Equity Savings Account Withdrawals and Taxation in Nordnet

Personal finances
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I asked the same question on Shareville, but I’ll post it here too, in case there are experts here.

So, a tricky question about the taxation of an Equity Savings Account (OST) / the amount of money that can be deposited, as I can’t get a sensible answer from Nordnet’s customer service.

Let’s take a situation where your Equity Savings Account (OST) is initially empty, and you first deposit 10,000 euros into the account and buy shares worth 8,000 euros (incl. trading costs). You are left with 2,000 euros in cash. The shares rise by, say, 20% in a week, and you then decide that you need the remaining 2,000 euros for something other than buying rising stocks. So you keep the shares in your portfolio and don’t sell them. However, you decide to transfer the remaining 2,000 euros back to your Securities Account (AOT) and withdraw them from there to your own account. What do you think happens with this withdrawal? Do you pay tax on anything? How much more money can you deposit into the OST after this? According to my understanding, the answer should be that no taxes are incurred because you are only transferring uninvested cash back to another account. And you should still be able to invest 42,000 euros into the OST. Or have I misunderstood something here?

I just have a similar situation with my OST, where in the initial phase I shuffled some cash between the OST and AOT. I did roughly this:

6.3.2020: First deposit to OST 7000 euros
6.3.2020: Bought Citycon and Wärtsilä so that 33.50 euros remained in the account
9.3.2020: New deposit 5000 euros. So account balance 5,033.50 euros
9.3.2020: Bought Nordea and Fortum for a total of 4175.1 euros (incl. trading costs), so the account balance remained 858.4e.
9.3.2020: On the same day, I decided to transfer 850 euros back to the AOT, because there was so much to buy on that side that I needed every euro there. The OST balance remained 8.40 euros. However, Nordnet had automatically split this withdrawal into two: -847.52 EUR (type: OST WITHDRAWAL) and -2.48 EUR (type: WITHDRAWAL, without OST marking)
11.3.2020: I managed to transfer more money from my current account to the AOT and then transferred 1750 euros from there to the OST, balance 1758.40. At the same time, I bought Fortum so that the OST balance remained 31.15e.
11.3.2020 - 12.3.2020: I again scraped more money from other accounts to the AOT and made additional deposits of 12,000 euros to the OST and bought a bit of this and that for the OST so that the balance after purchases was 1082.35 euros.
13.3.2020: I again withdrew 1000 euros from the OST because I needed it for purchases on the AOT side as the stock market sale continued. Nordnet did not split this withdrawal into two like the previous one.
13.3.2020 - end of year: I only made deposits and purchases, the first dividends came into the portfolio only on 30.3.2020

I calculated that I made deposits from AOT to OST in 2020 totaling 42,250 euros and made withdrawals from OST back to AOT totaling 1,850 euros. All withdrawals were made in the early part of the year before any dividends came into the portfolio and there were no sales in the portfolio. So, if I deduct the withdrawals, I have put 40,400 euros in cash into the OST.

Since the OST limit is 50,000 euros, according to my calculation, there should still be room for 9,600 euros in the account, but Nordnet’s system states “You can still deposit into the account: 9597.52 EUR”. So there is a 2.48 euro discrepancy. This means, according to Nordnet, I can never deposit 50,000 euros into the account, meaning I will never get a return on that missing 2.48 euros. I wouldn’t really bother complaining about a couple of euros, but as a coder, this is interesting because I think there’s a bug there, but Nordnet doesn’t seem interested. That 2.48 euro discrepancy fits exactly with that split withdrawal on 9.3.2020. It’s also possible that I have completely misunderstood the taxation/withdrawals of this OST…

When I asked about this, Nordnet’s customer service only gave me this generic answer, which I didn’t really understand:

Please note that capital gains are also considered taxable income in an Equity Savings Account (OST):

For tax purposes, it does not matter how the return was generated (dividend, interest, appreciation of the investment, currency exchange gain on an account in a currency other than euros) or in what order. Thus, in addition to realized capital gains from shares, the unrealized appreciation of shares acquired for the account is also considered income from the Equity Savings Account when funds are withdrawn from the account.

Osakesäästötilin verotus | Nordnet

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Now that I’ve been reading tax guides online, it seems that unrealized capital gains are somehow included when withdrawing from the account. My best guess is that when I withdrew money on March 9, 2020, the portfolio was, by sheer luck, slightly in the black. And when I made a new withdrawal on March 13, 2020, the portfolio was in the red: this explains why the second withdrawal appears different in the transactions than the first. But what makes this confusing is that I don’t see any taxable profit generated for my OST (Osakesäästötili - Share Savings Account) anywhere in Nordnet (e.g., from the 9A report), as far as I can tell.

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Based on your example, you’ve misunderstood. With an OST (Owner’s Savings Account), the overall account performance is always considered, and if it’s in profit, a portion of each withdrawal is deemed a profit, and you can only return the equity portion to the account. This is why I try to tell people not to withdraw money placed in an OST if they want to maximize tax benefits.

In your example, a €10,000 account grows to €11,600. If you withdraw €2,000, €276 of that is profit and €1,724 is equity. So you pay €83 in taxes and in the future, you can only deposit up to €41,724 into the account. That is, the missing €40,000 and that €1,724 equity portion.

I don’t want to calculate your exact account situation on my phone, and as a coder, you can do it yourself once you understand the logic.

Edit: To calculate your exact OST account situation, you would need to find out the portfolio value on the withdrawal days, so it gets quite difficult.

It’s not surprising if Nordnet can’t tell you about the taxes related to OST withdrawals in their reports; it’s a new thing for them too, and they probably forgot that some people also withdraw money from there.

