Investment account

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Solution for active investors

Investment account enables to postpone the income tax obligation and reinvest the gain earned without paying the income tax in between.

  • Transactions with financial assets
  • Investment account report helps organise transactions
  • Investment account report data directly to the income declaration.

Changes in Income Tax Act in force from 01.01.2015:

  • Foreign currency conversion in the investment account is not deemed to be a pay-out.
  • Wider scope of financial assets. As an exception, assets not purchased for the money in the investment account may be added into the investment account system, e.g. gift and succession. The amendment expands the exemption to all similar situations, e.g. acquisition of financial assets as liquidation proceeds and holding option. Depending on thenature of transaction (no possibility to buy for money).

What is an investment account?

Investment account is a solution meant for active investors that enables the income tax obligation to be postponed if the money received from a sale of financial assets is transferred to the investment account. The money can be reinvested without paying the income tax in the meantime. Postponing the tax payment obligation is allowed only if the transactions made on the investment account involve financial assets. The obligation to pay the income tax arises only after you withdraw more money from the investment account than you paid into it.

How to open an investment account?

Investment account is an ordinary current account. It is reasonable to open a new current account in the branch of bank for using an investment account. In Swedbank's Internet Bank it is possible to give a separate name to the current account used as an investment account, such as “investment account”, which makes it easier to distinguish the account from other accounts.

Everyday transactions should be kept separate from investments

We do not recommend that investors use the current account they use for everyday transactions as the investment account, because it means that they would have to declare all incoming and outgoing payments in the account.

It is not recommended to enter into direct or standing order contracts or open bank cards for the current account used as an investment account, make everyday transactions from the account (payments for services and utility costs, etc.), cash transactions or select it as the servicing account for credit agreements (loans, credit cards, lease, etc.), as all entries not related to the acquisition of financial assets must be declared as a payment from the investment account and thus it might happen that income tax must be paid for a payment not related to investment.

Upon using an investment account it should be made sure that all amounts payable to the bank are settled on time, as a negative balance on one current account might in certain cases be covered from the means of another current account, including on account of the funds held in the investment account. In addition to keeping track of the credit agreements entered into in your name it is important to monitor contracts in which you are a co-applicant. As such a transaction is not related to acquiring financial assets, the obligation to pay income tax might arise again from the payments not related to investment.

Investment account transactions must be declared.

  • Investment account is an ordinary current account, but you have to inform the Tax Board on the income declaration if you use it as an investment account. The declaration shows all the contributions and payouts made in the investment account.
  • To make the declaration of investment account transactions easier we advise using the Swedbank investment account report , which helps to sum up the transactions made with financial and other assets on the investment account. The report data can be electronically sent to the declaration.

One or two securities accounts?

If you have a securities account and want to use the investment account system, you have to select your investment account as the current account that services your securities account. You can tie your investment account to your existing securities account or open a new securities account with an investment account at any Swedbank branch.

The number of investment accounts you can open is not limited and you can open them in the credit institutions of any European Union Member State or Organisation for Economic Co-operation and Development (OECD) member country. In addition to the restriction on territory, the circle of transactions that can be concluded with the money held in investment accounts is also limited. The exact list is available in the Income Tax Act.

An investment account is an additional option, not an obligation.

Two parallel systems are in use. Investors can also use the so-called ordinary system. The moment of taxation is the difference between the two: in the ordinary system, the obligation to pay tax arises after every sales transaction, but in the investment account system, you have to pay tax only after you withdraw more money from the investment account than has been paid into it.

What are financial assets?

Postponing the income tax obligation is permitted only if the transactions from the investment account are made with the financial assets stipulated in clause 171 of the Income Tax Act. Financial assets must be in conformity with the requirements stipulated in the Income Tax Act upon its acquisition. Financial assets include, for example, the securities traded on the stock exchange of EEA and OECD member states, most units/equities of investment funds, but also unit-linked life insurance contracts signed from 01.08.2010 and investment deposits signed from 01.01.2011.

