Investment fund shares
An investment fund is based on a fund management company collecting money from investors and investing it in different objects, such as shares. Together, those investments form the investment fund. An investment fund is divided into shares, which are equal in size. You can use any sum you want to purchase shares.
How are investment fund shares taxed?
You pay tax on the income you receive from fund shares based on the capital gains tax rate.
There are two kinds of fund shares:
- Profit shares
- Growth shares.
You have to pay tax on the return on your profit share every year. In practice, the tax is paid so that when paying the profit, the fund management company withholds 30% of tax and forwards it to the Tax Administration
As for a growth share, you only pay tax when the fund share is sold. Otherwise, it always remains as fund capital.
If you wish, you can exchange profit shares for growth shares and vice versa without tax. This is only possible within the same investment fund, however. If you want to exchange your fund share with a share in another fund, this is considered a sale of the share, and you have to pay capital income tax on the sales profit, if any.
Calculate the sales profit or loss
When you sell your investment fund share, it usually results in either profit or loss. You can determine the amount of either by deducting the following from the selling price of the shares:
Their purchase price
The expenses incurred in making a profit, such as brokerage and handling fees.
Read more on calculating profit and loss in the detailed tax instructions .
Alternatively, you can deduct the deemed acquisition cost from the selling price of the shares:
- If you have owned the fund share for less than 10 years, you can deduct 20% from the selling price.
- If you have owned the fund share for at least 10 years, you can deduct 40% from the selling price.
Please note that if you use the deemed acquisition cost, you cannot deduct the purchase price of the fund shares and the expenses incurred in making a profit from the selling price of the fund shares.
Read more about the deemed acquisition cost from the detailed tax instructions
Pay tax on profits, deduct losses
If you receive a profit on selling your fund shares, it is your capital income. This means that you need to pay capital income tax on the amount.
If you incur a loss due to the sale of your fund shares, it is deducted from the total of your capital income. If you have no capital income or if said income is lower than the sales losses to be deducted, the deduction is transferred to the following 5 years. Sales losses incurred before 2016 are only deducted from your sales profits, however, not from all of your capital income.
The FIFO principle is often applied to the sale of fund shares
If the fund shares you own are of the same type, i.e. they comply with the same principles, the FIFO principle (First In – First Out) is usually applied to their sales. In that case, the purchase prices of the shares included in each batch are deducted from the selling price of the batch in the order, in which you acquired the shares.
In case of fund shares, an exception to the FIFO principle can be made, however. A fund management company must keep a share register on all shares of the fund and record the serial number of the share certificate or fund subscription in the register. If you wish, you can ask the fund management company to redeem the fund shares referred to in a specific share certificate or shares with a specific serial number that you have acquired.
The tax on the profit share of a foreign investment funds is credited in Finland
If you have invested in a foreign fund, the country in question may levy taxes on the profit paid for the profit shares of the fund. This is usually due to the profit share being equated with dividend income in the country in question. In such cases, the tax is credited against your Finnish taxes.
Read more about crediting taxes in the detailed tax instructions
Check your pre-completed tax return
Check that the information on the sales of your fund shares and the return on their profit shares is shown in the pre-completed tax return you received in the spring and that it is correct. Report missing information and correct wrong information.
If you have sold investment fund shares or other securities through a foreign remote intermediary, also report the profit or loss from these transactions.