemonnee scheme. Any voluntary action by Limburg.net in the e-wallet scheme is organized together with a municipality or a NGO, or a combination. The volunteer living on benefit as unemployed person has to report to the authorities (RVA). If no reaction within 10 days, the volunteer can continue the activities. The municipality has a document for the volunteer that mentions the need to comply with these regulations. 3.3 Employment Terms Links to original law texts and contact details regulatory authorities relevant for this sub topic: The Belgian law does not allow wages being paid otherwise than in legal tender. Exceptions are strictly regulated (e.g. rent or energy as part of wages). People employed abroad can be paid out their wage in foreign currency if they have a document in writing that states their request for such payment. The payment of wages in complementary currency is not being mentioned in the law and is thus not allowed. [Wet van 12 april 1965 betreffende de bescherming van het loon der werknemers (B.S. van 30 april 1965) ] 4. Privacy and safety Data protection is an important topic for most network services. Within CCIA project partners are responsible for formulating and implementing privacy policies to protect sensitive user data. The safety protection of individuals is embedded in several legal texts. We show how these apply to the selected currency types. For example do we deal with registered offenders who want participate in currency programs? In addition there are specific regulations for working with the elderly and children. 4.1 Safety/Protection of (vulnerable) CC users Access to the central database called ‘Rijksregister’ is strictly regulated and only accessible for public bodies and specific categories like notaries and pharmacies. Law: 8 AUGUSTUS 1983. - Wet tot regeling van een Rijksregister van de natuurlijke personen. 4.2 Data storage and protection Limburg.net complies with the privacy regulations. This was also a precondition to get access to the national register a specific procedure for public bodies. Regulator: http://www.ibz.rrn.fgov.be/nl/rijksregister/toegang-tot-het-rijksregister/ Any organization (or person) who collects and saves data about individuals needs to register these activities with a centralized administration. (privacy commissie). The use is restricted and regulated, any person can demand to change or remove his or her data from the database. Links to original law texts and contact details regulatory authorities relevant for this sub topic:

 

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http://www.privacycommission.be/ 5. Financial service regulations Any organization that prints physical ‘money’, or vouchers, makes electronic monetary units available, that are convertible into legal tender or is engaged in the provision of payment services will need to review how the relevant financial services regulations apply to their currencies and which enforcement bodies (Central Banks, National and international Finance institutions) need to be engaged with for compliance or exemptions. All countries have very strict laws restricting who can print money and currency operators will need to ensure that they do not contravene these rules. The provision of the electronic money directive and payment services directive only apply to those currencies that are not able to show that they operate in limited network. But more general rules and laws might apply, for example for the issuance of paper notes. 5.1 Issuing physical currency The E-wallet currency doesn't use physical notes. For currency schemes using paper notes, they will not be considered a currency by the supervisory authorities (FSMA and Nationale Bank van België NBB) if they operate in a restricted sphere or locality: Lets schemes, Torekes system in Ghent etc. The legislation referred to when consumers are involved is about the emission of coupons, vouchers, reduction on face price (consumer protection). Links to original law texts and contact details regulatory authorities relevant for this sub topic: Wet van 23 december 1988 monetair statuut Wet van 10 december 2001 betreffende de definitieve omschakeling op de euro voegt een nieuw artikel 178bis toe aan het strafwetboek (penal law) Wet van 11 juni 1889 betreffende de drukwerken en formulieren die het voorkomen hebben van bankbiljetten of andere papieren waarden 5.2 Digital currency non-convertible to national currency Limburg.net does not define itself as a digital currency. Only recently the FSMA sent out a warning about Bitcoin, the first such warning to our knowledge. The FSMA and NBB warn for the use of what they call ‘virtual money’ like bitcoin and Litecoin. They state that these currencies are nor money nor electronic money. Contrary to electronic money the exchange rate for virtual money is very volatile, risk is high and no legal guarantee is present. No authority supervises these currencies. These currencies are no legal tender, no payment must be accepted. For e-wallet, the points are not backed by € and points are not convertible, so that the electronic money law does not apply. E-portemonnee is only a reward scheme. No payments can be caried out with the currency but the exchange for a selection of items on the redeeming list. In 2014 an expire date is added to the points. Links to original law texts and contact details regulatory authorities relevant for this sub section: http://www.fsma.be/en.aspx https://www.nbb.be/en

 

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Oversight minimum requirements for e-money, ECB, August 1998 E-money system security objectives (EMSSO), ECB, May 2003 5.3 Digital currency convertible to national currency Limburg.net does not define itself as a digital currency. Nor is the ‘point’ convertible. Only to make the system acceptable and understandable for (new) users do we refer to the €-cent. This rate is also used as a rule of thumb to make up the budgets in points. RES is in this situation and has got an exemption since the maximum counter value per user does not exceed 150 €. Reference: http://www.resplus.be 5.4 Money laundering This is specific regulation focused on financial institutions. Part of penal law, so everybody must obey this rules. Links to original law texts and contact details regulatory authorities relevant for this sub topic: 11 JANUARI 1993 [Wet tot voorkoming van het gebruik van het financiële stelsel voor het witwassen van geld en de financiering van terrorisme] - BS 23 januari 2004 (Officieuze coördinatie) Laatste update : wet van 25 april 2014 (BS 27 mei 2014) Institutions for electronic payments are included in this law. 5.5 Other central bank oversight regulations NBB: Only for recognized and registered financial institutions: banks, insurance etc. FSMA: If a currency scheme would raise capital with the general public (e.g. a co-operative society), then they should make a prospectus that has to be approved in advance by FSMA.

6. Acceptance of CCs by (local) government Being accepted in lieu of legal tender particularly by public entities is the goal of many CCs. Municipalities accepting local currencies for both services (swimming pool, public transport etc) and taxes (business rates, local taxes) gives CCs greater use value and credibility. However, especially in the Eurozone, those who tried to establish such spending possibilities in different countries encountered barriers of different kind, sometimes of personal nature (risk averseness) sometimes allegedly due to regional procedure regulations, state law or even EU law. 6.1 Acceptance of CCs for municipal services and taxes The points in e-portemonnee are not legal tender. So nobody and no local authority is obliged them as means of payment. However, local authorities can give citizens the opportunity to pay for certain services by using the points. (e.g. Cultural center, swimming pool,…) To use the points as means of payment for taxes needs further research, the whole tax legislation being regulated very strictly.

 

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