What is an equity savings account?
Within the equity savings account, equity investors will able to trade in shares without incurring any direct taxes.
Parliament approved a proposal to introduce equity savings accounts in March 2019, and equity investors will be able to start making deposits to their equity savings account as of 1 January 2020. However, you can already open an equity savings account as of 10 December 2019. Within the equity savings account, equity investors will able to trade in shares of both Finnish and foreign companies listed on a stock exchange or, for example, the Nasdaq First North exchange without incurring any direct taxes.
Dividends and interest will also be exempt from taxes on the equity savings account and account holders will have the opportunity to re-invest them without having to pay any taxes in between. Thus the equity savings account makes it possible to reap the full benefits of the compound interest effect when investing in equities, as the proceeds and dividends are credited to the account without direct tax liability.
The equity savings account suits long-term investors
The equity savings account is intended for anyone interested in investing in shares and it is particularly well-suited to long-term investors who prefer to periodically update their portfolios themselves and re-invest their possible returns and dividends.
Long-term saving in equities will become more attractive, as investors will benefit from the effect of compound interest. In a nutshell, this means that investors will be able to add their returns to their investment instead of withdrawing them and earn interest on a larger amount over the next interest period.
As the amounts and the time involved increase, the benefits of compound interest will become more pronounced each year. With long-term savings, a savvy investor may benefit greatly from compound interest.