In the Tuleva Additional Investment Fund, you can grow your portfolio using the Estonian Investment Account system (investeerimiskonto). We’ll break down exactly who it’s for, why it’s beneficial, and how the technical side works.
Who is the Investment Account for and why is it useful?
When you earn a profit from investing, you must pay income tax. For example, if you bought fund units or stocks for €1,000 and sold them three years later for €1,500, you owe the state income tax on the €500 gain. Unlike the Pillar II and III (1), there is no way to avoid this tax entirely.
However, you can defer your tax liability if you don’t use the profit from selling a security immediately. This is exactly what the Estonian Investment Account system allows. An Investment Account is a separate bank account used exclusively for investing, which you declare to the Estonian Tax and Customs Board. By using this system, you only pay income tax once the withdrawals from the account exceed the total contributions made into it.
This is beneficial if you trade different securities or frequently buy and sell. It’s also useful if you ever want to move your investments from one platform to another. This way, the amount available for reinvestment – and the resulting compounding interest – is larger, because you only pay tax when you finally take the profit out for consumption. Over the years, the benefit of an investment account can amount to several percentage points of your total return.
If you are a “buy and hold” investor who consistently puts money into a single fund, there isn’t a massive difference whether you use an investment account or not. You will have to pay income tax anyway when you eventually use the assets. However, using the investment account system never hurts and provides more freedom should you ever need to switch platforms.
How to buy fund units using an Investment Account?
You can open an Investment Account at major Estonian banks and investment firms, such as Swedbank, SEB, or LHV. While you cannot open an Investment Account directly within Tuleva, our fund is fully compatible with the system.
You can use the funds on your bank’s Investment Account to purchase units of the Tuleva Additional Investment Fund. (2)
As an LHV client
- Open an investment account: If you don’t have one yet, open an investment account and transfer the amount you wish to invest. To do this, go to “Info and settings” → “Accounts and limits”. Select “Accounts” and click “+ Add account”. Make sure to check the box for “Investment Account” (I named mine “Investment Account” to keep it simple). Don’t forget to increase your transfer limits – by default, LHV sets these to €0.
Tip: It’s worth opening a new investment account even if you’ve used the LHV Growth Account before, as making withdrawals from the Growth Account can be cumbersome.
- Open an Additional Investment Fund account: Log in to the Tuleva website and select “Additional Investment Fund → Start saving.”
- Choose the amount: Decide how much you want to invest.
- Make your first deposit: You will be directed to your bank via a payment link. Make sure to select your Investment Account as the source. You can also set up a standing order for automatic monthly investing.
- Done! You are now a fund unit owner. You can manage your units by logging into Tuleva.
- Declare your transactions early next year: Before submitting your tax return, send your Investment Account report from your internet bank to the Tax and Customs Board. The report must categorize transfers as: 1) deposits to the account, 2) withdrawals from the account, or 3) financial asset transactions. You only pay income tax if withdrawals exceed deposits. Transactions made to buy or sell Tuleva fund units are “Financial asset transactions” and do not affect your taxable balance. Read more in LHV’s guide.
As an SEB client
- Open an Additional Investment Fund account: Log in to the Tuleva website and select “Additional Investment Fund → Start saving.”
- Open an investment account: If you don’t have one yet, open an investment account and transfer your investment amount there. Go to “Investing” → “Investment accounts” → “Open new account.”
- Choose the amount: Decide how much you want to invest.
- Make your first deposit directly from your bank using the following details:
- Recipient: Tuleva Täiendav Kogumisfond
- IBAN: EE71 1010 2203 0670 7220
- Description: Your personal identification code (isikukood)
- Done! You are now a fund unit owner. You can manage your units by logging into Tuleva.
- Declare your transactions early next year: Follow the reporting process in your internet bank as described above. Read more in SEB’s guide.
As a Swedbank client
- Open an investment account: If you don’t have one yet, open an investment account and transfer your investment amount there. Go to “Savings, Investing” → “Accounts for investing” → “Investment account + Securities account” → “Open accounts.”
- Open an Additional Investment Fund account: Log in to the Tuleva website and select “Additional Investment Fund → Start saving.”
- Choose the amount: Decide how much you want to invest.
- Make your first deposit: You will be directed to your bank via a payment link. Make sure to select your Investment Account as the source.
- Done! You are now a fund unit owner. You can manage your units by logging into Tuleva.
- Declare your transactions early next year: Follow the reporting process in your internet bank as described above. See more in Swedbank’s guide.
- Withdrawals from the Pillar II and III are tax-free if you choose a fund pension (monthly pension supplements). Read more about it here.
- Lightyear has restricted withdrawals from their cash accounts, making it technically impossible to buy Tuleva Additional Investment Fund units through them at this time. It is fully possible via traditional Estonian banks.The Income Tax Act allows the purchase of qualifying financial assets from an Investment Account, including units of the Tuleva Additional Investment Fund. The Tax and Customs Board has confirmed this.
