Best Country for Trading (Tax efficiency)

[luisHK]

In Germany "capitalism" is a dirty word, "profit" is indecent and tax evasion is considered and punished harder than child abuse! Exchanges are considered to be worse than casinos and as an options traders you would be on every short list of "the usual supects". So take care!

That sounds very much like a Berlin disease, is it as bad in Munich, Hambourg and Frankfurt ? Not the only place in Western Europe where there is such mentality btw, but usually moderately successful capitalists tend to flock to the same areas and live relatively peacefully, and Germany is certainly not lacking of successful entrepreneurs.
Imo Berlin is the ugliest capital of all western european countries (can't say it is in western Europe geographically), run down and dirty seem to be very trendy there. Other parts of Germany are quite nice though.

 

[alexanderhu]

Hungary update: If you're a woman with 4+ children (and not a US or a citizen of any other country that taxes you based on your citizenship) then you may not have to pay personal income tax to Hungary ever again, assuming that you're a tax resident in Hungary only. The government has just announced that woman who has 4 or more children will be permanently exempted from paying personal income tax.

 

[billv]

Hungary update: If you're a woman with 4+ children (and not a US or a citizen of any other country that taxes you based on your citizenship) then you may not have to pay personal income tax to Hungary ever again, assuming that you're a tax resident in Hungary only. The government has just announced that woman who has 4 or more children will be permanently exempted from paying personal income tax.

What's the catch?
Are there restrictions on ethnicity or religion?
Do the kids have to be born in Hungary Or to be under-aged?
Or to move there with their Mom?

 

[alexanderhu]

As far as I know there will be no catch at all. Any woman who has 4 or more children, whether they're fully grown adults (over 18 years old) or underage children, may qualify for permanent personal income tax exemption.

 

[otctrade]

So just gotta marry a woman with 4 kids and hope she doesn't take off with the money (and have all the trading done under her name)

 

[Pekelo]

Probably there aren't that many career women with 4 kids. My guess is that the government isn't losing too much money because of this law. But this new rule makes an interesting idea of marrying one.

 

[otctrade]

If that is the special savings or whatever it's called account, then you're wrong. That is for investors, not for traders. I have confirmed this with Swedish advisors and if you trade on it then you should pay regular income tax. Same goes for Netherlands' 1.2% wealth tax on investments. It is useless for traders who open and close positions frequently.

Alexanderhu do you know if it's possible to daytrade US stocks in TBSZ accounts or would profits be classified as taxable income?

 

[alexanderhu]

Alexanderhu do you know if it's possible to daytrade US stocks in TBSZ accounts or would profits be classified as taxable income?

As far as I know only HUF denominated assets can be bought and sold on TBSZ. The law has been changed since its original implementation so now it may be possible to do so. Now you made me curious as well. I'm going to read the law, top to bottom and will get back to you when I can form an opinion about the issue.

 

[alexanderhu]

As far as I know only HUF denominated assets can be bought and sold on TBSZ. The law has been changed since its original implementation so now it may be possible to do so. Now you made me curious as well. I'm going to read the law, top to bottom and will get back to you when I can form an opinion about the issue.

F-me! Thank you for your question! Indeed, the law has been changed in 2016 and then in 2017 again. From now on you can open TBSZ not just with local but with foreign brokers as well and you can trade any assets (stocks, bonds, currencies, options, futures, etc.). However, if you want to open a TBSZ with a foreign broker that obviously does not know what TBSZ is then all you have to do is to meet the requirements of the TBSZ and to report to the tax authorities that you want to treat this account of yours as a TBSZ.

Some of the requirements and benefits of a TBSZ:

• You can open only 1 TBSZ with each financial institution in a tax year (calendar year).
• You must fund your account with at least 25,000 HUF (approx. €80).
• If you withdraw any money, even just €1 from your account in the first three years, then you have to pay the regular 15% tax on all the profits, not just on the amount you have withdrawn and your TBSZ will be closed.
• You can withdraw money at the end of the third year without having to close the account if you leave at least 25,000 HUF on the account. In this case you will have to pay tax with a lower 10% rate on the gains you made. If let's say you funded your account with €1,000 and you made €9,000 during the three years period and you decide to withdraw €5,000 from your €10,000 balance, then you would have to pay 10% personal income tax on €4,500 only because you have withdrawn 50% of your balance so the law assumes that you have withdrawn 50% of your capital and 50% of your gains.
• If you keep your account for five years then all the profit you made can be withdrawn free of any tax at the end of the 5th year and you don't have to declare your withdrawn profit on your tax return.
• Theoretically you can move your TBSZ account from one broker to another but how it's done in practice is questionable since if you open a regular trading account with a foreign broker which doesn't offer TBSZ by default, then you have to report to the tax authorities that you want to treat this account of yours as a TBSZ but according to the law if you withdraw any money from the account before the third year then the law says that from a tax point of view your account has been closed on the day you withdraw the money and you'll have to pay tax on it. I presume that a broker-to-broker transfer may solve this issue if your chosen broker supports this option.
• If you want to open an account with a foreign broker and treat that account as a TBSZ, then you have to report this to the tax authorities within 30 days and you have to fund your account with minimum 25,000 HUF within that 30 days.
• You can fund your account only once with one transaction. You cannot top up your account later. What you transfer to your TBSZ account within the first 30 days is the amount you have to use as long as you wish to keep your TBSZ open.

Based on these changes, you can effectively trade from Hungary free of any tax if you do not withdraw your trading gains for five years. Should you need any income during those five years, you can either close your account and pay tax based on the above mentioned rules or you can simply have two accounts, one regular and one TBSZ and you cover your living expenses from the regular account on which you pay the regular 15% personal income tax each year.

This is not a legal tax advice and should not be relied upon as such. All or any of this information may be partly or fully incorrect and/or some requirements may be missing. This is intended to serve as a general information about the special tax favorable account called TBSZ. Please seek professional advice and do not make any decision based on this post. This post represents my opinion only and I'm not a tax professional. I'm not liable to any financial damages that you may run into and I strongly recommend to seek professional advice and/or to directly contact the tax authorities to confirm tax your situation.

 

[alexanderhu]

Even more tax incentives coming. It has not yet been confirmed but there is a good chance it may happen this year or from next year.

0% tax on dividends. It means that the 9% corporate tax plus the 2% city tax may be the final tax and you may won't have to pay any tax on dividends that you pay to yourself. Also, this means that if you use that special tax status for your company that I shared a few pages before, then you may pay 0% on retained earnings within the approx. €9 million total asset limit and the annual max. approx. €3 million revenue and 13.2% including the city tax on the money you want to withdraw and maybe 0% on the dividend.

So even with just a simple company, you may pay as little as 11% total assuming that you won't have to pay any tax on the declared dividends.