Long-Term Investment Account is a fixed-term savings program through which you can make tax benefits, choose from a variety of investment opportunities and maximize your return expectations for our risk-tolerance capability.
TBSZ (Long-Term Investment Account) is one of the most popular investment objectives of Hungarians.
How does the account work?
By opening the TBSZ account, we undertake to deposit our money for T + 5, but at least for T + 3 for the given financial institution. Paying to the account is possible in the calendar year of the account opening (T), which is called TBSZ year of collection .
During this period, you can make payments several times, increasing the value of your account. If we want to get our money after T + 3, we can do it with reduced tax (10% interest tax).
Those who have access to their money on the TBSZ account after 5 years have free access to their savings.
Periods of managing a long-term investment
Collection period – collection year
The period from the conclusion of the contract to the end of the calendar year in which, at any time, any amount may be placed on the TAB.
No further payments to this particular TBSZ account are possible. The amount of the savings account may, of course, be increased by the amount of interest earned on the investment. During the subscription period, a “billed account” (transfer, cash withdrawal) will immediately terminate the TBSZ contract.
When can I withdraw money from the account?
The classic savings period is 5 years when we can access our savings free of tax. However, unexpected life situations may occur when we need to break the bill sooner.
Before 3 years of savings, cash withdrawal from the account
Of course, we can access our money here at any time. In this case, however, we have to pay the (currently) 15% interest rate on our total interest income.
You can’t withdraw a subtotal so you need to move the total value of the account.
- the TBSZ account is terminated
- the interest tax deduction is not automatic, you have to admit it to you.
After 3 years the account can be accessed
After 3 years, we have access to a part of our savings on a single occasion with the payment of a reduced interest tax on the TBSZ account .
The main rule is that after a partial withdrawal, you must have a minimum of $ 25,000 in your account. Then we have to wait for 5 years with the amount remaining on the invoice to get it free of tax.
Finally, you have to wait another two years and the total amount may be free of interest tax. Here you can decide whether you are going to withdraw money from your account or continue with it and start a new 5-year cycle. If you make a statement about it in time, you don’t have to wait for the next year, from January 1st you can start your 5-year cycle.
After 3 years, the balance of our TBSZ account is HUF 3,500,000. The original amount was $ 3,000,000. We would like to make a one-time cash withdrawal and take out 1,750,000 forints.
In this case, we will have to pay interest on interest at the rate of 250,000 HUF. The interest tax payable in this case is HUF 25,000.
Tax on account
By the end of the 3rd year after the opening of the TBSZ account (T + 3) we will have to pay a 15% tax on our account after the exception. This means that the original amount can still be tax-free, we only have to pay the tax on our interest income.
As of 1 January 2017, it will be repealed by Act LXVI of 1998 on Health Contribution. 3 / A of the Act. Under the change, the obligation to pay a 6 percent health contribution to a domestic private individual will be terminated, which would previously be the term of the long-term investment contract concluded after 1 August 2013 and terminated before the last day of the three-year subscription period.
The subscription period is 3 to 5. We have the opportunity to access one part of our account once a year with 10% interest tax.
However, after the 5th year of the TBSZ account, we have full access to our account balance without any tax.
By 15 February of the year following the tax year in which the income came into existence, the long-term investment, the date of the long-term deposit and the date of termination or interruption of the term of the deposit shall be certified by the financial institution to the TBS owner.
Can I extend my account?
At the end of the T + 5 year, we have the opportunity to extend the bill. We need to pay attention to the need for our extension before the five-year subscription period actually expires.
We have the possibility to withdraw a partial amount from the TBSZ account and to extend the subtotal (min. 25,000 HUF). This is subject to an amendment coming into force on January 01, 2017.
CXVII of 1995 on Personal Income Tax. 67 / B. §. (10) (b) provides for the possibility of keeping funds held in the treasury register on the last day of the five-year subscription period on the basis of a fixed-term investment contract concluded by the investment service provider until the date of the five-year maturity date.
According to the statutory provision, the cash and financial assets recorded on the long-term investment accounts expiring on 31 December of that year are at the discretion of the client for an additional 3 or more. They can be kept in a long-term investment record for 5 years by enforcing tax breaks for long-term investments in assets.
Main rules for extension:
- Savings on the extended long-term investment account can be tax-free on December 31, 2023, or after the 3rd year, there is a possibility of preferential withdrawal.
- And at the end of the fifth year, the bill can be extended with partial withdrawal.
- In the extended long-term investment account, the cost of the cash and financial assets subject to the extension is at the acquisition date and is T + 5. of the market value as of December 31st
How can I sign a account with a foreign service provider?
From 01.01.2017, we have the opportunity to enter into our TBSZ account with a foreign service provider and use the tax allowance.
Pursuant to the law in force from January 2017, the account holder must inform the NAV within 30 days of the TBSZ opened abroad in order to have a lower tax rate (after a 3-year term) or tax exemption (after 5 years). apply to income earned on your account. This avoids double taxation.
The notification must contain:
- the name of the contributor,
- tax ID,
- the amount paid,
- the transferred financial assets,
- and the value of the money.
- In addition to the notification, the foreign financial institution must have a certificate from which the income generated on the TBSZ can be determined.
If the foreign TBSZ has reached 5 years, the income from TBSZ should not be included in the Hungarian tax return.
The process of concluding foreign TBSZ
The main steps in opening a foreign TBSZ
The question arises as to how the TBSZ account can be converted into regular savings when payments cannot be made after the year of collection?
The solution is to have multiple TBSZ accounts at once. This means that each year you make another TBSZ account, which you pay monthly for the amounts you have planned.
Cost of account
It is important to be aware of the fact that TBSZ account management also has costs, while the fund manager’s fee for the investment (on average 1.75% / year for funds) can be charged.