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Taxation of income received from financial assets

From 2011 natural persons a possibility to defer the tax liability created on income received from financial assets until the time of taking the income into use, by using an investment account for this purpose.

An investment account may be used for deferral of the tax liability. An investment account is just an ordinary monetary account with an obligation to record all money transfers. An investment account may be opened in a resident credit institution of an OECD member state or in a permanent establishment of a credit institution located in that country. For attaining an objective by means of an investment account, financial assets may be acquired for the money in the investment account only, and income received from the investment account must be transferred to an investment account without delay. Several investment accounts may be used for subsequent tax exempt reinvestments of income received from financial assets. A taxable amount shall be created when the disbursements made from all investment accounts exceed the balance of contributions in all investment accounts after the disbursement. Balance of contributions shall be calculated after every contribution and disbursement. All transfers from the investment account are deemed to be disbursements, except for the transfers made for acquiring financial assets and transfers to another investment account. Account balance before the account is taken into use as an investment account and additional transfers made to an investment account is deemed to be a contribution to an investment account. Non-taxable income received from investment assets and money transferred from another investment account is not deemed to be a contribution. For example, if the balance of contributions in the investment account is 2000 euros, the taxable income will be created only after the disbursements not related to acquisition of financial assets exceed 2000 euros.

When a bank account used for everyday settlements is taken into use as an investment account, every contribution to and disbursement from the settlement account must be recorded. For example, wages and salaries received must be entered in the accounts as contributions, and payments of utility costs are to be recorded as disbursements, etc. If an investment account is taken into use only for transactions in financial assets, the record keeping of contributions and disbursements is much easier.

Income received from financial assets and declared as a contribution to an investment account must be immediately transferred to the investment account. If a person fails to do so, the derived income shall be deemed to be a disbursement from the investment account.
The principles of taxation of income derived from the transfer of financial assets not complying with the requirements specified in 171 of the Income Tax Act remain unaltered. The current taxation regulation may also be applicable when a person does not wish to defer the tax liability on income derived from financial assets through the investment account.

When using an investment account, a person must, in addition to information to be declared, keep records of the acquisition cost of the financial assets, so that it would be possible to determine the acquisition cost of financial assets acquired for money in the investment account, if necessary.