Taxes on profits from the sale of shares - easy
Profit tax on the sale of shares is currently subject to at 13%. This is the main thing to know. But there are nuances that can significantly affect profits.
Calculation formula
Let's start with the fact that the profit from the sale of shares is calculated by the following formula:
PROFIT = value of shares on sale - value of shares on purchase - commissions for purchase, sale, storage
Income tax is calculated as the financial result of all transactions for the calendar year (tax period) or by closing the account with the broker. It is important that all calculations are made using the FIFO method, i.e. previously purchased shares are taken into account first. Here is a simple example.
Example
You bought 100 shares at 200 rubles, then bought another 100 shares at 400 rubles. After that, you sold 100 shares for 500 rubles.
Profit for the tax deduction will be, respectively: 500*100 - 200*100 = 300*100 = 30,000 rubles.
Although it seems to us that the average value of our shares is (200 + 400) 2 = 300 rubles, and thus the profit should have been 10 000 rubles less, it is not true. The calculation comes from the very first purchases of shares and beyond.
How can I reduce or avoid paying tax?
Tax can be reduced or avoided altogether in four cases:
- If your shares have been in your ownership for more than 3 years before the sale.
- If you sold stock in high-tech companies that you owned for up to one year. These are not the most profitable or liquid securities, there are not many of them, and this deduction will work until the end of 2022.
- If you bought the stock on EIS type A, then you will not have to pay tax as long as the account is open. If the IIM has to be closed, tax will be withheld from the profits. In this case, for the time being, you can simply transfer the shares to a regular brokerage account without selling them. Then the tax will also be avoided.
- If the shares were purchased in a type B individual investment account.
Taxes on dividends on shares
The tax on share dividends is also 13%. The broker helps in the calculation of this tax, i.e. your account is already "clean" with the tax paid. This works for Type A and Type B IIMs, but Type A IIMs have a bonus - the tax paid is almost entirely refundable if you do not withdraw the dividend income, but reinvest it, i.e. use it for new investments, and then get a tax deduction on that amount.