Categories: Economy

Record Increase in Withholding Tax on Proceeds from Investments Due to Higher Interest Rates and Popular Demand for Term Accounts and Bonds

In the first quarter of this year, withholding tax increased by 45 percent to almost 1.2 billion euros, primarily due to rising interest rates and the popularity of term accounts and bonds. The increase in interest rates is making it more expensive for the government to refinance loans but has positive effects on the treasury. Income from withholding tax increased by 362 million euros compared to the same period last year, as reported by new figures from the Federal Public Service Finance.

The significant increase in withholding tax on proceeds from investments is attributed to two main reasons. Firstly, higher yields on investments resulting from the European Central Bank’s interest rate hikes have led to an increase in withholding tax on dividends and other movable income, mainly from fixed-income products like term accounts or bonds. 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.

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 to seek higher returns on their investments amidst rising interest rates and shifting market conditions.

According to De Tijd, income from withholding tax increased by 362 million euros compared to the same period last year, mainly due to an increase in interest rates and popular demand for term accounts and bonds. This shift has resulted in decreased balances on savings and current accounts while boosting investments in term deposits and bonds.

Families are increasingly choosing bond investments over savings accounts due to their higher yields despite facing a significant rise in taxes on proceeds. With interest rates continuing to rise across Europe, this trend is likely to continue as investors look for better returns on their investment portfolios.

Overall, while rising interest rates are having a negative impact on some aspects of the economy such as government borrowing costs, they are also driving up profits for financial institutions offering high-interest rate products like term accounts or bonds.

Aiden Johnson

As a content writer at newspoip.com, I have a passion for crafting engaging and informative articles that captivate readers. With a keen eye for detail and a knack for storytelling, I strive to deliver content that not only informs but also entertains. My goal is to create compelling narratives that resonate with our audience and keep them coming back for more. Whether I'm delving into the latest news topics or exploring in-depth features, I am dedicated to producing high-quality content that informs, inspires, and sparks curiosity.

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