In the first quarter of this year, the proceeds from withholding tax increased by 45 percent to almost 1.2 billion euros, driven by rising interest rates and growing popularity of term accounts and bonds, as reported by De Tijd. This represents a 362 million euro increase compared to the same period last year, according to new figures from the Federal Public Service Finance.
Individuals who receive dividends or earn interest from bonds or term deposits are subject to a 30 percent tax. Withholding tax on dividends saw a 25 percent increase in the first three months of this year compared to the previous year, while other movable income experienced an 81 percent uptick. This includes interest on fixed-income products like term accounts and bonds.
The European Central Bank’s interest rate hikes have led to higher yields on investments, contributing to the increase in withholding tax revenue. Additionally, households have shifted billions from tax-friendly savings accounts to more heavily taxed investment products that offer better returns.
Between February 2023 and February 2024, around 30 billion euros were withdrawn from savings accounts while an additional 35 billion euros were placed in term deposits. Record amounts of bonds, including government bonds, were purchased last year. All proceeds from these investments are subject to the 30 percent withholding tax.
Overall, the increase in withholding tax revenue reflects the changing investment landscape as savers and investors seek higher returns in a rising interest rate environment.
