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|Tax calculation||It must be made, if the amount withdrawn from the investment account exceeds the total amount deposited.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 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|
|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|
|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|
|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|
|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 firstname.lastname@example.org.
This material is of a general informative nature and does not constitute tax advice.