.png)
Digital banks are racing to become your one-stop shop for all things money. N26, the German neo-bank, has joined this race by adding ETF investing to their banking app.
But while having everything in one app sounds convenient, it often comes with compromises. In N26's case, you'll face limited ETF options. And if you're in Belgium or Italy, you'll need to handle complex tax obligations yourself.
Here's what you need to know before choosing N26 for your ETF investments.
Pros and cons of N26 for ETF investing
The story of N26
N26, the Berlin-based neobank, known for its intuitive app and transparent approach, has taken a significant step forward by venturing into trading and investing.
As one of Europe’s leading neobanks with millions of users across the continent, N26 is renowned for offering hassle-free banking services, sleek design, and real-time spending insights. Now, the neobank aims to bring that same simplicity and accessibility to the world of investing.
By integrating ETF trading directly into its app, N26 is following Revolut in positioning itself as a one-stop financial platform where users can seamlessly manage both their day-to-day banking needs and long-term investment goals.
Let's take a look at their offer with a focus on how they handle taxes.
Fees
Fee structure
It's free to create an account with N26. Also, there's no membership fee unless you buy a "You" (€9.90 per month) or "Metal" (€16.90 per month) subscription. So in most cases, you'll only pay a transaction fee for whenever you buy or sell something.
N26's fee structure is fairly standard with a commission per trade. The cost of the ETFs are the same as stocks. At €0.90 per trade, N26 is slightly cheaper than Trade Republic's €1 transaction cost.
Interest on uninvested cash
At the time of writing, N26 is providing a 1.3% interest rate. This is the cash which remains uninvested in your balance. However, double-check where you're based and what the current N26 offer is as it varies between countries and they often change. If you're a paid member of N26 you receive better interest rates.
Convenience of N26 for investing
Limited choice
N26 is limited in their options for investors. The selection features only a variety of ETFs so you may not be able to find the actual ETF you searching for. However, you can easily search by name, ticker or the ISIN.
Targeted for traders
Although N26 doesn't have advanced trading options yet like options and futures, you get a sense that they want you to actively trade and buy some stocks. For example, in their app, they show you the most traded stocks which pushes you to potentially take action and buy a stock (or two!).
Automated savings plans
Yes, N26 offers investment plans. You'll have to manually choose what stocks or ETFs you want to add to your plan. You can choose the frequency (weekly, every two weeks, monthly or else every three months) for your investments. This is a neat feature.
Fractional shares
A popular investment strategy is euro-cost averaging, where you invest periodically instead of investing large lump sums in one go. You invest at fixed times, for instance every month, regardless of how the markets are performing. Most people are paid monthly, so it makes sense for their investments to follow the same pattern. Fortunately N26 offers the option to buy fractions of ETFs.
Customer support
N26 has very good customer service in comparison to other neo-banks and some neo-brokers. Their help centre covers most of your queries. Their email support is fast with responses too. One downside is that there's no phone service if you encounter some issues with the app.
🇮🇹 Declaratory regime
As an Italian investor, you'll receive an annual tax report from N26. You'll have to manually take care of the taxes. N26 provides all the information once a year and you'll have to declare your income, capital gains as well as the IVAFE (wealth tax). N26 puts the burden on you as an investor.
🇧🇪 TOB ("beurstaks" / "taxe boursière")
There’s a tax on the transaction every time you buy or sell a security in Belgium. The rules concerning the tax rate are complicated, also for ETFs. Depending on the characteristics of the ETF, the transaction tax varies between 0.12% and 1.32%.
Unfortunately N26 does not help you with this.
🇧🇪 Dividend tax
N26 doesn't help you with the dividend tax. In Belgium, any dividend you perceive is taxed at 30%. Accumulating funds, which directly reinvest dividends, are a way around this tax. On the other hand, distributing funds distribute their dividends, which means they're taxable.
🇧🇪 Reynders tax
For ETFs that consist of at least 10% bonds, there is a 30% tax on the profits made when selling. For example, if you bought a bond ETF at €100 and end up selling it later for €130, your net profit will only be €21. The other €9 will go to the Belgian state through this tax.
Unfortunately N26 doesn't withhold this tax for you. You will have to calculate and declare it yourself.
🇧🇪 Does N26 require declaring the account to the NBB?
Yes, as N26 is a foreign account based in Germany which means you have to declare to the National Bank of Belgium as well as on your tax returns every year.
Setting up an account
Let's dig into the details of setting up your N26 account for the first-time.