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Osakesäästötili
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You pay taxes in proportion to the ratio of profit to capital on your stock savings account (OST). For example, if you have deposited 10,000 euros and it has grown to 15,000 euros, when you withdraw any amount of money, one third of it will be taxed as profit. This is because the OST had 10,000 in capital and 5,000 in profit.

A stock savings account is like a chicken soup that you can’t just pick at. You always get chicken and broth in the same proportion as the soup.

It’s a good idea to ask the tax authorities about taxes. Their website has ready-made examples for you.

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So I clearly misunderstood the taxation of withdrawals. Thanks for these clarifications!

But what’s especially interesting here is that my 850 euro withdrawal from the OST (at which point the portfolio was apparently slightly in profit) transferred as is to the AOT. So no withholding tax was taken in between. Shouldn’t withholding tax be deducted from that if a profit was generated? At least according to the tax authority, Nordnet should, as I understand it, do this withholding tax:

When you withdraw funds from an equity savings account, the funds are divided into return and capital. The return is taxable income, while the capital is tax-free. The bank or other service provider calculates the return for you and deducts a withholding tax of 30% of the return.

Can any other Nordnet user confirm whether, if you have withdrawn money from a profitable OST, withholding tax has been deducted from it.

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I can confirm this. Here are the rows from the transactions and calculations for one withdrawal.
Profits are under “nosto” (withdrawal), and the taxes on them are “pääomatulovero ost” (capital income tax OST). My own withdrawn capital is “Nosto OST” (OST Withdrawal).

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image1082×108 6.08 KB

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That looks very similar to my own account, with the difference that I don’t have “pääomatulovero ost” (capital gains tax buy) at all. So there was a bug there, as my withdrawal wasn’t taxed then. I’m not going to complain about this if I’ve managed to accidentally avoid a few euros in taxes :grin: I would guess that the deposits, purchases, and withdrawal that happened on the same day, 9.3.2020, have somehow messed up this calculation.

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Or could it be that no withholding taxes are carried out for amounts below a certain sum? I understood that you were talking about a few euros. It could, of course, be a Nordnet bug. It wouldn’t be the first time.

I would guess that this will show up in your tax proposal, meaning you only postponed paying taxes a little.

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So does the bank withhold capital gains tax when withdrawing?

And on what grounds?

Quite a stupid thing. Even if you withdraw a million in profit, no profit is generated in the tax year if there are losses elsewhere

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Withhold. The tax authority, in its wisdom, has decided this. Prepayments under 20 euros are not withheld, which might be the case in @elakkeelle35v’s 850e withdrawal. Additionally, according to the tax authority, the closing values of shares from the previous day are used for the market value at the time of withdrawal. https://www.vero.fi/syventavat-vero-ohjeet/ohje-hakusivu/81118/osakes%C3%A4%C3%A4st%C3%B6tilin-verotus/#6-osakes%C3%A4%C3%A4st%C3%B6tilill%C3%A4-olevien-varojen-nostamisen-verotus

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So, it’s not worth “slaughtering” a share savings account unless it’s a profitable year.

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This is very much at the end of the year, when final taxation is as close as possible.

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Well, that 20 euro withholding tax limit does explain it for me. There’s no bug after all, I’ve been wrongly suspecting Nordnet. But I do have to wonder why on earth such a 20 euro limit was made. Nowadays, when taxation is fully automatic, it’s probably all the same for information systems whether the tax is 1 cent or 1000 euros. Such limits just unnecessarily complicate the OST (long-term savings account).

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Otherwise, it seems overly complicated, but the tax authorities do what the tax authorities do. I’m not surprised if customer service can’t answer these questions.

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Yeah, I don’t know what kind of people Nordnet hires for customer service. Probably students and recent graduates. I’ve even applied a couple of times, as a career change would interest me and I’d say I’d do well in the job. I’ve had investments since childhood and have managed them myself for almost twenty years.

They’ve never even invited me for an interview. Was the salary request too high or was there something else wrong with the application?

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The 20-euro limit for withholding tax on an investment savings account (OST) seems to be based on a regulation that predates the investment savings account itself, namely the “Prepayment Decree”: Ennakkoperintäasetus | 1124/1996 | Lainsäädäntö | Finlex

Occasional and minor payment
Withholding tax is not levied on capital income if the amount of the payment is at most 20 euros. Withholding tax is also not levied, nor is an employer’s health insurance contribution paid, if the amount of another single, occasionally paid performance is at most 20 euros per calendar month.

It’s not entirely clear from this whether the limit is per transaction or per month for OST withdrawals. I just started thinking in theory, if there is a loophole where you could withdraw money from the OST every single trading day (250 days a year) for a year, so that you make a profit of just under 20 euros, then you could withdraw about 5000 euros in profit (20 x 250) per year and no withholding tax would be deducted from any withdrawal. You’d be crazy to bother making those withdrawals like that, but you would “save” 1500 euros in withholding taxes that way. However, I would guess that even if no withholding tax is deducted, it would still show up as profit in taxation, and you would have to pay taxes on it later.

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Incidental and minor performance means that the loophole you mentioned doesn’t exist in this case.

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Only if the account had infinite capital. Tax is only paid on the profit portion. You cannot only withdraw profits, so the percentage is always below 30.

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So it would be advisable to withdraw funds from the OST once a month so that the profit share is, for example, 19.99 euros, thus making it tax-free? 12 months x that is 240 euros/year = net capital income tax benefit/year. Would it work like that?

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Yes, they will all be aggregated in taxation, and taxes will be levied on them.