Equity savings account
Within an equity savings account, you can buy and sell stocks without needing to pay tax on the individual sales. The dividends and interest income are not taxed yet when they arrive at the equity savings account, either. The profit from an equity savings account is only taxed when you withdraw money from the account.
How does an equity savings account work?
The equity savings account has separate accounts for the money and the shares.
You can invest a maximum of EUR 50,000 on an equity savings account. You can either deposit all money on the account at the same time or make several deposits. You can only invest money in an equity savings account – this means that you cannot transfer shares that you already own to the account.
There can be both money and shares on the equity savings account at the same time, however. Within the account, you can buy and sell shares without tax. You can also invest the dividends or interest you receive in new shares. The profit from an equity savings account is only taxed when you withdraw money from the account.
You can only withdraw money from the equity savings account, which means that if the account contains shares, you need to sell them before withdrawing funds. You can withdraw money from the account at any time. This means that the withdrawals are not limited to a specific deposit period.
If your equity savings account incurs a loss, you can only deduct the loss from your capital income in the year when you close the equity savings account. Therefore, the loss is not deducted yet when you withdraw funds from the account.
The bank takes care of withholding tax – check your pre-completed tax return
When you withdraw funds from the equity savings account, they are divided into profit and capital. The profit is taxable income, while the capital is tax-exempt. The bank or other service provider calculates the profit for you and withholds the tax, which is 30% of the profit.
If you have withdrawn some money from the account during the tax year, the amount of profit and the tax withheld are transferred to your pre-completed tax return automatically. This means that you do not need to report this information at all – it is enough that you check the information when you receive the pre-completed tax return. There is a specific entry on your pre-completed return for your revenues or losses relating to an equity savings account.
If you did not withdraw money during the tax year, no profit is pre-filled under the “revenues and losses relating to an equity savings account” entry. However, up-to-date information about your account and the fair market value of your savings are shown under “Assets”.
The service provider usually deducts its service fees or other costs from the money account of your equity savings account. In that case, you cannot deduct them from your other capital income.
If you take out a loan to invest money in the equity savings account, the loan in question is an income generation loan. The interest on an income generation loan is deducted in full from all capital income. Check that the intended purpose of the loan is entered correctly in your pre-completed tax return.
How is the profit calculated?
You can determine the profit from your equity savings account as follows:
Separate the share of the profit from the fair market value of the equity savings account.
Divide the profit from the fair market value of the funds on the account.
Multiply this amount with the amount in euros that you have withdrawn from the account.
Example 1: Sari has deposited EUR 10,000 on the equity savings account and has subsequently used it to purchase shares in a Finnish listed company. The value of the shares has increased by EUR 5,000. In that case, the fair market value of the funds on the account is EUR 15,000 and the profit is EUR 5,000.
Sari sells some of the shares on her account and withdraws EUR 1,500 from the account. Out of the sum, EUR 500 is taxable capital income:
EUR 5,000 (profit) / EUR 15,000 (fair market value) × EUR 1,500 (the amount withdrawn) = EUR 500.
The remainder of the money withdrawn from the account, EUR 1,000, (EUR 1,500 – EUR 500) is a tax-exempt withdrawal of capital. The remaining amount of capital deposited by Sari is EUR 9,000 (EUR 10,000 − EUR 1,000).
Example 2: Keijo invests EUR 10,000 in the equity savings account and purchases shares with the whole sum. The value of the shares decreases to EUR 7,000 during the year. Keijo withdraws EUR 2,000 from the equity savings account. No tax is levied on the amount, because the equity savings account is at a loss. The loss can only be deducted in taxation in the year when Keijo closes the account.
The funds on the account and the value of the shares at the time of withdrawal are included in the fair market value of the equity savings account. The value of stocks is the closing price of the day before the day of withdrawal.
You can only have one equity savings account at a time. This is important to keep in mind, because if you have several equity savings accounts at the same time, the Tax Administration imposes a tax increase of EUR 10 per day on each account.
If you want to change banks, you can transfer the funds accumulated on your equity savings account directly to another bank. You do not need to sell shares or pay tax in connection with the transfer. In that case, you need to terminate the agreement on your previous equity savings account with your old bank and draw up an agreement on a new equity savings account with your new bank. Your funds will be transferred to the new account immediately after your previous agreement ends.
The partial tax-exemption of dividends and the deemed acquisition cost cannot be used
If you had an ordinary securities account, 15% of the dividends from shares in Finnish listed companies on the account would be tax-exempt. You cannot take advantage of this tax-exempt portion with an equity savings account: all profit – including the dividends – is taxable. The tax rate on capital income is 30% up to EUR 30,000 and 34% for the part over that amount.
Trade involving an equity savings account also differs from the usual trading in shares because you cannot use the deemed acquisition cost in connection with selling shares.
Frequently asked questions
According to tax rules in force, anyone who has more than one equity savings account must pay a punitive tax increase, which under the rules is €10 per day and per account. The reason for the existence of the punitive charge is to prevent abuse of the tax shelter that equity savings accounts offer to the account holder. There is a maximum limit of €50,000 that can be deposited in one account, but those who attempt abuse have opened 2 or more accounts in their name.
Tax year 2020
However, if you have opened your second account by mistake, you are entitled to submit an application for dismissal of the punitive charge if it concerns the 2020 tax year. This requires that your second account has no history of deposits or other transactions, and that a misunderstanding was the reason why you opened it.
The Tax Administration will soon send written instructions to all individuals who have 2 equity savings accounts with no transactions in one of them. After the Tax Administration has finished your tax assessment for 2020, you can submit an application for dismissal. To do that, you can log in to MyTax or complete the paper form no. 7302 (“Application for relief from tax” – Hakemus verosta vapauttamisesta, available in Finnish and Swedish).
However, if a back tax has been imposed in your 2020 tax assessment, you must pay it even if you have submitted the application. If you have difficulty in paying the back tax and you need more time, you can ask for a payment arrangement in MyTax.
Tax year 2021
From tax year 2021, no punitive tax increase is imposed on individual taxpayers who have obviously made a mistake of some kind that caused them to hold more than one accounts simultaneously, on the condition that amounts of deposited money or corporate stock were in max. one account during the tax year. In the same way, no increase – or a reduced punitive increase – is imposed, if:
- considering the small size of the balances in the equity savings accounts, the punitive tax increase would be unreasonably high, or
- there are justified grounds for the tax authority to reduce or refrain from imposing the punitive increase. Examples of justified grounds include the individual taxpayer’s sickness, during which he or she was unable to manage their equity savings account, and problems with the IT connections, which prevented the taxpayer from closing the extra account or accounts.
No, as long as you hold just one equity savings account, it is no problem. The punitive increase would be imposed if you had more than one such account. However, in the case of ordinary book-entry accounts, there are no restrictions on how many accounts you can open. You can also participate in many different funds at the same time freely; and it does not even matter if the funds are in different banks.