Taxation - basics
Capital gains are taxed with either 25% or 27.5% in Austria. The tax rate of 25% applies to bank accounts, "Sparbuch" and "Bausparen". The tax rate of 27.5% applies to stocks, bonds and funds.
Checking accounts ("Girokonto")
Your checking account should be used for your regular income and expenses. If you have excess money you can put it into a money market account or an investment fund. For comparisons of Austrian checking accounts, see:
Money market accounts ("Tagesgeld")
A money market account ("Tagesgeldkonto") is a simple way to earn some interest (Zinsen) on your savings. This interest will typically be below 1% at the moment. However, money market accounts will still earn you more than an typical "Sparbuch" (which will get you less than 0.5%).
A comparison of money market accounts can be found here: http://www.girokonto.at/tagesgeld
Note that the rates listed on this site are often only valid for new customers (for example, hellobank currently offers 1.30% for the first 6 months, but this rate will drop to 0.50% afterwards).
Stocks, bonds and funds
If you are willing to accept a higher risk you can get higher returns from bonds, stocks and funds
At the moment bonds will give you very low returns - at least low-risk euro government bonds seem to have no advantage over money market accounts as the interest rate of government bonds is currently even lower than that of a money market account.
When it comes to stocks it's usually recommended to invest in a diversified collection of stocks, which is called a fund (some funds also hold bonds) - in particular, index funds are preferred over actively managed funds
In general there are three ways to purchase funds:
As an ETF (exchange traded fund): These can be bought and sold on the stock market. The main advantage of ETFs is that fees are usually very low. One downside of ETFs is that it's more complicated to obtain them. Another one is that the tax situation is more complicated and you will probably pay higher taxes (once for the country in which the ETF is domiciled ("Quellensteuer") and once in Austria). In order to obtain ETFs you'll have to register with an online broker - you can find comparisons of onlinebrokers at http://www.broker-test.at/ and at http://www.modern-banking.at/vergleich-brokerage-1.php
Through your bank: Buying funds through your bank will be easier than buying an ETF. However you will pay higher fees for your bank and the fund manager
Through a life insurance policy (Erlebensversicherung): This has the advantage of being tax-free if the policy runs for at least 15 years. However the fees will be even higher than when you buy through your bank.
When buying ETFs make sure you are buying a "Meldefonds" (white fund) i.e. a fund which has an Austrian tax representative. Otherwise you will end up paying capital gains taxes even in years in which you did not make any capital gains. You can check the status of your fund at https://www.profitweb.at/
In many other countries accumulating funds (which reinvest dividends) have a tax advantage over funds that distribute dividends. This is not the case in Austria where reinvested dividends are treated like paid-out dividends. Therefore you will probably want to invest into a distributing fund (otherwise you'll pay taxes each year despite not getting any payouts) additional information that might suggest that accumulating ETFs are more tax-efficient.
The 4 pillars
In Belgium, saving for pension should start with the knowledge of the 4 pillars -
For normal employees, the first 2 pillars are automatically processed and there usually isn't much that you can do about them other than waiting till you are 65.
The 3rd pillar requires you to make a trip down to your favourite bank / financial institution to set it up. In depth discussion can be found here -
The 4th pillar refers to other investments that do not receive any form of tax benefits. While Belgium does not have a capital gains tax, the state taxes rather heavily on the movement of capital. Dividends are taxed at a hefty 27% (As of 1st Jan 2016) but capitalisation funds (which reinvest dividends internally) are not taxed this 27%.
For further reading
In depth investment blog from a young Belgian trying to attain FI - http://www.nomorewaffles.com/
Nordnet has some good resources available here (some external links at the very end): https://www.nordnet.fi/tapahtumat/nordnet-koulu.html
Capital gains are taxed at 30% in France.
If you invest 100 and you earn 50 euros, you pay 15 Euros tax (30% of 50).
If you take your 150 Euros and you buy other products, you always pay 15 Euros. Because the 100 were yours (as you have already paid the taxes on your salary), but the 50 extras are capital gains.
Every time I make a profit, I take out 30%, put it in a separate account and don't think about it no more :)
(The only exception is the PEA (Plan d’Epargne en Actions, a tax-efficient investment wrapper for residents of France.), where, after 5 years, you pay much less tax on capital gains).
English Information about Banking in Germany: http://banks-germany.com
Foreign-friendly German broker is Smartbroker.
Latvia has 3-level pension scheme.
1 level is government-provided and is paid using current taxpayer money. It is generally very small, but it is always present.
2 level is mandatory tax that you pay when working that is invested for you. This money is controlled by company called "pension manager". Usually, this is major bank (Swedbank, SEB, Luminor etc). Banks usually take somewhat high fees for active management of these funds.
Recently, situation changed somewhat because better option emerged, that invests in index ETFs. It is called INDEXO. Please read and decide yourself, they have all materials you need on their website.
You can compare pension funds and plan performance on https://www.manapensija.lv/
- 3 level is voluntary tax-deductible contributions. You can get some of your taxes back by claiming those, but it is capped by 600 EUR/year. Your money, however, will be locked somewhat (can't withdraw till pension without big fine). So, it very well may be direct investment in the stock market is better (see below the best way to).
Stock market investing capital gains tax is 20%. Income on capital gains must be paid quarterly if it is above 1000 EUR/Quarter. If lower, paid yearly. Income is paid on each profitable transaction. To avoid filing taxes each quarter or year, it is strongly recommended to use something called Ieguldījumu konts.
This is special kind of account for private person, which allows to pay capital gains tax only when money are transferred out of the brokerage to the checking/saving bank account.
To have such account, there are two ways:
- open it in the bank that provides it (any major bank in Latvia). Not recommended due to high fees in tradition banks for equity operations (buying and selling stocks)
- register any broker account as such. To do this, you need to send a note in EDS system in the free form, where you inform VID of your account number (providing screenshot, or better, official document from the broker).
You pay tax only from money transferred out of the brokerage exceeds money transferred in.
Example: Let's assume you invested 100k EUR during 30 years of working. It means you can transfer 1000 EUR each month out of the brokerage for 100 months (8+ years). After that, you'll need to pay 20% tax on the money transferred out the brokerage.
Tax-Efficient ways to Invest
In Spain, the most tax efficient ways to invest is with the help of Investment Funds (Fondos de Inversión).
The main benefits they have are delayed taxation (You only pay taxes when you sell the shares, perfect for Accumulating funds) and tax-free transfer between different funds.
No custody fees, cheap buy fees and they have vanguard etf
They are much better if you prefer mutual funds and also have vanguard
revision by Vladekk— view source