Planning to invest and save for your future while in Belgium? Here is our helpful guide for expats on the Belgium taxes on savings and investment incomes and other important information about shares, capital gains tax and speculation tax in Belgium.
You have successfully moved to Belgium as an expat and made it your new home. Now you are planning for your future by considering to build up savings and investing in Belgium. But before you take that next step, it is imperative that you first learn about Belgium’s tax on investment income, the current Belgian tax on savings income – and more importantly, how these can affect your overall financial plan.
International Belgium-based bank BNP Paribas Fortis‘ estate planning and wealth management expert Nico Jaeken explains everything you need to know about Belgian savings accounts, Belgium’s investment income tax rate, the capital gains tax, tax on securities and trading accounts, changes to Belgian tax rules and whether an existing double taxation treaty applies to you as an expat.
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Differences between savings and investments in Belgium
Most of us know that there are distinct differences between savings and investments. The global working definition of savings and investments also applies in Belgium. Savings are generally low risk funds that can be easily liquidated when needed like emergency funds and savings accounts. Investments, on the other hand, involve higher risk but yield a potential of much greater financial returns when left to ride the tides of the stock market. Examples of investments include principal put into securities and mutual funds, which could not be quickly liquidated unlike savings.
Tax residency in Belgium
Once you have deemed whether opening Belgian savings accounts or investment accounts in Belgium are more suitable for your financial future in Belgium, the most important factors, Jaeken says, is to ascertain your tax residency status.
“Tax residency is the key concept on determining what type of taxation and how much will be due,” Jaeken says.
Foreigners are considered Belgian tax residents if their home base or their seat of economic interests is in Belgium. There are a couple of (refutable) assumptions that your residency is based in Belgium, namely if you are registered at a Belgian municipality or, if you are married, or if your household resides in Belgium – no matter how much time you spend abroad. Expats like foreign diplomats, foreign international civil servants and beneficiaries of the special tax status for foreign executives, however, are treated as non-resident taxpayers no matter the length of their residence in Belgium. To enjoy the benefits of holding non-residency, you must ensure that your chosen financial institution has the right documents – such as identification, proof of residence and work contract – to consider you as a non-resident. Read Expatica’s guide on taxes in Belgium to verify whether you hold a resident or non-resident Belgian tax status.
“From a tax point of view, the status of some expats in Belgium is different from Belgian residents as the tax treatment of investments is completely different if you are a regular expat with Belgian tax residency or if you are ‘non-resident’ like employees of the EU, NATO or SHAPE,” Jaeken adds.
Belgian tax on savings for resident taxpayers
The Belgian tax on savings income depends on the type of Belgian savings accounts taxpayers with resident status hold. There are two kinds of Belgian savings accounts: regulated and non-regulated. Here are the differences between regulated and non-regulated savings accounts and how it affects the taxes you pay in Belgium.
Tax rates on regulated savings accounts in Belgium
Regulated Belgian savings accounts must conform to specific standards and are consistently under review by the Financial Services and Markets Authority (FSMA). Currently, the main features of a regulated savings account are as follows:
- interest from the account is comprised of a base rate and a fidelity rate;
- the base rate is paid annually on 1 January;
- the fidelity rate is paid quarterly and a fidelity premium can be obtained a year after the deposit is made or from the beginning of a new fidelity period;
As part of a recent tax reform, interest payments on regulated Belgian savings accounts are tax exempt up to €940 (before €1,880) in 2018 while a reduced tax rate of 15% applies to any amount exceeding the threshold.
“Regulated savings accounts are popular with most Belgian households,” Jaeken says. “Some of the reasons why Belgians tend to have lots of saving in regulated savings accounts is because the taxation is lower and they don’t want to take risks in investments.”
Tax rates on non-regulated savings accounts in Belgium
Unlike regulated accounts, non-regulated savings accounts in Belgium will have their interest income taxed in advance starting from the first euro. They are also subject to a generally higher rate of Belgian tax on savings income.
