In the first quarter of this year, the proceeds from withholding tax increased by 45 percent to almost 1.2 billion euros, mainly due to the rise in interest rates and the increasing popularity of term accounts and bonds. This increase is attributed to two main reasons: higher yields on investments resulting from the European Central Bank’s interest rate hikes and households 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, the increase in interest rates is making it more expensive for the government to refinance loans but also has positive effects on the treasury as income from withholding tax increased by 362 million euros compared to the same period last year. Withholding tax on dividends saw a 25 percent increase in the first three months of this 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 is attributed primarily to two factors: firstly, higher yields on investments resulting from interest rate hikes by the European Central Bank; secondly, households transferring billions of euros from low-tax savings accounts into more heavily taxed term deposits and bonds as they offer higher returns. This shift has resulted in decreased balances on savings and current accounts while boosting investments in term deposits and bonds.
In conclusion, investors and savers are seeking higher returns amidst rising interest rates and shifting market conditions by moving their funds into more heavily taxed fixed-income products like term deposits or bonds. The significant increase in withholding tax on these proceeds reflects this trend as well as changes in interest rates set by central banks globally.
Overall, it is important for investors and savers to be aware of how their investment decisions can affect their taxes, especially when dealing with fixed-income products that carry high taxes like term deposits or bonds.
