What type of deduction for IIS is more profitable

Any investor in Russia can receive a government premium to the profitability of his portfolio in the form of an individual investment account (IIS) tax deduction. There are two types of deduction — let’s discuss which one is more profitable.

IIS is a type of brokerage account. They also open it with a broker, deposit money and buy securities on it. But there are features:

What type of deduction to choose — personal income tax refund or exemption from sales tax? In short, IIA type A is designed for a non-professional investor who has another source of income from which he pays personal income tax, for example, a salary.

Type B deduction is more suitable for investors with high-yield portfolios who invest large amounts, do not have other income taxable with personal income tax, or pay taxes less than the return on the IIA will be. Now let’s understand in more detail.

Type A

To take advantage of this deduction, you just need to put money on the IIS. It doesn’t matter what happens on the account next — you can buy securities (you can even use only part of the money) or sell them — next year the state will return 13% of the invested amount. The deduction can be received every year, if the account is topped up annually within the maximum limit (1 million rubles). But when you decide to close an account, you will have to pay tax on sales income.

The maximum that can be returned by IMS type A is 52 thousand rubles per year (this is 13% of 400 thousand).

Where did this 13% come from? This is your personal income tax for the last year — the state returns taxes already paid. If the investor has not paid this tax — for example, he is self-employed or self-employed, there will be no refund. If the amount of taxes paid is less than 13% of the percentages deposited on the IIA, the deduction will be less. The refund of personal income tax, which was received on other grounds — paid education or treatment, is also taken into account. In a word, the sum of all tax deductions cannot be more than what you yourself gave to the treasury.

Type B

This exemption option exempts from paying tax on income from the sale of securities — also 13%. It is logical to use it if you do not pay personal income tax or expect a very high yield — so that the tax savings from the sale of securities are greater than the guaranteed return.

A type B deduction can be obtained upon closing an account, but not earlier than three years after its opening and only if during this time the investor has never received a type A deduction.

The maximum amount of replenishment of the IIA in this case is 1 million rubles per year. The benefit is in no way connected with other deductions and is not limited in amount — no matter how much you earn, everything is yours (however, dividend tax will still need to be paid).

There is no simple formula for comparison. To assess the net result of a portfolio on IIA with a deduction of type A, it is necessary to add the resulting deduction to the profitability and subtract the tax after the sale of the portfolio. The final result even depends on the time of receipt of the deduction, and on whether it is reinvested or withdrawn. The type B deduction is a little easier to count, but it is still the most convenient to use

Example 1

You opened an IIS, put 150 thousand on it, and each subsequent month for three years added 20 thousand rubles. Thus, in three years you have deposited 150,000 + (20,000 x 35 months) = 850 thousand rubles. You chose a type A deduction and reinvested the amounts received annually (the third deduction is not reinvested, you will receive it only at the end of the term).

With a portfolio yield of 10% per annum, in three years it will cost 1,111,627 rubles. When closing the IIA, you will need to pay 13% tax on income from the sale of securities — this is 22,464 rubles.

As a result, taking into account the third deduction, you will receive 1,122,388 rubles. The portfolio’s net profitability will be 16.38% per annum.

With the deduction of type B, the same account would bring 10% per annum or 159,833 rubles.

Example 2

A professional investor opens an IIS and deposits 300 thousand rubles on it. Then, for three years, every month he replenishes the account with 60 thousand. If the portfolio yield reaches 32%, then in three years it will cost 3,962,431 rubles. By choosing a type B deduction, the investor will save 203,116 rubles on taxes. Investment result — 1,562,431 rubles.

With the deduction of type A, without reinvestment, the same investor would have received a little less after taxes — 1,554,315 rubles.

As you can see, provided that the investor can fulfill all the mandatory conditions, the main factors of choice are the amount of investment, profitability and the possibility of reinvesting the deductions.

Type A deduction is independent of portfolio performance, so it is better suited for beginners. Type B becomes relevant when profitability is high or when you are not satisfied with the restrictions of the first type — for example, you are not sure that you will continue to work for hire and pay 13% of personal income tax.

Note that IIS can be combined with