Investing from Belgium

You can apply the Bogleheads® investment philosophy if you live in Belgium, but you must be aware of a few details. This page introduces a series of them. Please seek advice in the Bogleheads forum and contact a professional advisor before acting on them.

The general guidance given in Bogleheads® investing start-up kit for non-US investors, Investing from outside of the US and EU investing is applicable.

This page is not intended for US (tax) resident investors, as their situation is very specific.

Saving and investing in Belgium
The Belgian investor has access to:
 * 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), and corporate bonds.
 * Stocks:
 * Most Belgian retail banks offer access to several stock exchanges as most banks have an in-house broker.
 * Alternatively the Belgian investor can use one of the (foreign) often online low-cost brokers such as Interactive Brokers (IB).
 * Belgian brokers will ensure that you comply with the dividend withholding tax, tax on capital gains for bonds, taxation on the size of your investment accounts, taxation for funds that are not legal entities, and so on. If you select a foreign broker make sure you understand how you can remain compliant with the Belgian tax legislation, and what parts of the declarations and payments you will have to do yourself.
 * Please note that 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, investors seeking broader diversification can consider the EU as the home-market.


 * Many people (72% in 2014) own their house in Belgium. The mortgage payments may provide some tax benefit depending on the calendar year during which the loan was registered and the region in which the borrower is domiciled.
 * 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. Please note that ETFs have a much smaller total expense ratio (TER) than the comparable Belgian mutual funds.
 * Saving through insurance contracts:
 * Tak-21 savings insurance (Tak-21 spaarverzekering): Life insurance insuring the combined premiums (after costs) and a guaranteed fixed return augmented with an optional bonus. There is government protection until 100,000 Euro.
 * 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.
 * The tax on the insurance premium (2%), the high total expense ratio (TER) (typically 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 commonly considered acceptable for Bogleheads.

Taxation of investments from outside of Belgium
Investors that hold funds that hold securities are taxed at multiple levels on dividends. Depending on the tax treaties there might be withholding taxes by the country of domicile of the asset before the Belgian Taxation applies. (For example, US tax treaties or  US estate taxes.)

International Withholding Tax
Funds themselves can be taxed internally on the dividends they receive from individual stocks they hold. This is especially relevant for investors domiciled in Belgium since many Belgian investors make use of:


 * Accumulating funds to avoid paying dividend witholding tax and leverage the non-existent capital gains taxation on accumulating equity funds.
 * Funds domiciled in Ireland to minimise the tariff on brokerage transaction taxation.

Funds that are domiciled in Ireland are liable to foreign (most notably, US) dividend witholding taxation. As of 2020 there is no easily accessible way for Belgian investors to recuperate these foreign witholding taxes incurred by funds domiciled in Ireland. This has been named international withholding tax leakage, often referred to as "dividend leakage". While this is highly technical fiscal material, investors should carefully consider the effect of foreign witholding tax on their investment because it lowers expected returns by the same order of magnitude as the funds' total expense ratio. See the Nonresident alien investors and Ireland domiciled ETFs wiki page for some common figures on well known funds.

For example:

The Vanguard FTSE All-World UCITS ETF (VWRL) fund notes 9.8% percent Level 1 dividend tax withholding for each percent of dividend yield received during the year 2014. Assuming a fictional but realistic 2% dividend yield, we can estimate the dividend leak as follows:

9.8% dividend withholding of a 2% gross dividend = 0.20% dividend leakage

As of 2020, the FTSE All-World charges an 0.22% ongoing cost figure (OCF). But for Belgian investors, an additional estimated 0.20% is lost to foreign withholding tax. Which brings the total estimated figure of cost and taxation incurred by the fund itself to 0.42%. A significant difference although an average 10% dividend leakage is likely lower than the local Belgian dividend withholding rate. Note that accumulating funds subject to foreign withholding tax are not eligible for the Belgian tax credit for dividend income.

A simpler way to account for dividend leakage without delving into balance sheets is to look at the difference between reported fund return (performance) and gross index benchmark return. When funds report annual returns they usually measure these against net index benchmark returns. This is the gross index return minus a tax index benchmark.

For example:

When we compare FTSE All-World UCITS ETF (USD) Accumulating (VWRA) to it's gross benchmark published by FTSE Russel for 2019 we obtain these figures:


 * A gross index return of 27.22%
 * A net index return of 26.53%
 * A reported fund return of 26.52%

First, note that the reported fund return is only 0.01% lower than the net index return of 26.53%. A difference that is not intuitive due to the stated 0.22% total expense ratio of the fund. This is likely due to the fact that the tax index benchmark used to obtain the net index return overestimates the 15% withholding tax tariff on US dividends. See the average 10% figure computed in Nonresident alien investors and Ireland domiciled ETFs. This is also one of the reasons why the fund sometimes "outperforms" the net index benchmark.

