The Public Debt Agency has announced that the new one-year government bonds that will be launched early next month will have a gross interest rate of 3%. However, the Federal Government has yet to reach an agreement on the level of withholding tax that will be levied on interest accrued on the bonds.
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New 1-year government bond will have a gross interest rate of 3%, still no decision on rate of withholding tax to be levied
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As things currently stand it seems unlikely that the rate of withholding tax on the bonds will be reduced to 15% as was the case with the highly successful government bonds release last summer. The standard rate of withholding tax in Belgium is 30%.
If the standard rate is applied to a gross interest rate of 3% it would leave investors with a net interest rate of 2.1% or 21 euro interest on an investment of 1,000 euro. A 15% rate of withholding tax would leave investors with a net interest rate of 2.55% or 25.5 euro interest per 1,000 euro invested.
A decision on whether to apply a reduce rate of withholding tax will be taken at a meeting of federal ministers on Wednesday. However, in an interview with VRT radio on Tuesday morning the Federal Prime Minister Alexander De Croo (Flemish liberal) indicated that it is highly unlikely that a reduced rate of withholding tax will be levied on the bonds.