Investment account

Investment account provides an opportunity to conveniently manage investments in financial instruments, as well as to reduce the administrative burden in accounting of transactions and preparation of personal income tax (PIT) and capital gains declarations for the Internal Revenue Service (IRS). 

The investment account is especially beneficial for private persons who actively trade in financial instruments (shares, bonds, investment funds, ETFs, futures and options, Forex, CFDs, etc.) and who have special conditions for calculating and declaring personal income tax.

Benefits of the investment account:

  • Relieved calculation and declaration of gains tax;
  • Less frequent submission of tax returns on earned income to the IRS;
  • Possibility to defer payment of PIT from capital increase;
  • When opening an investment account, the PIT does not have to be paid until the amount of funds paid out from the investment account exceeds the amount of funds paid in;
  • Renesource Capital prepares an investment account statement, including the taxable income from the investment account;
  • Losses from financial operations are also taken into account in future tax periods (unlike the normal regime, where losses can only be used in the current year);

 

Investment account or Financial instruments account

  Investment account Financial instruments account
 
Tax calculation It must be made, if the amount withdrawn from the investment account exceeds the total amount deposited. The tax must be paid only if the payments from the investment account exceed the contributions to the investment account. In case of a positive difference, income tax must be paid by including it in the annual income tax return. If the PIT has already been deducted from the income received from transactions with Financial Instruments (for example, in case of bond coupon payments), then the Client may reduce the taxable part by this amount. It must be made for every earning income from each sale of financial instruments.
Liability of tax payment The client is responsible for the calculation of capital gains, income declaration and tax payment. The client is responsible for the calculation of capital gains, income declaration and tax payment.
Income declaration
Income from the investment account and accrued tax are declared in the annual income statement.
PIT payment is required only when funds are transferred from the investment account to another account.
It depends on the amount of income earned in the quarter. Once a quarter, if the quarterly income from transactions exceeds EUR 1,000. Once a year, if the income from transactions per quarter is less than 1,000 EUR.
Income tax returns Renesource Capital prepares an investment account statement, which summarizes information on cash deposits and withdrawals made to the investment account during the taxation year, and financial transactions, on the basis of which the Client fills in the annual income declaration. The client independently prepares information for the declaration of income from capital gains.
Financial instrument transactions All transactions (trading, safekeeping) with financial instruments are allowed, except for securities transfers. All transactions with financial instruments are allowed.

Comparison of Investment Account and Financial Instrument Account Yields over 4 Years

2018 INVESTMENT ACCOUNT FINANCIAL INSTRUMENTS ACCOUNT
Amount of investment 55 000.00 55 000.00
Return on investment 10 % 10 %
Total profit / loss 5 500.00 5 500.00
PIT (20%) of the total profit  0.00 1 100.00
Obligation to pay tax NO YES
Amount paid from the account for tax payment 0.00 1 100.00
2019    
Investments in financial instruments 60 500.00 59 400.00
Return on investment 12 % 12 %
Total profit / loss 7 260.00 7 128.00
PIT (20%) of the total profit  0.00 1 425.60
Obligation to pay tax NO YES
Amount paid from the account for tax payment 0.00 1 425.60
2020    
Investments in financial instruments 67 760.00 65 102.40
Return on investment -5 % -5 %
Total profit / loss -3 388.00 -3 255.12
PIT (20%) of the total profit  0.00 0.00
Obligation to pay tax NO NO
Amount paid from the account 25 000.00 25 000.00
2021    
Investments in financial instruments 39 372.00 36 847.28
Return on investment 15 % 15 %
Total profit / loss 5 905.80 5 527.09
PIT (20%) of the total profit 3 055.56* 1 105.42
Obligation to pay tax YES YES
Amount paid from the account (incl. For tax payment) 45 277.80 42 374.37
Account balance 0.00 0.00
Total amount withdrawn 70 277.80 67 374.37
Tax paid 3 055.56 3 631.02
Total income after taxes 67 222.24 63 743.35
The difference 3 478.89
 

*The amount of taxes is calculated from the positive difference between the amount of funds paid in and the total amount of funds paid out. (25 000.00 + 45 277.80-55 000.00 = 15277.80 EUR ; 15 277.80 * 20% = 3 055.56 EUR)

The investment account is not suitable for you if you plan to use the income from transactions with financial instruments for daily expenses by transferring funds to your current account, as a result of which it is not possible to defer the payment of PIT. Income earned on an investment account qualifies as income from capital and is taxed at a PIT rate of 20%.

You can transfer funds from your bank and / or payment institution's current account, which you use for daily transactions, to the investment account. You may have investment accounts with several banks and / or investment brokerage companies.

Opening, maintaining and closing an investment account with Renesource Capital is free of charge.

For account opening, please contact Company's representative by calling +371 67 092 737 иor sending an e-mail to trading@renesource.com.

This material is of a general informative nature and does not constitute tax advice.

Risk Disclosure Statement. Margin transactions (Forex, contracts for difference CFD, futures and futures options, stock options, REPO transactions, transactions in over-the-counter derivatives and transactions using broker credit, including selling short) involve higher risk. The level of risk increases with the leverage ratio. As the result of margin transactions, relatively high profits are possible with low level of initial investments, as well as significant losses which may exceed the principal amount of investments or the amount of the collateral. Please ascertain whether margin transactions in their essence and content suit the risk profile that was assigned to you by AS IBS Renesource Capital and whether the content of margin transactions corresponds to your investment goals.

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