If interest income is paid directly on your non-regulated Belgian savings account, your bank must immediately deduct a 30% withholding tax – the enforced rate as of 1 January 2017 – which they will in turn forward directly to Belgium’s tax authorities. While holders of non-regulated Belgian savings accounts only receive the net income following the deduction, they are also exempt from declaring any interest income in their annual tax return.
Belgium’s withholding tax on interest income has experienced an upsurge in recent years from its 2011 rate of 15%.
Belgian tax on savings and investments for non-resident taxpayers
For non-residents, Belgium’s tax on investment income and savings are quite simple. The general rule is that non-residents are only taxed on their Belgian income – specifically Belgian bonds and shares – while all other income is exempt. Therefore, if a non-resident receives investment income on their Belgian bank account, the Belgian bank will not issue a withholding tax but the income will be liable to taxes in their home state.
In principle, the declaration and taxation of income for non-residents should be done in their resident state.
Filing US taxes from Belgium
Despite the fact that every US citizen and green card holder is required to file a tax return with the IRS even when living abroad, many expatriates still fail to do so. Many are unaware of these obligations, thinking that as an expat they do not need to pay or file tax returns in the US. You do! For more information and help filing your US tax returns from Belgium, contact Taxes for Expats and see our Guide to taxes for American expats.
Belgian tax on shares
Investors in Belgium who hold shares, stocks or equities receive income on their investments through dividends. Companies incorporated in Belgium have the obligation to withhold the investment income tax rate of 30% from these dividends.
However, if the company paying dividends into a Belgian bank account was incorporated in another country, the Belgian bank must automatically withhold the investment income tax rate of 30% but an additional withholding tax set by the source country will also be applied. Belgium has a double taxation treaty with most countries in the world, leading to a reduced withholding tax from the source country. The United States, for example, usually charges a 30% withholding tax on dividends on top of the 30% Belgian withholding tax but after invoking the double taxation treaty, the US withholding tax decreases to 15% while the Belgian tax is retained at 30%. Even with a double taxation treaty, these types of investors are still left with a lower net dividend. Check this helpful list from the Belgian finance ministry to see if a double taxation treaty is relevant to your situation.
“This matter with double taxation has already been to the European Court of Justice but unfortunately, there is no way to avoid it,” Jaeken says.
To encourage people to invest rather than to save, a new partial withholding tax exemption on dividends has been introduced. The withholding tax exemption will apply to a threshold up to €640 dividend distribution from 1 January 2018 and has to be claimed via the personal income tax declaration.
Capital gains tax in Belgium
Capital gains are realised once an investor receives a profit by selling his/her capital asset – which can include stocks, shares and investment properties – for a price higher than the original purchase price. Capital gains earned from an individual’s personal shares are tax exempt in Belgium, at least for now.
A different rule for capital gains tax in Belgium applies if the investment is done in an investment fund: a 30% withholding tax will be due on the interest-bearing part of the capital gain if more than 10% of the assets in the fund are invested in interest bearing instruments.
Tax on securities and trading accounts
As part of a recent tax reform, a 0.15% tax on securities and trading accounts has been introduced as from 1 January 2018.
The tax is due on securities accounts held by individuals that have a value in excess of €500.000 per account holder. However, not all financial instruments are targeted. The tax is also not due on savings accounts or term deposit account.
The tax is also due on Belgian securities accounts held by non-residents.
International exchange of tax information in the EU
Starting 2016, a new directive from the European Union came into force to improve the automatic exchange of financial account information within the EU.
The provision of information between tax authorities and banks are more sophisticated and will include information such as: the identity of the account holder, their account numbers and balances, dividend income, income from certain investment insurance and sales proceeds from financial assets.
The initial report has already been made in June 2017 with respect to income accrued in 2016. Taxpayers who fail to declare investment income received abroad will risk penalties, which vary from country to country.