Did you make money in 2021 on financial instruments? Don’t forget this (Peter Varga for FORBES)

Following on from the investment-rich year of 2021 comes the period when tax returns need to be made. This is normally associated with several, mainly administrative, complications. Every investor should have supporting documentation for the tax return so that they can defend their tax position in the event of a tax audit.

The form and scope of such documentation always depends on the specific investment. For example, if a taxpayer invests in bonds issued by a Slovak issuer, in principle he does not need any supporting document because his tax liability will be settled by the issuer upon payment of the proceeds. However, when it comes to investments in securities issued by a foreign issuer, the situation is more complicated. By default, such investments are made through banks or securities dealers who provide their clients with information support for the purpose of completing their tax returns. In particular, the taxpayer must be able to classify the type of income from the documents in question. It may be a standard :

• dividend income;
• income from the sale of securities;
• the coupon on the bond;
• income from the redemption of a security;
• other type of income from a security or interest income.

Some types of income are exempt from tax, different tax rates apply and the tax base is calculated differently. Some types of income are taxed at the so-called. on a net basis, where a tax expense must be deducted from income. For example, when securities are sold, the purchase price and any transaction costs are normally deducted from the sale proceeds. When dividends are paid, the gross amount of the dividend is taxed for a change, but this may be different from the amount received by the taxpayer in the bank account. Exchange rate differences and possible foreign withholding taxes add further complexity.

Therefore, the taxpayer must require his intermediary to provide him with a transparent and detailed description of the individual receipts, at least to the extent of their :

• Source;
• Classification;
• the purchase price;
• transaction fees;
• exchange rates and withholding taxes applied.

For more on this topic, see the FORBES article

If you are interested in this topic, please do not hesitate to contact us.