TOB: what you need to know for your investments (tax on stock exchange transactions)

What is the transaction tax?

The TOB is a tax on transactions in financial instruments on a stock exchange or through a Belgian intermediary. Belgium introduced it in 1927 and has amended it several times since then. The main purpose of the tax is to generate revenue for the Belgian government. It also regulates stock exchange activity to deter high-frequency trading and excessive speculation.

It's an important aspect of investing in Belgium as it directly affects the cost of buying and selling ETFs, stocks, bonds, and other financial instruments.

How much is the transaction tax

The TOB is a percentage of the transaction amount. There are three different tax rates: 0.12%, 0.35% and 1.32%. So if you buy €1,000 of something on the stock exchange that has a TOB rate of 0.35%, you will have to pay a transaction tax of €3.50. The tax rate depends on the type of financial instrument, the type of transaction (buy or purchase), as well as the characteristics of the instrument.

Furthermore, some brokers interpret the law slightly differently than others. It sounds crazy, but it's possible that you'll pay a different tax rate for different brokers for the same ETF!

For stocks

For most individual stocks, the TOB rate is 0.35% at purchase and 0.35% sale. There are exceptions, so make sure to check Wikifin.

For ETFs

The calculation is complicated. It first depends on where the ETF or one of its compartments is registered. Strangely enough, ETFs that are not registered in Belgium have a lower TOB rate. Secondly, the distribution of dividends has an impact. The TOB rate for accumulating ETFs is higher. This can be a factor in deciding whether to invest in accumulating or distributing ETFs.

Determining the TOB of an ETF is such a common question that we wrote down an extensive step-by-step guide below.

For other types of investments

There's also a transaction tax when investing in less common instruments like turbos or warrants, or real estate certificates. In that case, we again recommend that you consult Wikifin.

Is there a maximum TOB you can pay?

Yes, fortunately there is!

• 0.12% rate: maximum of €1,300
• 0.35% rate: maximum of €1,600
• 1.32% rate: maximum of €4,000

Sadly, these amounts are high enough that you need to make a huge transaction before hitting the maximum.

Is the TOB calculated before or after broker fees?

Unfortunately, the calculation of the tax rate is done before the broker takes their commission. Suppose your transaction is €1,000, but €15 of it goes to the broker as their fee. In that case, the transaction tax is still calculated on the full €1,000, not on €985.

How to determine the TOB rate of an ETF

You need to answer five questions to determine the TOB of an ETF:

1. Is it really an ETF?
2. Is it registered in the European Economic Area?
3. Is it registered in Belgium?
4. Is any compartment of the fund registered in Belgium?
5. Is it distributing or accumulating?
   

Let's determine how we can answer each question.

1) Is it an ETF?

The most common ways to invest in a fund in Belgium are through:

• Mutual funds, which are commonly called SICAV in French or BEVEK in Dutch
• ETFs
  

The main difference is that ETFs are traded on an exchange (hence their name "Exchange-Traded Fund"). In contrast, mutual funds are bought directly from the fund provider, without an exchange coming in between.

You can search for a fund's ISIN code in your broker's search functionality to check whether a fund is an ETF. Or, if the fund is on justETF, then it's an ETF.

Continue reading if the fund is an ETF.

2) Registered in the European Economic Area?

When we've determined that we're dealing with an ETF, we need to answer whether the fund is registered within the European Economic Area. The EEA consists of all EU member states as well as Iceland, Liechtenstein and Norway.

Fund providers list the countries where a fund is registered on their website. The easiest way to get to the right page is through Google. Type in the ISIN of the fund and go to the search result on the fund provider's website.

On the page of the fund provider, we see the countries that the fund is registered in. Let's look at some examples.

iShares Core MSCI World (IE00B4L5Y983)

On the iShares website we can see that the fund is registered in several countries within the EEA.

iShares Core SPI (CH0237935652)

The fund is domiciled in Switzerland, which you can tell because the ISIN starts with "CH". But on the iShares website we see it is also registered in Liechtenstein. So it is registered in the EEA, as Liechtenstein is part of the EEA.

