Posted by First of all, a friendly reminder for the tax declaration deadline in Belgium in 2021: the deadline for the paper version is June 30th, and for the online is July 15th. If you don’t know much about tax declaration in Belgium yet, now it is good to learn more about it! Check my previous post Tax refund in Belgium: Optimise your income tax.
My friend Toon has written a very extensive blog post about investing in Belgium, where he recommends buying ETF on Degiro as a passive investing strategy. If you haven’t read it yet, please click here: Investing for beginners. Today I would like to talk about the tax on investments such as stocks, bonds, and funds.
First of all, a quick intro to the basic concepts:
Stock: A securities product issued by a company to raise funds. If you buy a stock, you are a shareholder and have partial ownership of the company.
Bonds: Companies/governments/financial institutions, etc. issue bonds to borrow money. If you buy bonds, you are the creditor, and the risk for bonds is lower than that of stocks.
(Securities Investment) Fund: Financial companies recombine the distribution of various stocks, bonds, currencies, etc., and turn them into a new investment product to sell to the public. The advantage is that investors can buy an investment fund at a low price, and the risks are relatively spread. So you buy a share of the fund, it can include stocks, bonds, currencies, etc.
So, what taxes will investors be levied in Belgium?
1. Transaction tax
When you buy or sell investment products, the Belgian government will charge you an investment transaction tax of 0.12%-1.32% of the transaction volume.
If the product you invest in is registered within the European Economic Area (EEA), the transaction tax rate is 0.12% (such as Degiro’s ETF recommended earlier).
If the ETF is registered outside the European Economic Area, the tax rate is 0.35%
If the invested product is registered in Belgium and the investment product is accumulative/reinvested (no dividends), the transaction tax rate is 1.35%
However, most trading platforms already collect transaction tax when you buy and sell, so there is no need to declare additionally.
2. Taxation on dividends
Investing in stocks or funds, in addition to enjoying the benefits of increasing their value, many companies also regularly distribute dividends to shareholders.
It is up to the board of directors of the company to decide whether to distribute dividends, how often, and how much.
For example, Apple pays shareholders a quarterly dividend of about $0.22 per share (the number can vary). Amazon, on the other hand, never pays out dividends, opting instead to reinvest all of its earnings back into the company, with five-year sales growth of 185% and a five-year stock value growth of 111%.
In Belgium, dividends or bonuses on stocks and interest income from bonds are taxed at 30%!
Therefore, from the perspective of the most profitable strategy, it is recommended to choose stocks or funds with automatic reinvestment of dividends, such as the index funds mentioned in this article, or Amazon (of course, it is not recommended to buy too many stocks of a single company)
3. Tax on capital gain
If your investment product goes up in value, the gain you get when you sell is called capital gain.
Capital gains on stocks are not taxed in Belgium!
Capital gains on bonds, on the other hand, are subject to a 30% tax (if you sell the bond at a higher price than when you bought it).
If you buy a fund that includes stocks and bonds, capital gains on the bond portion are also subject to 30% tax.
That’s why I don’t have bonds in my portfolio.
4. Taxation for the richest investors
If the combined portfolio of all your investment accounts exceeds one million euros, the Belgian government will charge you a tax of 0.15%.
If your account is in Belgium, this tax is automatically levied, and if your account is abroad, you need to declare the account number and amount yourself.
This seems to have nothing to do with me haha.
How will your investment in Degiro affect your tax returns?
If you use Degiro to buy stocks or funds, you don’t need to do extra work to pay taxes (all taxes are automatically deducted).
However, because your Degiro account is linked to a German bank account, which is under your name, you have to declare it to the Belgian government so that they know whether you belong to the 4th category 🙂
- To declare a foreign bank account, you need to go to this website and follow the instructions. The flatex bank account number corresponding to your Degiro account can be found in two steps on your Degiro app.
- Then when you file a tax return on tax on web, when the last page asks if you have a foreign bank account, just indicate yes.
Alright, that’s a bit about the tax on investment in Belgium, don’t forget to submit your tax declaration soon! Tax refund in Belgium: Optimise your income tax.
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Disclaimer: This is not financial advice.
References:
https://curvo.eu/article/taxes-you-should-know-about-as-a-belgian-investor#:~:text=There’s%20a%2030%25%20tax%20on,but%20also%20to %20distributing%20funds.
The 30% tax on dividends is a crime, and by far the biggest shock I had moving here. The UK’s dividend tax is 0%. Just shows how earners are punished here and the hereditary rich (with no capital gains tax) stay that way. That’s continental Europe for you, I guess!
Good to see you posting again 😉
Thanks! 🙂
You forgot the mandatory “This is not financial advice” disclaimer (chilling those ETFs :P)
Hahahha good idea! I will add it hahahah