Secondly, note that there's a difference of almost 0.7% between the reported fund return and gross index benchmark. 0.25% of that is explained by the funds' stated expense ratio for 2019. The remainder of that difference consists of dividend leakage and (to a minor extent) internal transaction cost etc.

Taxation of investments by Belgium

 * 30% taxation on income (interest, dividends, royalties) from investments that are really received by the individual investor.
 * The first 940 euro interest on regulated (gereglementeerde) savings accounts is exempt. Interest above that is taxed at 15%.
 * Except dividends that are reinvested within the fund. There is no dividend taxation on these for Belgian investors. As Belgium does not have any capital gains tax, there is no Belgian taxation on the growth of equity funds.
 * Except life insurance that is not taxed on the return, if duration of the contract is longer then 8 years, or death-coverage is more than 130% of the capital.
 * Apart a few other other exceptions such as real-estate collective investment trusts (bevaks), social investments, and some other movable assets.
 * The dividend withholding tax on the first 800 Euro of dividends can be recovered through the yearly tax.
 * No taxation on capital gains, including the dividends immediately reinvested in accumulating funds.
 * Except for capitalizing funds with more than 10% bonds; These funds do not distribute the interest received as dividends, they are reinvested in the fund. When selling the fund, the capital gains on bonds portion will be subject to 30% tax withholding.
 * No taxation on net-wealth..
 * Belgium imposes an inheritance tax.
 * Tax on stock exchange transactions (0.12%, 0.35%, 1.32%).

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

First and second pillar: pensions

 * The first pillar consists of a state pension (rustpensioen) that provides a basic income from age 67, 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 of 1.75%, with a possible participation in the gains. A limited number pension schemes allow to divert a portion of pre-tax earning to the scheme or allow an extra 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 long term saving. Contracts are typically until age 60 or 65.


 * 1) Individual pension saving
 * 2) * Available via a bank or via life insurance. For insurance contracts, the underlying product is a Tak-21 or Tak-23 respectively.
 * 3) * There is the choice to save in a life insurance with guaranteed return (pension saving insurance - pensioenspaarverzekering) or to save indirectly in a funds (pension saving funds - pensioenspaarfonds).
 * 4) ** The pensioenspaarverzekering guarantees fixed return augmented with an optional bonus. The return is announced each year.
 * 5) ** The returns of the pensioenspaarfonds are determined by the underlying funds. The typical choices are defensive, moderate, or aggressive. By law these funds are mixed funds with bonds and stocks (between 50 and 70% stocks), and they need invest the majority of theirs funds in European assets.
 * 6) * Has a maximum contribution of max 990 or 1270 euro per year. The contributions result in a tax-credit of 30% if you invest the lower euro maximum, or 25% if you invest the higher amount (add local taxes to both) for the yearly investing. Withdrawals before the end of the contract are taxed at 33%.
 * 7) * At age 60 the balance is subjected to a 8% 'liberating' tax. . No other taxation will happen on interest, dividends or capital gains. Contributions after age 60 still benefit from the tax credit, and are completely free from any final taxation.
 * 8) Long-term saving (Langetermijnsparen)
 * 9) * Available through Tak-21 insurance contracts for people who do not have a mortgage payment deduction with a maximum of 2.390 euro. Contribution and income limits are shown in the accompanying table.
 * 10) * The contributions result in a tax-credit of 30%. Withdrawals before the end of the contract are taxed at 33%.
 * 11) * At age 60 the balance is subjected to a liberating 10% tax. No other taxation will happen on interest, dividends or capital gains. Contributions after age 60 still benefit from the tax-credit, and are completely free from any final taxation.

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

Asset Allocation for an investor from Belgium
As investor you need to decide your asset allocation.

Your chosen asset allocation together with the general evolution of the market will be the largest determinant of the results that you will get.

Stock asset allocation
When deciding on their stock allocation, every investor needs to make a number of decisions:
 * What regional allocation will I adhere to?
 * Do I want global diversification?
 * Do I overweight one region?
 * Do I overweight my region and introduce a home-bias?

Bogleheads choose an asset allocation that is widely diversified. Have a look at the main article to check if you need to deviate from a globally diversified equity allocation.

Stable assets asset allocation
Also known as "bonds" asset allocation or "fixed income" asset allocation. With the current bond returns you need to decide how much of your stable assets you invest in bond (funds) and how much you keep in high(ish) yield savings accounts or other cash like assets.

