Trade Republic's savings account promises a tempting 2.75% interest rate. That's higher than what most Belgian banks offer today. But there's a catch. Unlike Belgian regulated savings accounts, every euro you earn in interest is subject to a hefty 30% tax. And you'll need to declare it yourself.
Let's explore how Trade Republic's savings account really works, how much you'll actually earn after taxes, and whether it's worth your time.
What is the Trade Republic savings account?
Trade Republic is best known as a low-cost brokerage app that allows users to trade stocks and ETFs. However, in response to rising interest rates, the app has introduced a savings account feature that offers an attractive interest rate on uninvested cash. Basically, you earn an interest on any cash you don't invest and that you leave sitting on your Trade Republic account.
The current rate is set to 2.75%. This makes it a competitive interest rate, which is often higher than what traditional Belgian banks offer. Note that Trade Republic regularly updates its rates based on market conditions, so it’s worth checking their latest offer, as this 2.75% can be out of date.
How is the interest rate paid out?
Unlike some banks that only credit interest monthly or annually, Trade Republic offers daily interest accrual. This means that you can benefit from compound interest, as your earned interest starts generating additional returns immediately.
There is also no minimum deposit required which makes it an accessible way to park your money. However, you earn the interest only on the first €50,000 you deposit.
Do I have to pay any fees to withdraw?
No. You can access your money at anytime and not pay any fees to withdraw.
Is my money safe with Trade Republic?
Yes. Trade Republic benefits from the European Deposit Guarantee Scheme (DGS), which covers up to €100,000 per depositor. This is the same level of protection as Belgian banks offer.
Trade Republic likely profits from your money by:
- Lending out deposits to financial institutions (a common practice in banking).
- Partnering with third parties that pay Trade Republic for deposits.
- Using deposits for investment purposes within regulated limits.
Although this is a normal practice, it differs from the way traditional savings accounts work in Belgium, where banks primarily use deposits to fund mortgage and business loans.
How am I taxed on this?
Watch out. There's no such thing as a free lunch when you're parking your money. Unlike Belgian regulated savings accounts, where the first €980 of interest is tax-free, every euro earned with Trade Republic is fully taxable.
While Trade Republic offers a high interest rate, it is considered a non-regulated savings account under Belgian tax law. This means:
- You must pay a 30% withholding tax on all interest earned.
- There is no tax-free exemption.
What's the difference between a regulated and a non-regulated savings account?
A regulated savings account offers a base rate and a fidelity premium rate. The premium is for money that stays in the account for over a year. Your traditional savings account at your bank is very likely regulated.
A savings account without a fidelity premium is a non-regulated savings account. The tax authorities impose a 30% withholding tax on its proceeds starting from the first euro.
Concretely, how much tax do I need to pay?
Imagine you deposit €1,000 into your Trade Republic savings account on May 1, 2025, at an interest rate of 2.75% per year. You leave this money untouched for one full year until May 1, 2026. So, after one year, you earn €27.50 in interest.
You now need to apply the 30% withholding tax to all your interest earnings. So you need to pay a €8.25 tax and you actually get to keep €19.25 instead of €27.50. So in essence, the effective interest rate is 1.925% rather than 2.75%.
How do I declare the tax?
Trade Republic does not withhold taxes on your behalf, nor do they provide a ready-made calculation of the tax you owe. This means you’ll need to calculate and declare the tax yourself. You can use the example provided earlier as a reference.
To report your interest earnings, you must complete the Belgian resident income tax return ("Déclaration à l'impôt des personnes physiques" / "Aangifte in de personenbelasting"). Specifically, you need to:
- Declare the net amount of foreign interest earned (after any foreign taxes withheld) in Section VII of the tax return, under movable income ("Revenus mobiliers" / "Roerende inkomsten").
- Use tax code 1150/2150 to report foreign interest income. However, as tax codes may change, it’s recommended to consult the latest tax return guide to ensure accuracy.
- Submit your tax return by the deadline.
Make sure to report this income correctly, as failure to declare foreign interest can result in penalties from Belgian tax authorities.
How does it compare to a traditional regulated saving accounts?
It's important to understand the differences between regulated and non-regulated (like Trade Republic's) savings accounts:
There are alternatives. When we look at the best traditional savings accounts, we can see that for instance the Vision Plus account by Santander Plus has a higher interest rate of 2.25% than the net interest rate of 1.925% on Trade Republic accounts.
Should I open a savings account?
A good place for an emergency fund
A savings account is a great place to put money that you need to access at any time. If you deposit €1,000 today, it should be safe tomorrow, next week, and next year (unless the bank fails). Even a little more, because of the interest.
That's why a savings account is the best place for your emergency fund. It's a safety net for unexpected events, like losing your job, a costly car repair, or a plumbing leak. Without an emergency fund, you may have to take out a high-interest loan. And avoiding debt is the first rule of responsible financial planning.
You're unlikely to meet your financial goals with a savings account
Yet, a savings account is a poor place to save for the long term. The reason is the low interest rate paid out by banks. In fact, due to inflation, you may have "lost" savings this past decade. Keeping money in a savings account hurt you, as interest rates were lower than inflation. A €10,000 savings account in 2006 would be worth about €7,500 today, after inflation.
A savings account won't help you much with achieving your long-term goals. Instead, investing in the financial markets is a way to earn a higher return and meet your financial goals. For instance, a global stock ETF earned a 10.2% average annual return since 1979. Considering the average yearly inflation is around 2%, this earns a healthy return above inflation. The reason for the superior performance is that by investing in the financial markets, you earn a dividend on the growth of the world economy. An investment in the stock market fluctuates more than a savings account. But for that risk, you are rewarded with a much higher return on the long-term.
We can see this when when comparing the historical performance of a savings account and a global stock ETF like IWDA. The average return of a savings account these last 20 years was around 0.9%, whereas it's been 8.4% for stocks. Due to compound interest, this translates to a total amount of €46,000 vs €12,000 on an initial €10,000 investment.
The illustration below shows the difference between a savings account and investing. A savings account provides a predictable and stable return. But you don't earn much of a return. Investing is more of a rollercoaster because the financial markets go up and down over time. But over the long term, you can be almost certain that you will earn a higher return.
Our conclusion
Trade Republic's savings account offers an attractive interest rate of 2.75%, but the 30% tax on all earnings makes it less appealing for Belgian investors. While it's a legitimate option for storing cash, remember that you'll need to handle tax declarations yourself, unlike with Belgian regulated savings accounts.
For your emergency fund, a savings account makes perfect sense. But if you're looking to grow your wealth over the long term, the stock market has historically provided much better returns. Through Curvo, you can start investing in a diversified portfolio of ETFs that's tailored to your goals, all while avoiding the complexities of tax declarations and portfolio management.