Dollar ETFs: The

By the editorial team Fargoinvestor · 21 October 2026

Why the advertised return is no longer the real return

For the Belgian retail investor, geographic diversification has always relied on a simple premise: buying US assets to capture global growth. For years, due diligence was limited to checking the fund's management fees. But the landscape has shifted. Since the new tax regulations took effect, portfolio management now demands unprecedented mathematical rigor.

Buying a dollar-denominated ETF is no longer just a routine stock market transaction. It brings immediate exposure to two key variables: currency volatility on one hand, and a strict taxation mechanism on the other. Ignoring bank conversion fees and the intricacies of stock market taxes is no longer a mere optimization oversight—it actively erodes your net returns. Investors must now navigate a scissor effect where actual costs do nothing to soften the tax burden.

Key takeaways

• A strict tax base: Taxable capital gains are calculated as the selling price minus the purchase price. No fees or taxes (such as currency conversion costs or the TOB) are deductible.
• The active 10% tax: Belgium applies a 10% tax on capital gains realized on financial assets. This includes an annual exemption of €10,000 per taxpayer, with a €1,000 carryover if unused.
• The burden of the TOB: The Stock Exchange Tax (TOB) hits every transaction and varies wildly depending on where the fund is registered, chipping away at capital upon both purchase and sale.

The dual engine (and double risk) of a dollar ETF

The mechanics of performance

Investing in the US market from Europe means accepting a two-variable equation. According to KBC Brussels, the return on a stock denominated in a foreign currency depends on both the stock's price performance and the value of the currency in question. When you buy an index fund tracking the S&P 500 or the Nasdaq, the index's trajectory is only part of the story.

The tangible impact of fluctuations

This dual engine can quickly become a double penalty if exchange rates turn unfavorable. Recent market data illustrates this clearly. According to UBS, for European investors holding unhedged US equities, the dollar's depreciation between November 2022 and November 2025 significantly dragged down returns once converted into their home currency.

A Belgian investor watching their dollar index rise on their brokerage dashboard might not realize that a weak currency against the euro is quietly eroding their final purchasing power. The gross returns displayed by the North American stock market therefore remain largely hypothetical until they are repatriated and measured in the local spending currency.

The illusion of gross performance: Why non-deductibility changes everything

The new tax framework

The new tax laws have redrawn the investment map in Belgium. A 10% tax now applies to capital gains on financial assets. However, this levy spares smaller portfolios thanks to an annual exemption set at €10,000 per taxpayer, with a €1,000 carryforward option if left unused. For long-term investors, the asset's value on December 31, 2025, serves as the reference purchase price for pre-existing holdings. If this reference value is lower than the original purchase price, the calculation defaults to the original price to prevent the creation of an artificial capital gain.

The scissor effect on net profitability

The biggest shift lies in the calculation method. The taxable capital gain is calculated as the sale price minus the purchase price. During this calculation, absolutely no fees or taxes are deductible. Consequently, the currency conversion fees charged by banks do not lower the tax base.

This mechanism creates a cascading effect for foreign currency transactions. Here is the mathematical reality every investor must now factor in:

1. First, the investor absorbs brokerage fees and the euro-to-dollar conversion spread upon purchase.
2. They pay the TOB at purchase, which immediately chips away at the capital actually invested.
3. Upon selling, they are hit again by brokerage fees, the dollar-to-euro conversion spread, and the exit TOB.
4. The tax levy: A 10% tax is applied to the difference between the gross sale price and the gross purchase price. This calculation completely ignores the frictional costs incurred in steps 1, 2, and 3.

The investor thus ends up paying taxes on a theoretical margin they never actually pocketed. On frequent trades or in highly volatile markets, the accumulation of these non-deductible costs drastically widens the gap between the benchmark index's posted return and actual wealth creation.

Accumulating or distributing? The intersecting trap of the TOB and withholding tax

The distribution dilemma

Navigating this framework makes fund selection crucial. Traditionally, Belgian investors steer clear of distributing ETFs to avoid revenue confiscation. While individual stocks offer some protection—the first €833 of ordinary dividends per person is exempt, with a recoverable withholding tax up to €249.90—this exemption does NOT apply to dividends from collective investment schemes, mutual funds, or ETFs. A distributing fund will therefore suffer a flat 30% withholding tax at the source, with no possibility of recovery.

The Belgian registration trap

To bypass this withholding tax, the obvious strategy is to turn to accumulating ETFs. But this choice triggers another mechanism, often poorly understood by retail investors. As noted by Curvo, the TOB applied to ETFs stands at 0.12%, 0.35%, or 1.32% depending on the financial product's characteristics, capped per transaction to limit the blow on very large trades.

Making the right call requires precision regarding a specific contagion rule. It's crucial to note that a distributing ETF is subject to a 0.12% TOB, whether registered in Belgium or the EEA. For accumulating ETFs, however, Belgian registration causes the tax to spike to 1.32%. As soon as one share class of a sub-fund is registered in Belgium, all share classes within that sub-fund are deemed locally registered. The direct consequence: the TOB on an accumulating class from that sub-fund jumps from 0.12% to 1.32%—an elevenfold increase.

* Note: A distributing ETF registered in Belgium or the EEA (outside Belgium) is generally subject to a 0.12% TOB. The 1.32% rate applies to accumulating share classes of a sub-fund registered in Belgium.

The dollar ETF equation is therefore highly complex: dodging the 30% withholding tax by opting for accumulation demands absolute vigilance regarding the fund's registration status. Otherwise, you risk watching the TOB slash your capital both on entry and exit.

Should you choose a euro-hedged ETF?

The invisible cost of insurance

Faced with the fickle fluctuations of the greenback, it's tempting to opt for a currency-hedged ETF (often labeled "EUR Hedged"). This strategy aims to neutralize the impact of currency swings on your returns. However, this protection is far from free.

The cost (or gain) of currency hedging is driven by interest rate differentials between the two hedged currencies. On top of this macroeconomic mechanism are the transaction costs inherent in the forward contracts used by managers, involving spreads levied on both legs of the trade. This "cost of carry" is a continuous drag on the ETF's performance, whether it's explicitly accounted for in management fees or tucked away in the net asset value.

Forfeiting the upside

Hedging doesn't just generate fees; it also cuts off market opportunities during cycles that favor the foreign currency. Currency hedging can cap upside potential: between June and December 2014, a surging dollar boosted US equity returns when converted into local currencies for European investors—an additional yield that holders of hedged exposures entirely missed out on. Choosing to hedge effectively trades volatile risk for a structural burden.

What is the TOB, and who pays it?

The Stock Exchange Tax (TOB) is levied on the purchase and sale of financial assets in Belgium. Its rates sit at 0.12%, 0.35%, or 1.32% depending on the financial product, with specific caps applied per transaction. If you trade through a Belgian-based intermediary (like brokers Bolero or Keytrade), they withhold it automatically. Conversely, if you use a foreign broker, you are responsible for paying it yourself.

Conclusion: Restructuring your geographic allocation

The lens through which Belgian investors must view their portfolios has fundamentally changed. New tax constraints are reshaping passive management in foreign markets. Today, acquiring US assets requires a vision that goes beyond simple index tracking. Geographic diversification is now measured in yields net of local tax frictions. Faced with this friction, investors must make a definitive choice: does maintaining dollar exposure justify the exchange fees and non-deductibility, or do interest rate differentials make currency hedging a smarter play over the long haul?