In the first quarter of this year, the proceeds from withholding tax increased by 45 percent to nearly 1.2 billion euros, primarily due to rising interest rates and the growing popularity of term accounts and bonds. According to De Tijd, the increase in interest rates is making it more expensive for the government to refinance loans but also has positive effects on the treasury.
Income from withholding tax rose by 362 million euros compared to the same period last year, as reported by new figures from the Federal Public Service Finance. Anyone receiving dividends or earning interest from bonds or term deposits is subject to a 30 percent withholding tax. Withholding tax on dividends saw a 25 percent increase in the first three months of this year compared to the same period last year, while there was an 81 percent increase in other movable income, mainly from fixed-income products like term accounts or bonds.
The significant increase in withholding tax on proceeds from investments can be attributed to two main reasons. Firstly, higher yields on investments resulting from European Central Bank’s interest rate hikes have made it more attractive for investors to invest in these products. Secondly, households have been transferring billions of euros from tax-friendly savings accounts to more heavily taxed term deposits and bonds as they offer higher returns. This shift has led to decreased balances on savings and current accounts while boosting investments in term deposits and bonds.
Between February 2023 and February 2024, around 30 billion euros moved from tax-friendly savings accounts to term deposits and bonds. Additionally, families invested a record amount of 33 billion euros in bonds last year, all subject to the 30 percent withholding tax on proceeds. This trend reflects a strategic move by investors and savers seeking higher returns on their investments amidst rising interest rates and shifting market conditions.