How much can you save on taxes if you keep stocks and bonds in your portfolio for a long time?

Gains from the sale of securities are taxed at a rate of 13%. But you can not pay personal income tax if you own shares and bonds for more than three years. For each year during which the security is in the portfolio, the investor is exempt from income tax in the amount of 3 million rubles. Independent

If you are a long-term or at least a medium-term investor, you can save on taxes due to special benefits, in particular long-term benefits

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When people talk about the long-term ownership benefit, they are most often referring to the three-year benefit.

For each year of holding securities, the investor is charged a conditional 3 million rubles, from which you can not pay personal income tax. So, based on the results of three years, you can exempt from tax:

3 years х 3 million rubles = 9 million rubles

At the end of four years, the amount will already be:

9 or 12 million rubles is income from which you do not need to pay personal income tax. This means that if an investor bought securities for 10 million rubles and sold them after three years for 15 million, his income was 5 million rubles. You do not need to pay tax on them: 5 million fit into the maximum benefit amount of 9 million rubles.

The exemption applies to income from exchange rate differences.

If the amount of the benefit is not enough, you can sell part of the assets later. Imagine that an investor bought securities in 2018, their price increased significantly over 3 years — and he earned 11 million rubles from their sale in 2021. In this case, the profit received will be greater than the benefit and he will have to pay tax:

Benefit: 3 years х 3 million rubles = 9 million rubles
Profit: 11 million rubles
Personal income tax payable: (11 million — 9 million) x 13% = 260,000 rubles

But if in 2021 he sells only a part and fixes a profit of 9 million, and the rest — next year, then now there will be no tax. True, there is a risk that the securities will fall in price over the course of the year and profits will decrease more than the tax savings will be.

If the investor owned the shares of one company for 3 years and earned 3 million rubles when selling them, and kept the shares of the second company in the portfolio for 4 years and received an income of 4 million rubles, then to calculate the deduction, the average holding period must be multiplied by the amount of the annual benefit:

(3 years x 3 million + 4 years x 4 million) / (3 years + 4 years) x 3 million = 11.57 million rubles

In total, the benefit for the two companies exceeds 11.5 million rubles. Therefore, the investor does not need to pay tax on 3 and 4 million rubles, which he received from the sale of shares of the first and second companies.

If, for example, Apple shares are traded on the Moscow or St. Petersburg stock exchanges, then they can be bought on the NASDAQ and also take advantage of the long-term ownership privilege.

The privilege of long-term ownership can only be used by tax residents of the Russian Federation (at the time of sale).

The privilege does not apply to an individual investment account (IIA). Although if you close the IIA and transfer the securities to a regular brokerage account, you can take advantage of the privilege. In this case, the date of purchase of securities will be the date of their purchase on the IIS.

The long-term ownership benefit applies to stocks, bonds, open-ended mutual funds and ETFs. This tax deduction does not apply to interval and closed-end mutual funds (unless they are admitted to organized trading on the Russian market), precious metals, currencies, derivatives market instruments, and so on.

The long-term ownership exemption applies only to income in the form of the difference between the purchase and sale price of the paper. If an investor has bought shares or bonds and receives dividends or coupons on them, then the tax deduction does not apply to them, they come to his brokerage account already minus personal income tax. However, if you buy an ETF or BPIF that reinvests dividends or coupons, then that income will be eligible for long-term ownership.

The long-term ownership benefit can be exploited in two ways:

You can use the long-term ownership benefit on a regular brokerage account, and on

The privilege of long-term ownership can also be advantageously combined with IIA type A: for example, when the IIA is closed, securities must be transferred to a regular brokerage account, which the investor is ready to own for more than three years from the date of purchase.