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Vanguard Total Stock Market ETF (US9229087690)

American funds (the ISIN starts with "US") are not registered in the EEA.

Not registered in the EEA?

The transaction tax is 0.35% at purchase and 0.35% at sale. You can stop the how-to.

Registered in the EEA?

Continue to the next step.

3) Registered in Belgium?

We can use the list of countries from the previous step to determine if a fund is registered in Belgium.

Not registered in the Belgium?

Continue to the next step.

Registered in Belgium?

You may skip to step 5.

4) Is any compartment of the fund registered in Belgium?

A fund can have several compartments, for instance to provide accumulating and distributing versions of the fund, or to offer it in multiple currencies. Each compartment gets its own ISIN code and the fund provider can choose to register compartments in different countries. So the distributing compartment of a fund can be registered in Belgium whereas its accumulating compartment is not.

As soon as one of the compartments of a fund is registered in Belgium, the Belgian tax authorities consider all compartments to be registered in Belgium. This has significant implications for the TOB rate. Because if a distributing compartment of a fund is registered in Belgium but its accumulating compartment is not, the accumulating fund will still be taxed as if it was registered in Belgium. And the TOB rate is then 1.32% instead of 0.12%, which is an 11-fold difference.

The FSMA, the Belgian financial regulator, maintains a list of all foreign funds that are registered in Belgium. You can download the spreadsheet here. Unfortunately, the list does not consist of ISIN codes. Instead, to check whether the fund is on the list, we have to rely on:

• The name of the fund (columns "Compartment French official name"/"Compartment Dutch official name" in the spreadsheet)
• The issuing company (columns "CIS French official name"/"CIS Dutch official name" and "CIS Legal form")
  

The fund is registered in Belgium if there's an entry in the spreadsheet where the names match, and the issuing company matches exactly. This sounds tedious, and it is. It will become clearer in the examples below, where we calculated the TOB for some popular ETFs.

But first, let's move on to the last but easy step: determine whether the fund is accumulating or distributing.

5) Distributing or accumulating?

The Belgian authorities charge a different TOB rate for funds that distribute dividends (distributing funds) and those directly reinvest them (accumulating funds). You can check whether a fund is accumulating or distributing on justETF, or on the website of the fund provider.

The fund or one of its compartments is registered in Belgium

• Distributing fund: the TOB is 0.12% at purchase and 0.12% at sale
• Accumulating fund: the TOB is 1.32% at purchase and 1.32% at sale
  

The fund or one of its compartments is NOT registered in Belgium

• Distributing fund: the TOB is 0.12% at purchase and 0.12% at sale
• Accumulating fund: the TOB is 0.12% at purchase and 0.12% at sale

Visual guide

The chart below makes it clearer:

Faster way for Bolero users

There's a shortcut to finding out the TOB tax rate of an ETF if Bolero is your broker. Just simulate buying the ETF and it will tell you the TOB amount, from which you can deduce the tax rate. Note that this works only on the web app, not in their mobile app.

For instance, when buying one share of the VWCE ETF for €113.52 (at time of writing), the TOB is €1.50. This means that the TOB rate is 1.32%.

TOB for popular ETFs

To illustrate, we followed the guide to calculate the TOB for three popular ETFs:

• VWCE (Vanguard FTSE All-World)
• IWDA (iShares Core MSCI World)
• IESE (iShares MSCI Europe SRI)

VWCE (Vanguard FTSE All-World)

Is it an ETF? Yes

It's on justETF.

Is it registered in the European Economic Area? Yes

The fund is registered in several countries within the EEA:

Is it registered in Belgium? Yes

From the same list, we know that the fund is registered in Belgium.

Distributing or accumulating? Accumulating

On justETF we see that the fund is accumulating.

Conclusion: TOB is 1.32% at purchase and 1.32% at sale

IWDA (iShares Core MSCI World)

Is it registered in the European Economic Area? Yes

The fund is registered in several countries within the EEA.

Is it registered in Belgium? No

Belgium is not on the list of registered countries.

