Shares in investment funds
An investment fund is based on a fund management company collecting money from investors and investing it in different objects, such as shares. Together, those investments form the investment fund. An investment fund is divided into shares, which are equal in size. You can use any sum you want to purchase shares.
How are investment fund shares taxed?
You pay tax on the income you receive from fund shares based on the capital gains tax rate.
There are two kinds of fund shares:
- Profit shares
- Growth shares.
You have to pay tax on the return on your profit share every year. In practice, the tax is paid so that when paying the profit, the fund management company withholds 30% of tax and forwards it to the Tax Administration
As for a growth share, you only pay tax when the fund share is sold. Otherwise, it always remains as fund capital.
If you wish, you can exchange profit shares for growth shares and vice versa without tax. This is only possible within the same investment fund, however. If you want to exchange your fund share with a share in another fund, this is considered a sale of the share, and you have to pay capital income tax on the sales profit, if any.
Calculate the sales profit or loss
When you sell your investment fund shares, it results in either profit – capital gains – or loss – capital losses. You can determine the amount of either by subtracting the following from the selling price of the shares:
Their purchase price
The expenses incurred in making a profit, such as brokerage and handling fees.
If you sell your fund shares, and the way you had received them had been by gift or inheritance, you can deduct their taxable value, which was confirmed by the Tax Administration for the purpose of gift or inheritance taxes.
Alternatively, you can deduct a “deemed acquisition cost” from the selling price:
If you owned the fund share for a shorter time than 10 years,
the "deemed cost" is 20% of the price you receive when you sell it.
- If you owned the share longer than 10 years,
the "deemed cost" is 40% of the price.
Please note that if you use the deemed acquisition cost, you cannot deduct the purchase price and selling expenses of the fund shares from their selling price.
You have two options:
- either the purchase price (or the confirmed tax value from an earlier decision on inheritance tax/gift tax) + expenses
- or the deemed acquisition cost.
Read more about the deemed acquisition cost from the detailed tax instructions
Pay tax on profits, deduct losses
If you receive a profit on selling your fund shares, it is your capital income. This means that you need to pay capital income tax on the amount.
If you incur a loss due to the sale of your fund shares, it is deducted from the total of your capital income. If you have no capital income or if said income is lower than the sales losses to be deducted, the deduction is transferred to the following 5 years. Sales losses incurred before 2016 are only deducted from your sales profits, however, not from all of your capital income.
The FIFO principle is often applied to the sale of fund shares
If you sold fund shares in multiple transactions, you must make a First In – First Out calculation to determine the profits received from the sales. Under FIFO, the purchase prices of the sold shares in every transaction must be deducted in the same order as you had bought the shares in, transaction-by-transaction.
In case of fund shares, an exception to the FIFO principle can be made, however. A fund management company must keep a share register on all shares of the fund and record the serial number of the share certificate or fund subscription in the register. If you wish, you can ask the fund management company to redeem the fund shares referred to in a specific share certificate or shares with a specific serial number that you have acquired.
The tax on the profit share of a foreign investment funds is credited in Finland
If you have invested in a foreign fund, the country in question may levy taxes on the profit paid for the profit shares of the fund. This is usually due to the profit share being equated with dividend income in the country in question. In such cases, the tax is credited against your Finnish taxes.
Read more about crediting taxes in the detailed tax instructions
Check your pre-completed tax return
Check that the information on the sales of your fund shares and the return on their profit shares is shown in the pre-completed tax return you received in the spring and that it is correct. Report missing information and correct wrong information.
If you have sold investment fund shares or other securities through a foreign remote intermediary, also report the profit or loss from these transactions.