How can you avoid the special tax on investments?

In the competition for investment products, the path has been tilted toward government securities, as Hungarian government securities purchased after June 1, 2019 do not have to pay 15% interest tax. As of July 1, the tax on the return is already 28% in the case of a corporate bond, fixed deposit or investment fund, compared to 0% for government securities. The former must thus achieve an extra return of 4% to offset their tax disadvantage, which is no small feat, especially if we measure this 4% against the benchmark, the S&P500 stock market index’s 40-year average return of 11%.

With this step, I would like to direct savings even more towards Hungarian government securities, since the population is the best financier of the state. They stand by their own country, for better or for worse, while international institutional players are sensitive to risks and keep a watchful eye on the yield of alternative investment opportunities.

Government securities have their place in every savings portfolio, as they are the ones that can be easily accessed at any time, if life calls for it. But in the long term (15-20 years), based on past statistics, it is absolutely not certain that we will be on a good horse if we rely solely on debt investments. The return on risk-free government securities is often eaten up by inflation, as for example this year, where we can count on a currency deterioration of over 18% compared to a return of 16%.

The big returns in the long term are where you get an ownership stake in a business, that is, you buy shares, and you do it all thinking like a global investor, in the case of euro and dollar markets. In contrast to loaned money, where the return is fixed, if you choose ownership, you can be part of the growth of a company, which can give a return that exceeds the government securities market. Of course, there is also the risk of beating the risk-free return, because companies can not only grow, but can even shrink.

The new regulation does not affect stock market investments in any form, nor does it change the tax benefits associated with permanent investment accounts. With the help of the permanent investment account, a 0% exchange rate profit tax can be achieved during an investment period of 5+1 years, and in the case of Hungarian shares, even the rate of dividend tax is 0%. If the investment funds subject to the extra social contribution are taken into a permanent investment account, then in addition to the exchange rate profit tax, we can also avoid the obligation to pay the 13% social contribution.

Opening of a Permanent Investment Account on the Portfolio Online Exchange.

In essence, the new regulation also steers those with savings a little in the direction of financial intelligence. In our globalized world, becoming a bit of a global investor, having American, European, and Asian investments, paying attention to the cost implications of investment products, and buying products denominated in euros and dollars in addition to HUF savings does not seem crazy.

All of this can be realized with the help of a unique share portfolio or index-tracking passive investment fund, so-called ETF, in the case of the latter, you can become a global investor by saving up to HUF 100,000.

In the creation of the unique share portfolio and ETF portfolio, the Portfolio Trader Advisory Service can help.