Is any compartment of the fund registered in Belgium? Yes

We have to look at the spreadsheet by the FSMA. There is a fund named "iShares Msci World Ucits Etf":

We also see that the fund provider is "iShares PLC". But when we check the fund on iShares, we see that the fund provider doesn't match: IWDA is managed by "iShares III PLC", which is a different legal entity than "iShares PLC". Furthermore, all of the variants of IWDA, EUR Hedged (Distributing) or GBP Hedged (Distributing), are managed by "iShares III PLC".

We conclude that no compartment of IWDA is registered in Belgium.

Distributing or accumulating? Accumulating

On justETF we see that the fund is accumulating.

Conclusion: TOB is 0.12% at purchase and 0.12% at sale

IESE (iShares MSCI Europe SRI)

Is it registered in the European Economic Area? Yes

See on the iShares website.

Is it registered in Belgium? No

Belgium is not on the list of registered countries.

Is any compartment of the fund registered in Belgium? Yes

There's an entry with a matching name. And the issuing company on the FSMA spreadsheet, "iShares II PLC", matches the issuing company on the iShares website.

When we look at the iShares website for its distributing compartment IE00BGDPWW94 (see here), we can actually confirm that it is registered in Belgium.

Distributing or accumulating? Accumulating

Conclusion: TOB is 1.32% at purchase and 1.32% at sale

How to declare and pay the transaction tax

There's good news if you use a Belgian broker, because they will declare and pay the transaction tax for you. But if you're investing through a foreign broker, it's likely you're out of luck. Few foreign brokers handle the Belgian transaction tax. In most cases, you'll have to declare and pay it yourself. The process is a bit tricky, so make sure you do it the right way.

Use the following table to find out if your broker handles the transaction tax for you:

Considering the TOB when building your investment portfolio

Taking care of the transaction tax is a downside of managing your own investments and buying ETFs directly. You need to choose the ETFs such that your portfolio:

• Is diversified. VWCE provides great diversification in a single fund but has a 1.32% transaction tax. We calculated that the impact of the high TOB on the long-term return is not negligible.
• You're not over-spending on broker fees. Brokers charge a commission for every transaction. So broker fees increase when you have more funds in your portfolio. A simpler portfolio is therefore preferred. You need to take this into account if you want to replace VWCE, which has a high transaction tax, with alternatives that have a lower TOB but will result in higher broker fees.
• Is future-proof. Suppose you have a large investment in an ETF, accumulated after many years of investing. You will be very unhappy if its transaction tax were to increase drastically.

Not having to worry about the transaction tax

There is a way to passively invest in ETFs while not having to worry about the transaction tax. At Curvo, all taxes are taken care of. Also, each portfolio is globally diversified and has already been optimised for cost so you don't have to calculate the trade-offs yourself. The portfolios are managed by NNEK, a Dutch investment firm licensed by the Dutch regulator (AFM). Find out how Curvo works to learn more.

Summary

The transaction tax is something to be aware of as a Belgian investor, to prevent any bad surprises. For ETF investors, the TOB plays in deciding whether to invest in accumulating or distributing ETFs, although it's not the only factor. Secondly, the TOB impacts the choice of broker. If you don't want any additional administration due to the declaration of the TOB, you should opt for a Belgian broker, or a foreign broker that handles the TOB, like DEGIRO.

Questions you may have

What are other taxes when investing?

To make matters more complicated, the transaction tax isn't the only relevant tax when investing in ETFs. The other taxes are:

• Tax on dividends
• Reynders tax, or tax on capital gains for bonds
• Tax on investment accounts exceeding €1,000,000

Learn more on how investing is taxed in Belgium.

We want to thank Tim Nijsmans from Vermogensgids who contributed to the guide on calculating the TOB of an ETF.

Disclaimer: We attempt to keep this article up-to-date with the latest laws around the TOB. But we cannot guarantee this to be the case when you're reading this. Check at the top when the article was last updated. Also, we are not professional tax advisors. Always do your own research or seek external advice, especially if the outcome can affect your financial situation.