Investing from Belgium

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You can apply the Bogleheads investment philosophy if you live in Belgium, but you must be aware of a few particularities. The general guidance given in EU investing is applicable. The pages Investing from the Netherlands and UK investing also have good information, and are used here as a inspiration (or even plainly copied).

Saving and Investing in Belgium
Saving and Investing in Belgium has traditionally focussed on:
 * Regulated and unregulated saving accounts (with government protection until 100,000 Euro).
 * Various instruments that offer protection of the principal: Certificate of Deposit (kasbons), term accounts, government bonds (staatsleningen or Obligations Linéaires -Lineaire Obligaties; abbreviated OLO, in one of these nice Belgian bilingual abbreviations).
 * Stocks: The stock market in Belgium is very small, dominated by a few companies and not very diversified. As Belgium is very integrated into the EU, it is advised to consider the EU as the home-market.
 * Many people own their house in Belgium. This is considered a very good investment. The mortgage payments provide some tax benefit.
 * Mutual funds and ETFs: In Belgium, an investor is currently able to buy index funds in the form of exchange-traded funds (ETFs) through a bank or broker and there are companies offering index mutual funds.
 * Saving through insurance contracts: The tax on the insurance premium (2%), the high total expense ratio (TER) (typical larger then 1.3%), and entry fees (typically 3%, even going up to 6%, but all negotiable) and exit fees for these funds are very high compared to what is typically considered acceptable for Bogleheads. Insurance not taxed on the return if duration of the contract is longer then 8 years, or death-coverage more then 130% of the capital.
 * Tak-21 savings insurance (tak21-spaarverzekering) : life insurance insuring the combined premiums (after costs) and a guaranteed fixed return augmented with an optional bonus.
 * Tak-23 investment insurance (tak-23 beleggingsverzekeringen) : life insurance investing in underlying mutual funds.
 * Tak-26: not an insurance, hence no premium tax of 2%, but no exception on tax on return.

Taxation of investments

 * 25% (27% from 2016 onwards) taxation on income (interest, dividends, etcetera).
 * Except for the first 1,880 euro interest on regulated (gereglementeerde) savings accounts which is exempt. Interest above that is taxed at 15%.
 * Except life insurance that often have special regime, and
 * Except a few other other exceptions such as real-estate collective investment trusts (bevaks), social investments, and some other movable assets..
 * No taxation on capital gains.
 * Except for 33% taxation on speculative short term gains if the position was held less then 6 months. (starts on Jan 1st 2016)
 * No taxation on net-wealth.

Retirement investing in Belgium
In Belgium, retirement savings are often formulated according to a "four pillar" funding system. The first 2 pillars are pensions, the third pillar is tax-advantaged savings and the fourth pillar are the different kinds of after-tax savings.

Pensions

 * The first pillar consists of a state pension (rustpensioen) that provides a basic income, the level of which is linked to the statutory minimum wage and the amount of years that a person has contributed.
 * The second pillar consists of the collective pension schemes (groepsverzekering) linked to the employer. A majority of the Belgian employees employed in the private work space have some level of collective pension. Previously these pensions were often 'defined benefit', now they are mostly 'defined contribution' by the employer. These have a guaranteed (accumulating) return (3.75% until the end of 2015; from 2016 onwards this is 1.75% with a possible participation in the gains). Some pension schemes allow a personal contribution.

Tax-advantaged investments
The third pillar includes the tax advantaged investments. Two kinds of tax-advantaged saving exist: individual personal pension saving and the long term saving. The contracts are typical until age 60 or 65. The contributions result in a tax-credit of 30% for the yearly investing. At age 60 the balance is subjected to a eight resp. ten percent 'liberating' taxation. Withdrawals before the end of the contract are taxed 33%.


 * 1) The individual pension saving has a maximum of 940 euro per year.
 * 2) * One can invest via a bank or via life insurance.
 * 3) * One has the choice to save in a fund with guaranteed return (pensioenspaarverzekering) or to save in an underlying mutual funds (pensioenspaarfunds). For the insurance contracts, the underlying product is a Tak-21 or Tak-23.
 * 4) ** The pensioenspaarverzekering guarantees fixed return augmented with an optional bonus. The typically choices are defensive/moderate/agressive. The return is announced each year.
 * 5) ** The returns of the pensioenspaarfunds are determined by the underlying funds.
 * 6) Long-term saving (Langetermijnsparen) through tak-21 insurance contracts for people who do not have a mortgage payment deduction. Contribution and income limits are shown in the accompanying table.

Rebalancing is possible inside the third pillar but one needs to remain within the same "type" to avoid taxation. One switch per year is often allowed without costs.

Which funds to invest in from Belgium
The EU investing wiki page mentions useful aspects of funds to consider, such as; whether the fund distributes dividends, if it is synthetically or physically replicating and the distinction between base currency and trading currency.

Type of ETF useful for investing from Belgium
For Belgian investors it seems best to invest through accumulating ETFs domiciled in Ireland:
 * Accumulating funds: because Belgium taxes dividends at 25% (but does not tax capital gains if the fund is held longer than six months).
 * Domiciled in Ireland : because Ireland does not tax foreign investors on dividends or estates and provides access to a wide treaty network.
 * Nonresident alien & Irish ETFs explains how ETFs domiciled in Ireland are more cost effective than holding US domiciled funds.
 * International investors are often advised not to buy US domiciled assets because of US estate taxes, FATCA (Foreign Account Tax Compliance Act) and because their country does not have a withholding tax treaty (see also Nonresident alien taxation).
 * Belgians investing directly in US-domiciled ETFs could qualify for the 15% US withholding tax rate on dividends, but since US domiciled ETFs are almost always distributing dividends, Belgians will suffer on top of that a 25% tax from the Belgian government and hence only retain 63.75% of the dividend.

Sample Equity ETF index funds
Like many international investors, people investing from Belgium could consider to approximate the global equity market.

Example funds (using the following selection criteria: all-cap, low costs, fund size is decent, full replication or a high amount of stocks relative to the index when using optimized sampling, accumulating):

The following funds can be used to focus on Europe:

For investing in the Eurozone:

Sample Bond ETF index funds
Belgian investors have access to many options for bond ETFs through one of the ETF exchanges: government bond funds (government bonds reduce credit risk); corporate, investment grade and high yield bond funds; inflation-linked funds; funds that are euro-denominated or funds in other currencies (generally bonds in your own currency are advised if bonds are used for protection. This avoids currency volatility which is a big part of short term volatility with bonds). Funds are available across the duration spectrum (lower duration means lower interest risk). Typically each risk reduction also reduces the expected return.

Some examples for bond ETFs:
 * Justetf.som search for world bonds accumulating with AUM >100M€
 * Examples for broad market, euro denominated bonds from the Amsterdam stock exchange; courtesy of iShares' product overview: