The Belgian dividend tax on ETFs is 30%. That's a fact that catches many new investors off guard. But here's something many don't realise: not all ETFs are subject to this tax.
In this article, we'll explain which ETFs are liable for the dividend tax, which aren't, and how you can use this knowledge to your advantage as a Belgian investor.
What is the dividend tax?
The dividend tax is a 30% tax levied on any dividend or interest that you receive. For instance, you must pay tax on the dividend of a stock, the coupon of a bond, and dividends from an ETF.
Which ETFs are liable for the dividend tax?
An ETF can be either accumulating or distributing, depending on how it distributes the dividend. An accumulating ETF will reinvest all dividends from the stocks it invests in (or interest in the case of a bond ETF). A distributing ETF will distribute the dividends to you. Because of this, only distributing ETFs are liable for the dividend tax. Accumulating ETFs are not.
Avoid the dividend tax with accumulating ETFs
So the good news is that you can avoid the dividend tax by investing in accumulating ETFs. That's why we recommend accumulating ETFs for Belgian investors. Unless you have a good reason to invest in distributing ETFs. For instance, if you want to use the dividends as income through ETFs that pay a high dividend. But if you're still in the accumulation phase of your life, you should invest in accumulating ETFs. You're growing your wealth to use it later. So distributing ETFs are likely not the best choice because of the fiscal penalty.
Besides avoiding the dividend tax, there are more reasons to prefer accumulating ETFs. Because they reinvest the dividends, you enjoy the effect of compound interest. Every year, you earn interest on the interest earned the previous years. This creates the famous snowball effect of investing. Coupled with a buy-and-hold strategy, you can grow substantial wealth by investing each month in a portfolio of accumulating ETFs.
Accumulating ETFs reinvest dividends for you. You don't need to worry about having to reinvest them. That makes them more in line with a passive approach where you try to spend as little time as possible managing your investments.
How to declare the dividend tax
First step, find out from the table below if your broker withholds and declares the tax for you. In general, Belgian brokers take care of it for you, whereas foreign brokers don't or only for some types of investments.
If your broker takes care of the dividend tax, you don't need to do anything. They will automatically withhold and declare the right amounts for you.
In the other case, declare the taxable dividend income in the code 1444/2444 of your yearly tax declaration. So suppose you earned a total of €100 in dividends in 2024. Then you need to fill in €100 in your tax declaration (even though you'll only end up paying €30 in dividend tax).
Be careful: you can't reclaim the dividend tax for ETFs
When you invest in individual stocks, you can reclaim up to €240 in dividend tax per year. The first €800 of dividends from individual stocks are tax-free.
But this does not apply to ETFs. So individual stocks have a slight tax edge over distributing ETFs when it comes to dividends. But ETFs have other advantages. They are more diversified, and they require less time to manage your investments.
Other taxes for ETFs
There are three taxes relevant when investing in ETFs:
- The transaction tax (TOB), between 0.12% and 1.32% of the transaction amount when buying or selling. The tax rate depends on the ETF.
- The Reynders tax, which is a 30% tax on the capital gains for accumulating bond ETFs.
- The dividend tax, which only holds for distributing ETFs and amounts to 30% of the dividend.
Conclusion
Understanding the dividend tax is crucial for Belgian investors. We've seen how accumulating ETFs offer a tax-efficient option, allowing you to avoid the 30% levy and benefit from compound growth. Remember, while individual stocks might offer a small tax advantage on dividends, ETFs provide broader diversification and require less management.
As you consider your investment strategy, think about your long-term goals. Are you looking for a passive, tax-efficient approach? If so, accumulating ETFs might be the right choice for you. And if you're looking for a simple way to invest in a diversified portfolio of accumulating ETFs, perhaps take a look at Curvo!