Time to open an account
Setting up an account through N26 is very smooth but you need to have an N26 banking account in order to use their investment service. You can choose to sign up wither with the app or via your computer. You have to register with an email and confirm it. Then you'll have to confirm your phone number whilst continuing to add your tax information. Verify yourself via an ID or passport and you'll be almost ready to create your account. There is no minimum deposit on N26 which is neat but you will be creating a bank account so do keep that in mind.
Ease of use: 3/5
As it pushes trading, N26 shows many details that aren't very relevant to most investors, especially for buy-and-hold index investors. The app feels very fresh and modern. Unfortunately there's a limit of ETFs available which makes it frustrating if we're looking for a specific fund to purchase. Also the fact that you have to handle all the tax declarations yourself if you're a Belgian or Italian user means we're rating it a 3/5. It's a lot of hassle especially with the TOB declarations in Belgium. You don't want to get a fine for a missed or incorrect declaration.
Learn how to invest
One neat feature N26 have is their "Learn" section. We've not come across many trading apps that have this type of educational material to help their users make better decisions. Kudos to the N26 team for this.
Children accounts and joint accounts
You're unable to create a child or joint account through N26.
Business accounts
Yes, you can open a business account on N26.
Is N26 safe?
Who is the regulator?
When you sign up for an investment account, you have to sign two agreements, one with N26 and the other with a third-party which is Upvest.
N26 Bank AG and Upvest Securities GmbH are both regulated by BaFin (Federal Financial Supervisory Authority of Germany).
Have they had any issues with the regulator?
As of now, there is no publicly available information indicating that N26 or Upvest has encountered regulatory issues.
How much of your assets are protected by the investor protection scheme?
Your assets are protected by the standard €20,000 European investor protection scheme as they are based in the EU.
Is your cash protected by the deposit guarantee scheme?
No, since this is an investment product, cash deposits are not protected under a deposit guarantee scheme.
Does N26 do securities lending?
It does not seem like N26 participates in security lending.
Does N26 do payment for order flow?
No, they do not do payment for order flow (PFOF). It is an important source of revenue for many new brokers, including another German provider Trade Republic. This practice involves routing your orders to certain market makers, who then pay the broker for the right of executing these orders. PFOF can work at your detriment, as brokers may prioritise payment over executing the best possible trade for you.
We have also compared N26 with other brokers if you want to dig deeper.
The easier way: Curvo
Brokers push you to trade and to pick individual companies to invest in. Rather than picking individual stocks such as Amazon or Tesla, index funds are a way to buy the whole market, across all sectors and regions of the world. Essentially, you own a small portion of thousands of companies throughout the world. Instead of betting on a particular company, you are placing a bet on the global economy.
Rather than having to pick the right stocks or ETFs among the hundreds available through a broker like N26, you invest in a portfolio that is tailored to you and your goals. These portfolios are composed of globally diversified index funds, meaning you earn a piece of the growth of the global economy, and they're best suited to make the most of your savings long term. And they're secure as they're under supervision of the regulator in the Netherlands (AFM).
We believe that investing is an important tool for our generation to improve our financial well-being and to prepare for our future. We are building Curvo to fulfil that vision, by making good investing easy and accessible to all:
- Diversified portfolio set up for you: The best portfolio for you is built based on your time horizon and financial goals. Simply answer a short questionnaire and you’ll get everything set up for you.
- Automated savings plans: Through Curvo’s app you can set up a monthly contribution from €50. That means that money is automatically invested for you in your portfolio. Put your savings on autopilot!
- Fractional shares: All the money you send towards your portfolio is fully invested. No cash is left on the side.
- No TOB: Significant savings as the portfolios aren’t liable for the Belgian transaction tax (or "TOB"). This saves you between 0.12% and 1.32% for every time you buy or sell!
- Sustainable investments: Your investments focus on one guiding principle: don’t invest in companies that are considered destructive to the planet. This means that sectors like non-renewable energy, vice products, weapons and controversial companies are all excluded.
- Project yourself into the future: Through Curvo you can see how much your portfolio is expected to be worth in the future. You can answer questions like “how will increasing my monthly contribution by €50, €100 or €200 affect my long-term savings?” to give a concrete idea for the “future you”.
Learn more on how it compares to investing through a broker.
Summary
While N26 offers an easy entry into investing with low fees and fractional shares, it might not be the best choice for everyone. The platform seems more focused on active trading than long-term investing, and the tax burden falls entirely on you as an investor.
Before diving in, consider what type of investor you want to be. If you're interested in picking stocks and making regular trades, N26 could work for you. But if you're looking for a hands-off approach to building long-term wealth, you might want to explore alternatives like Curvo that focus on passive investing and handle all the tax complexities for you.