Private clients who use the ‘ordinary’ system
If the client is the seller of the securities in the first half of a repo transaction, the relevant sale is regarded
as any sale of securities and the client may be obliged to declare the profit or have the right to declare the loss
(depending on the price for which the security sold in the course of the repo transaction was previously purchased).
It must also be kept in mind that a repo transaction does not have an effect on the acquisition price of the security,
which means that if the client sells securities in the course of a repo transaction and buys them back later for a
price that is higher by the repo rate, the initial sale price in the repo transaction is regarded as the acquisition
price, not the repurchase price of the security.
Private clients who use the ‘investment account’ system
A repo transaction is a transaction permitted in the investment account system, where the securities forming the
object of the repo transaction can be regarded as financial assets for the purposes of the Income Tax Act (e.g. if
they are publicly offered or accepted for trading on the market of an EEA or OECD country). The sale and repurchase
of a security can be regarded as transactions with financial assets, and payments to and from the investment account
must not be declared.
In the case of legal entities, a repo transaction can be regarded as an ordinary economic transaction that is not
subject to special rules and not taxed at the moment it is carried out. Corporate clients become liable to tax only
if profit is paid out in the form of dividends or if other payouts not connected with business are made.
Please note: the Bank does not advise its clients on taxes. Please consult the Tax and Customs Board in order to
clarify the exact taxation consequences that may result from repo transactions.