As a dividend investor in Belgium, reaching financial independence is a real challenge. The main problem is that the politicians leading this country and inventing new taxes, have little or no financial knowledge. At the start of 2016, the “little investor” tax became effective taxing all stock gains at 33% for the little investor. Losses cannot be subtracted which makes Belgium the unique country in the world of stupidity.
Belgium is as well one of the countries with the highest income tax. See graph for the last years.
Belgium is celebrating Tax Liberation Day at the 27 July 2016. The milestone comes earlier than last year 2015, when it was only 6 August. Belgium has now got ahead of France, and is no longer the worst pupil in the European Union. Tax Liberation Day marks the day in the year when Belgians stop paying taxes and start “working for ourselves”. The lower the tax rates, the earlier a country celebrates Tax Liberation Day.
The calculations were made by the French Institut Economique Molinari. It calculates each year how big a part of your wage goes back to the government. In Belgium, this share has dropped to an average of 56.90 percent this year, coming from 59.47 percent last year, a result triggered by the tax shift introduced by the Michel government. Consider the scenario where I invest my savings on a monthly basis and let them compound at a 6% rate annualy for 15 years. The power of compounding interest will increase the savings gap between my Belgian and American self even further. After 15 years my Belgian net worth is only 65% of my American net worth, a significant difference.
If you invest in foreign dividend stocks, you get taxed twice dependent on the country where you bought stocks. The Belgian dividend tax is 27% and politicians are investigating to lower company taxes by 2020 and squeeze the little investor as a lemon even further by raising dividend tax to 30%.
However you need to compare the NET DIVIDEND CASH FLOW after taxes and compare with the current banks savings rate you get it on your bank savings account. The current savings rate is 0,11% and this will soon go to ZERO….so investing will be the new norm soon instead of putting your money on a savings accounts which gets eaten by inflation.
Foreign dividend tax table (source Dierickx bank)
| Overzicht van de buitenlandse bronheffing
Overview of foreign dividend tax |
||
| Land / Country | Buitenlandse bronheffing* |
Terug- vorderbaar |
| Canada | 25% | 10% |
| Duitsland / Germany | 26,375% | 11,375% |
| Frankrijk / France | 30% | 15% |
| Italië | 27% | 12% |
| Japan | 7% | 0% |
| Luxemburg | 15% | 0% |
| Nederland/ Netherlands | 15% | 0% |
| Zwitserland/ Switzerland | 35% | 20% |
If you keep 5 to 10 % Net Cash Flow from your dividend investment, you are still better off than the 0,11% interest rate of your bank.
If you want to learn about inflation, read this blogpost. If you want to know why dividend investing is the new way of generating income cash flow, read this blogpost about my strategy .
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