  • Securities intermediated by Swedbank:

    Equities and ETF s, which are traded on the regulated markets of the states listed in this clause: Austria, Belgium, Bulgaria, Estonia, Spain, the Netherlands, Ireland, Italy, Canada, Lithuania, Latvia, Norway, Poland, Portugal, France, Sweden, Romania, Germany, Slovakia, Slovenia, Finland, Switzerland, Denmark, the Czech Republic, Turkey, UK, Hungary, USA, Russia, Croatia, Serbia.

    Derivative instruments that are traded on the regulated markets of the states specified above or whose underlying assets are traded on the markets of the states specified above and whose counterparty is Swedbank.

    The funds whose management companies are: Swedbank Investeerimisfondid AS, T. Rowe Price Funds, East Capital Funds, Franklin Templeton Investment Funds, JP Morgan Funds, Julius Baer Funds, HSBC Global Investment Funds, BlueBay Funds.

    Other securities, e.g. Swedbank interest bond

  • Investment deposits.

    Interest paid on investment deposits concluded as of 1 January 2011 is taxable with income tax.

    The client can verify from the internet bank or at a bank branch whether the bank withholds income tax from the respective investment deposit – the bank asks this when the investment deposit is concluded.

  • Unit-linked life insurance contracts (ULIC):

    Private Portfolio, Fund Plan, College Fund, College Fund+, provided that all payments have been made from investment account and they are linked to the financial assets.

    Read more

What are not financial assets?

Acquisition of assets not belonging to financial assets is deemed to be a payment. If there is doubt about the suitability of the financial assets, the Estonian Tax and Customs Board should be consulted. Questions can be asked in the forum of the Estonian Tax and Customs Board athttp://foorum.emta.ee/.

The financial assets do not include the equities not traded on the stock exchange and shares in private limited companies, fund units of the second and third pension pillars, insurance contracts of the voluntary pensions fund and savings and term deposits.

Among contracts mediated by Swedbank: Term deposit, savings deposit, equities not traded on the markets, shares of private limited companies, mandatory pension fund units (K1, K2, K3, K4), voluntary pension fund units (V1, V2, V3), voluntary funded pension insurance contracts (Private Portfolio for Pension, Pension Insurance to Funds, V+ Pension Insurance, Pension Insurance+, Pension Insurance with Guaranteed Interest, Pension Insurance with Life Insurance, Personal Pension Plan, Personal Savings Plan 2, Personal Savings Plan 3, Capital Growth Plan).

Should you have any questions about the aid material, please contact Swedbank investment support by phone 613 1606 or by e-mail investeerimistugi@swedbank.ee.

Should you have any questions about the aid material, please contact Swedbank investment support by phone 613 1606 or by e-mail investeerimistugi@swedbank.ee.

An exchange traded fund or ETF is a set of securities or other underlying assets, which is similar to an investment fund, but unlike investment funds, ETFs are traded like single equities during the opening hours of the stock exchange. Unlike investment funds, ETFs also lack the entry and exit fees that characterise funds and the services fees of equities of the relevant state/stock exchange are applied to ETF transactions.

This aid material is meant for the clients of Swedbank and only reflects Swedbank's best knowledge of the investment account regulation in the Income Tax Act. In addition to the aid material, we advise our clients to read the Income Tax Act, the investment account guidelines prepared by the Ministry of Finance at www.fin.ee/maksundus -> kasulikud viited -> investeerimiskonto juhend, or post their questions in the forum of the Estonian Tax and Customs Board (ETCB) at http://foorum.emta.ee/.

Only ETCB has the right to give final opinions of a client’s transactions with regard to investment account and financial assets, and Swedbank cannot in any case be held liable for the opinions of ETCB or any changes therein, or in the situations where the relevant opinions of ETCB differ from those of the bank.

Although Swedbank has tried to ensure that the aid material covers all of the securities and investment products that the bank intermediates or to which the bank is a counterparty, some of them may have been left out. This mainly concerns the securities and investment products that are offered to the bank’s personal wealth management clients.

The information given in the aid material cannot be construed as tax, investment, legal or any other advice. The information given in the aid material does not constitute an investment recommendation or an offer or an invitation to enter into any transactions. It may be advisable to speak to a consultant before relying on the aid material.

Swedbank has applied reasonable care to avoid any errors or omissions in the aid material, but cannot be held liable in the event that such errors or omissions are found. Swedbank shall review the aid material at least once a year and shall amend it if necessary, but shall not be held liable for any events that will occur in the meantime.

  • What is an investment account?

    • Using an investment account allows investors to defer income tax on the income earned on financial assets. The obligation to pay tax arises when the amount paid out of the investment account exceeds the amount paid into the account.
    • Payment of income tax can be deferred if financial assets are purchased for the money in the investment account. Financial assets are defined in the Income Tax Act. Purchase of any other assets for the funds held in an investment account is regarded as a payout from the investment account.
    • Investment account is an ordinary current account, which must be opened in a contracting party to the European Economic Area Agreement or OECD member country.
    • The tax authority must be informed of investment accounts. This means that you must specify the relevant account as an investment account in your tax return. A current account becomes an investment account only after the Tax Board has been notified of this. Any payments made into or from the investment account must be indicated in the tax return for the year when the payments were made.
    • We do not recommend investors to use the current account they use for everyday transactions (card payments, transfers, e-invoices, etc.) as the investment account, because it means that they would have to declare all incoming and outgoing payments on the account. New current accounts can be opened at any branch of the bank.
    • The number of investment accounts per person is not limited.

  • Does everybody have to use investment account to purchase securities?

    • Two systems are in use – the so-called ordinary system and the investment account system – everyone can choose which system they want to use. Both systems can also be used at the same time (e.g. income tax can be deferred when transactions are concluded with financial assets; and transactions with securities not classified as financial assets can be concluded using the ordinary system where investors pay income tax in the year following the earning of profit).

  • Can existing securities be transferred to the investment account system?

    • Not any more. Securities and unit-linked life insurance contracts owned at 31 December 2010 could have been transferred into the investment account system only in case the investment account system was taken into use in 2011 – otherwise the mentioned assets remained in the so-called ordinary system and shall be taxed in the ordinary way.

    It is possible to defer taxation of the income earned on investments (securities, investment deposit, unit-linked life insurance) since 1 January 2011 by using an investment account. You can read more about investment accounts HERE.

    In order to defer taxation of the income earned on securities purchased before 1 January 2011, it was possible to declare the acquisition cost of these securities as a payment into the investment account in the tax return submitted for 2011. The current account tied to the securities account had to be declared as an investment account and the investment account regulation had to be applied from the moment the investment account was taken in use.

  • Can the loss sustained on earlier sales of securities be transferred into the investment account?

    • Not any more. Declared securities loss owned at 31 December 2010 could have been transferred into the investment account system only in case the investment account system was taken into use in 2011 – otherwise it remained in the so-called ordinary system.

  • What is a contribution into an investment account?

    • A contribution into an investment account means any money paid into an investment account. If an investor starts using a current account which already contains money as their investment account, the money held in the account is deemed to be a contribution. Such account balance is declared as the first transfer into the investment account.
    • Income earned on financial assets is a contribution if it is taxed with income tax.
    • The direct documented expenses associated with the purchase and sale of financial assets are deemed to be a contribution into the investment account if such expenses were not incurred on account of a contribution.
    • Until 31.12.2014 foreign currency conversion for reasons other than purchase of financial assets is also deemed to be a contribution. In such a case the foreign currency sold is declared as a pay-out from the investment account and the foreign currency purchased is deemed to be a contribution into the investment account. From 01.01.2015 foreign currency conversion on the investment account is not deemed to be a contribution or a payout and the foreign currency conversion does not have to be declared.
    • Untaxed income on financial assets (income from transfer of assets, interest paid into the investment account, etc.) and money transferred into the investment account from the person's other investment account are not contributions.

  • What is a payout from an investment account?

    • A payout from an investment account is any transfer/payment made from an investment account, which is not used to purchase financial assets or not transferred to the person’s other investment account.
    • Purchase of securities that do not comply with the definition of financial assets given above (e.g. third pension pillar, non-publicly offered shares etc.) for the funds held in investment accounts is deemed to be a payout.
    • If the account tied to a securities account is an investment account, then the monthly maintenance fee of the securities account withheld from this account is deemed to be a payout from the investment account.
    • Until 31.12.2014 foreign currency conversion for reasons other than purchase of financial assets is also deemed to be a contribution. In such a case the foreign currency sold is declared as a payout from the investment account and the foreign currency purchased is deemed to be a contribution into the investment account. From 01.01.2015 foreign currency conversion on the investment account is not deemed to be a contribution or a payout and the foreign currency conversion does not have to be declared.
    • It pays to keep in mind that an investment account is an ordinary current account. This means that if necessary, money will be withheld from the account to cover any debts. For example, in the event of a loan where the accountholder is the borrower or the co-borrower, the necessary amount may be withheld also from the investment account in the event of arrears (if the terms and conditions of the loan agreement allow the lender to check all accounts for available funds). This also constitutes a payout, which may lead to the emergence of income tax liability.
    • So-called everyday banking transactions (payments, transfers made under direct debit and standing order agreements, debiting bankcard fees, card payments etc.) made from an investment account are deemed to be payouts.

  • Does an investment account only concern the transactions made with a securities account?

    • Unit-linked life insurance contracts can also be concluded in the investment account system, but it may not be the most reasonable thing to do. In the event of the School Fund, for example, the recipient of the payout is a third party, which may create the risk of double taxation!
    • Investment deposits can also be opened in the investment account system.

  • Can third pillar pension funds be tied to investment accounts?

    • As third pension pillar funds are not financial assets for the purposes of the Income Tax Act, then payments made from an investment account into the third pillar are deemed to be payouts. If an investor wants to hold and purchase additional voluntary pension fund units in a securities account where securities regarded as financial assets are also held, we advise to transfer the amount the investor wishes to invest in a third pension pillar fund to the investment account before the purchase is made (the contribution and payout are equal in such a case). However, in order to keep tax declarations simple, it is more reasonable to do transactions with financial assets in separate current and securities account.

  • Can deposits be set up on an investment account?

    • Term and savings deposits set up on an investment account and the interest earned thereon are deemed to be payouts.
    • Investment deposit is a financial asset and hence it can be opened also in the investment account system.

  • What currencies can be held in an investment account?

    • Any currency can be held in an investment account and used for transactions. Conversion of currencies on investment accounts is permitted immediately before the acquisition of financial assets and only in the amount required for acquisition of these financial assets. Using an investment account for earning income on currency conversion is not permitted.
    • Until 31.12.2014 foreign currency conversion for reasons other than purchase of financial assets is also deemed to be a contribution. In such a case the foreign currency sold is declared as a payout from the investment account and the foreign currency purchased is deemed to be a contribution into the investment account. From 01.01.2015 foreign currency conversion on the investment account is not deemed to be a contribution or a payout and the foreign currency conversion does not have to be declared.

  • Can assets acquired by succession or in other similar way be transferred into the investment account system?