Within the stable assets allocation, the typical choices for the Belgian investor investor are: Or a combination of the above.
 * A diversified set of Euro bonds
 * Global bonds, hedged to Euro
 * Or, cash or other fixed income investment like saving account, term-accounts, Tak-21 insurance contract, ....

Belgian investors have access to many options for bonds: government bond funds (government bonds reduce credit risk); corporate, investment grade and high yield bond funds; and inflation-linked funds.

A Belgian investor can hold bonds that are euro-denominated, or bonds in other currencies that can be hedged back to Euro. Generally bonds in your own Euro currency or hedged back to Euro are advised if bonds are used for stability. 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, but typically each risk reduction also reduces the expected return.

Which funds to invest in from Belgium
Traditional index funds are not widely available in Belgium. Investors in Belgium have a large choice on the ETFs to implement their chosen asset allocation..

The Index funds and ETFs outside of the US wiki page mentions useful aspects of ETFs 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.

There are multiple options on the choice of where to acquire your funds. Almost every bank provides the opportunity to buy bank-owned mutual funds and give access to the major stock exchanges for access to ETFs. In addition, domestic and international online brokers provide their services in Belgium. Please make your choice taking into account the transaction fees as well as the cost that you are charged for your portfolio; either fixed fee or fee per position. Please take into account that these fees are subject to change and also depend on your 'relation' and contract with the broker.

If choosing a foreign broker make sure you "register" the account, and that you understand if you need to pay the taxes yourself, or if the broker will withhold these for you.

Type of ETF useful for investing from Belgium
In general it is good to select widely-diversified Euro-denominated low-cost ETF from a reputable ETF provider.

Belgian investors can reduce tax and compliance costs for equity funds through non-registered accumulating ETFs domiciled in Ireland:
 * Since January 2018 the transaction tax for funds "not registered" in Belgium, but still registered in a different country of the European Economic Region (EER), has been lowered to 0.12%, as opposed to 1.32% for funds "registered" in Belgium, and 0.35% if not registered in the EER.
 * Accumulating ETF funds for equity funds, because Belgium taxes distributed dividends at 30% (but does not tax reinvested dividends, nor taxes capital gains if the fund is held longer than six months).
 * Also for bond funds, because bond funds are subject to a 30% capital gains tax.
 * Domiciled in Ireland, because Ireland does not tax foreign investors on dividends or estates and provides access to a wide treaty network.
 * ETFs domiciled in Ireland are more cost effective than holding US domiciled funds or Luxembourg domiciled funds.
 * Since 2018 it seems almost impossible for European investors to buy US-domiciled ETS as the US providers do not seem to want to comply with the European legislation.
 * Euro-denominated ETFs avoid the fees of currency exchange fees when buying or selling.

The site justETF is a place to start searches for non-US ETFs that satisfy your requirements.

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

Example funds, using the following selection criteria: total market, 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:

Depending on the coverage they desire, investors can choose to only invest in the developed markets; or they can add emerging markets, and they can also choose to add small caps.


 * For the pure developed markets, IWDA and SWRD are the prime candidates for Belgian investors.
 * For those wanting to include developed and emerging markets, VWCE can be a simple solution. IWDA or SWRD with EIMI is a good alternative.
 * To include small caps, you can select the three funds that follow MSCI indexes. This avoids problems with differing index definitions, which could lead to investing twice in the same country, or not at all in other countries, or both:
 * IWDA (iShares Core MSCI World) - excludes emerging Market and small caps
 * EIMI - Emerging Market - excluding small cap - EM represent about 10% of the global capitalization.
 * WSML (Ishares MSCI World Small Cap UCITS ETF) - world small-cap stocks - excluding emerging markets - according to MSCI definition, small caps are about 15% of the market. Using the Morningstar style box, it seems that 20% would be needed to correctly fill the small cap portion.
 * Based on this, a division 15-20% WSML, 10-15% EIMI, 70-75% IWDA is a good approximation of the world market.

Sample EURO and European equity ETF index funds
To introduce a home bias or tilt to the region, a Belgian investor can use one or more of the following.

Funds to focus on Europe:

Equity investing in the Eurozone:

Sample bond ETF index funds
As of 2018, with the current bond returns you need to decide how much of your stable assets you invest in bond (funds) and how much you keep in high(ish) yield savings accounts.

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; and inflation-linked funds.

Funds can hold bonds that are euro-denominated or bonds in other currencies. Generally bonds in your own Euro currency or hedges to Euro 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, but typically each risk reduction also reduces the expected return.

Please check the dividend and capital gains tax of the chosen fund.

Some examples for global bond funds, from a Justetf.com search for world bonds accumulating with AUM >100M€:

Examples for broad market, Europe bonds funds: