What is a state note?

The state note is a bond issued by the Belgian government in which you can invest. A bond is a fancy word for an IOU: you lend money that you are then owed afterwards. In other words, when you invest in a government bond, you are lending money to a country. In return, you receive a predetermined amount of interest, called the ‘coupon’, which is usually paid annually. At the end of a predetermined period (between one and 10 years), you get back the money you lent.

A state note is suitable for investors who like to combine security with a higher return than a savings account can usually offer. It is particularly secure because you are lending money to the government, and the risk that the Belgian government would go bankrupt is very small.

The government has been issuing state notes for a long time, but the issue in September 2023 led to a real rush. This was because the Belgian government offered an attractive return as well as a reduced rate of withholding tax. Withholding tax is a tax on interest that is paid back to the state. This is usually set at 30%, but in September 2023 it was exceptionally reduced to 15%. In a nutshell, state note investors got to keep a larger amount of money.

The interest rate is fixed in advance, but it is different each time the state note is issued, which means that the return changes as well. The rest of the process stays the same, however. You always know the interest rate and the term in advance, and at the end of that period, you get your money back. In the meantime, you receive an annual net return (with charges such as withholding tax already deducted).

Let’s consider an example calculation. If the gross interest rate is 2.50% with a one-year term, this would give the following net return: 

There are risks and costs involved with any investment, including government bonds such as the state note. There will always be a certain level of credit, liquidity, market and inflation risk, but you can generally expect the Belgian government to be able to pay its debts.

There are no entry charges, and there are also no exit charges if you wait until the maturity date (i.e. the end of the term). However, withholding tax is always deducted from your gross interest.

State notes are usually issued four times a year: in March, June, September and December. Once the return and the term have been announced, you usually have a week to invest. You can subscribe for as little as 100 euros and in multiples of 100 euros. A state note can be purchased from the Belgian Debt Agency, which manages Belgium's public debt. You can also make a purchase through KBC Brussels.

Investors who want to know the return in advance or who prefer a fixed term can also explore the different options offered by KBC Brussels. After all, there are alternatives available that offer similar benefits. It never hurts to check and compare your options. Perhaps you’re willing to accept a little risk for the chance of a higher return, or maybe you’d prefer a longer term to let your money grow slowly but surely. The choice is yours! Check out our options or talk to our experts.