- Daily & Weekly newsletters
- Buy & download The Bulletin
- Comment on our articles
A smarter investor: If you’re considering investing while in Belgium, here’s what you need to know
Expats tend not to arrive in Belgium with a suitcase full of money extracted from their savings and investments. At least to begin with, those investments are typically kept at home. Once you’ve arrived and settled in Belgium, then it’s time to explore whether and how much you might be able to save on your Belgian income.
There are four broad categories of investment: savings, financial investments, real estate and setting up a company. To compare them, look at the risk, the return, the liquidity and the diversification of each. There is also the option to invest in art or your children’s schooling, or to give back to society. Whatever you choose, there are compliance and tax issues to consider, and these may be more complex for expats than for locals. Under the Markets in Financial Instruments Directive (Mifid), designed to protect investors in the EU, a financial intermediary is obliged to determine your investor profile before selling you financial products, and check the products against your investment time horizon. In other words, how much risk you are prepared to take, and how long you can spare the money to be invested.
There are a number of ways to manage your investments. You can have the bank or other financial advisor manage your assets based on an investment mandate that you draw up together, after determining your Mifid profile and time horizon. Another option is to have the bank carry out advisory portfolio management, whereby you are actively involved in the investment choices and all transactions are confirmed with you before they are executed. In both cases, the bank must always check that the transactions are in line with your investor profile before executing them, and should also keep your time horizon in mind. If you’ve got the necessary knowledge of the market and the available products, you can manage your portfolio yourself.
As an expat in Belgium, if you pay taxes as a resident here, overseas financial assets or income in your home country or elsewhere should also be declared in Belgium. The OECD’s Common Reporting Standard will warn the authorities if you have financial assets elsewhere, so there is no room for omission in your tax declaration. If your country of fiscal residency is not Belgium, you must typically report your financial investments in Belgium to the authorities in your country of fiscal residency.
For US citizens, the Foreign Account Tax Compliance Act (Fatca) applies, which works in a similar way. With the exception of some specialised financial companies, Belgian banks are typically not able to help US citizens with financial investments, but might be able to provide other banking services including savings.
It may be wise to lodge at least a part of your financial investments in the country where you pay taxes as a resident, be that Belgium or elsewhere. That way you will learn how the local tax system works and can get help from your bank or other financial institution. If you pay tax as a resident in Belgium, and you hold investments abroad, you should check whether you need to pay taxes on stock-exchange transactions and securities accounts, as these apply on eligible investments abroad too.
Diversification is key. As the investment portfolio theory states: diversification leads to a lower risk and a higher return, at least in the longer run.
Property has its place in a diverse portfolio, and you don’t necessarily need to buy it yourself. You can buy shares in companies that invest in real estate, or in mutual funds that do it for you.
If an investment offer sounds too good to be true, then it probably is. Only invest in assets that you understand.
This article first appeared in ING Expat Time