📅 Last updated: 8 May 2026
· 🏷 Topic: TIPS, inflation-linked bonds, ILB
· 🇧🇪 For: Belgian investors
Inflation-linked bonds (in the US: TIPS = Treasury Inflation-Protected Securities; in Europe: ILBs = Inflation-Linked Bonds) are bonds whose principal + coupon are adjusted to inflation. For Belgian investors, an interesting “anchor” against inflation erosion.
How they work
Classic bond: fixed coupon, fixed principal. If inflation spikes, you lose real purchasing power.
Inflation-linked bond:
– Principal is adjusted to an inflation index (e.g. eurozone HICP).
– Coupon is calculated on the adjusted principal — so it rises with inflation.
Concretely: you buy a 10-year ILB with a 1.5% coupon, principal €1,000.
– Year 1, inflation 2.5%: adjusted principal = €1,025. Coupon = 1.5% × €1,025 = €15.38.
– Year 5, cumulative inflation 13%: principal = €1,130. Coupon = €16.95.
– At maturity: the adjusted principal back (€1,000 + cum. inflation).
Result: your real return is protected against inflation.
Available ILBs for Belgian investors
Direct via broker:
- OLOi (Obligation Linéaire indexée): the Belgian state has issued inflation-linked versions, limited supply.
- German, French, Italian ILBs: broader supply, all in EUR.
- US TIPS: available but in USD (currency risk).
Via ETF (simplest):
- iShares EUR Inflation-Linked Bond UCITS (IBCI) — eurozone inflation bonds. TER 0.1%.
- iShares Global Inflation-Linked Bond UCITS — worldwide, with hedging. TER 0.25%.
- Lyxor Core EUR Inflation-Linked Bond DR — comparable.
Pros and cons
Pros:
- ✅ Inflation protection — purchasing power is preserved.
- ✅ Defensive allocation — less volatile than equities.
- ✅ Diversification vs ordinary bonds.
Cons:
- ❌ Lower nominal return than ordinary bonds (the inflation protection is “paid for”).
- ❌ When inflation falls lower return than ordinary bonds.
- ❌ Reynders tax potentially applicable to the bond portion on sale.
- ❌ Low real yield sometimes — since 2020-2022 the break-even inflation (inflation expectation in the market) was high, so real yield on ILBs was negative.
Belgian taxation
On coupon: 30% withholding tax (roerende voorheffing).
On the inflation-component of the adjusted principal: complex. For individual ILBs this part is generally taxed as ordinary coupon income at maturity.
On bond ETFs (incl. ILB ETFs):
– TOB: 0,12% on distributing UCITS or non-Belgian-registered accumulating share classes (cap €1.300); 1,32% (cap €4.000) on Belgian-registered accumulating ETFs. The compartment rule applies: if a fund’s distributing class is FSMA-registered, the accumulating sister-class is also treated as Belgian-registered.
– Reynders-taks: 30% on the interest component on sale (applies to funds with ≥10% bond content for purchases from 1 Jan 2018; ≥25% for pre-2018).
– Since 1 January 2026: 10% capital gains tax on the genuine price-gain component above the €10.000/jaar exemption (€1.000/jaar carry-forward, max €5.000 cumulative). Reynders and the new CGT coexist — interest component = 30% Reynders, capital component = 10% CGT.
Practical role in a portfolio
For the defensive allocation:
| Profile | Allocation ILB / ordinary bonds / cash |
|---|---|
| Conservative 60/40 | 50% ordinary bonds + 25% ILB + 25% cash (of the 40% defensive) |
| Neutral | 60% ordinary bonds + 40% ILB (of the 30-40% defensive) |
| Inflation concerns | Higher ILB share — e.g. 60-80% of the defensive component |
For those who are seriously concerned about inflation: ILB as the largest defensive component.
For those who are confident inflation will stay low: ordinary bonds historically deliver a better return.
When are ILBs less useful?
- With negative real interest rates — which has often been the case since 2020.
- With falling inflation — ordinary bonds then perform better.
- With a very long horizon (30+ years) in a pure equity portfolio — equities historically offer better inflation protection than ILBs.
💡 ILBs are a specific tool for those with inflation concerns over a medium horizon (5-15 years). Not necessary in every portfolio, but useful for specific profiles.
🔗 See Inflation and purchasing power (NL) and Bonds and fixed income (NL).
Why the Reynders tax bites especially hard here
For a Belgian investor this is what decides the after-tax outcome. A fund with 10% or more bond exposure falls under the Reynders tax (art. 19bis WIB92/CIR92): 30% on the TIS component at sale — the interest component and debt-related gains.
In an inflation-linked bond fund that component is effectively the entire return. The inflation compensation meant to protect your purchasing power is, for tax purposes, simply interest. A real return that is marginally positive before tax can look quite different after Reynders.
This does not make inflation-linked bonds useless, but it does explain why they rarely work out as attractively in a Belgian portfolio as in countries without a comparable levy.
Individual bond versus fund
- Through a fund or ETF: 30% Reynders tax on the TIS component at sale, plus stock-exchange tax on purchase and sale.
- A directly held bond: the coupon is movable income and taxed at 30% withholding tax. The treatment differs, but neither route is cheap.
Anyone seeking inflation protection is better served comparing the after-tax outcome against the simpler alternatives — a regulated savings account, or a broad equity fund for the long term — rather than the gross yield quoted in product literature.
Sources
- iShares — Inflation-linked bond ETF factsheets
- Belgian Federal Treasury — OLOi and Belgian ILBs
- ECB — Inflation-linked bond data
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