    • The general rule is that payment of income tax can be deferred if financial assets are acquired for the money in the investment account. However, there are exceptions to the rule in the Income Tax Act that allow assets not purchased for the money in the investment account to also be added into the investment account system.
    • Until 31.12.2014 such exceptions are financial assets acquired by succession or as a gift. This means that for deferring the payment of the income tax on the financial assets acquired as a gift or by succession, the acquisition cost of the said financial assets must be declared in the income declaration as a contribution to the investment account.
    • From 01.01.2015 the exception is valid for all situations similar to gifts and succession. Income from financial assets that due to the nature of the transaction cannot be purchased for money can also be declared as investment account contribution, for example acquisition of financial assets as liquidation proceeds, holding option, etc. The exception is not valid in situations where due to the nature of the transaction the taxpayer can pay for the financial asset with money, but the taxpayer decides not to.

  • How do I declare an investment account?

    • When you use an investment account, you pay tax on the amount by which payouts exceed the contributions made into the account. Transaction fees, commission and other expenses directly related to the transaction are contributions, but the monthly maintenance fee of a securities account is a payout. Persons who use investment accounts declare all contributions into and payouts from all of their investment accounts in chronological order in their tax returns and calculate the contribution balance per transaction. No tax liability emerges until contributions exceed payouts, but all contributions and payouts must be declared!
    • Transactions must be shown separately in chronological order.
    • Investors who conclude transactions in currencies other than the euro must keep in mind that all contributions and payouts must be recognised in euros in the tax return. Contributions and payouts in currencies other than the euro must be converted into euros in the tax return using the European Central Bank exchange rate of the day when the relevant currency was purchased or sold from the investment account.
    • Investors who use the investment account system must always file tax returns if money was paid into or withdrawn from the account.
    • To make the declaration of investment account transactions easier we advise using the Swedbank investment account report , which helps to sum up the transactions made with financial and other assets on the investment account The report data can be electronically sent to the income declaration.

  • Can an investment account be closed?

    • An investment account can be closed at any time (also in the middle of the year). The following is deemed to be closure of an investment account:
      • closure of the current account used as an investment account;
      • declarative closure – the client continues using the current account, but doesn’t want to use it as an investment account anymore;
      • death of the person who used the investment account, as it is seen as equal to the closure of all of the person's investment accounts.
    • The possibility that tax liability may emerge must be considered when an investment account is closed. For instance, if an investor has another investment account at the time they close an account and they want to defer the tax liability, they must transfer the monetary balance on the account they close into the other investment account. The balance of the account at the time of closure is otherwise declared as a payout.
    • The financial assets existing at the time the last investment account is closed, which were purchased for the funds held in the investment account, must be transferred to the so-called ordinary taxation system. This is done by declaring the acquisition cost of the financial assets as a payout made on the day the investment account was closed.

  • How can I tell an investment account apart from an ordinary current account?

    • A current account becomes an investment account only after the Tax Board has been notified of this.
    • You can add a name or reminder to the account in the Internet Bank by going to the private client’s home page and clicking Accounts under My Contact Details and Settings.

  • What are financial assets?

    • securities offered publicly in contracting parties to the European Economic Area Agreement or OECD member countries.
    • securities traded in stock exchange or alternative market of an EEA or OECD state.
    • shares or units of an investment fund established in an EEA or OECD state.
    • investment deposits opened in a bank located in an EEA or OECD state.
    • unit-linked life insurance contracts concluded with an insurance undertaking located in an EEA or OECD state.
    • derivative which counterparty is a financial institution of an EEA or OECD state.
    • short-term debt securities issued by a resident of an EEA or OECD state.
    • investment account interest paid by a bank located in an EEA or OECD state.
    • investment fund shares/units and securities traded outside an EEA or OECD state only if the respective fund management companies and securities markets are under financial supervision and the investment fund share/unit or security is purchased through a financial institution located in an EEA or OECD state.
    • Specific requirements of financial assets are provided in the Income Tax Act.

Ask for advice

If you have any questions, don't hesitate to call our Investment Helpline on 613 1606 from 8:30 am to 6:00 pm Mon to Fri.