The Belgian stock exchange transaction tax, shortened to "TOB", is one of those taxes that you need to know about when investing, because it can impact your choice of investments. We explain what it is, and how it affects your investments.
What is the transaction tax
The TOB is a levy imposed on certain transactions involving financial instruments carried out on a Belgian stock exchange or through a Belgian intermediary. It was introduced in Belgium in 1927 and has undergone several changes since then. The primary purpose of the tax is to generate revenue for the Belgian government and regulate stock exchange activity. It also serves as a deterrent for 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.
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.
The following decision tree can help you determine the TOB tax rate of an ETF:
As an example, the tax rates for some popular ETFs are:
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! The calculation of the TOB rate for ETFs is further explained in our in-depth guide.
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 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 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:
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.
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 how-to 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.