Please, would it be possible to automatically withhold tax on interest on cash according to investor’s tax residency ?
If not, could the interest on cash be disabled completely ?
The interest income is negligible but it immediately triggers the need for filling tax report even for investors that would otherwise not be obliged to (e.g. regular employees). This creates overwhelming bureaucratic burden that discourages potential investors from opening an account at all.
Withholding tax is different, and it’s taken already automatically at source. What you are referring is your governmental tax. Where are you from? Just to have an idea, but I am pretty sure it won’t be that easy to implement something like that. Each country have different rules, sometimes it’s also based on the circumstances too (you don’t have to pay in some cases, eg. not enough income, and many more cases), etcc.. It’s not as simple.
In Czechia and Slovakia tax is automatically withheld on any interest on bank or investment account by domestic financial institutions (15% in CZ, 19% in SK). You don’t need to care about taxes on interest.
If it’s hard to implement this then turning of interest would be acceptable workaround since tax report obligation for negligible interest income is a deal breaker.
It seems that there actually is an option to disable interest on cash in settings… so it’s not so severe…
That solves that then! Out of interest, how does your region deal with dividend income or capital gains, which are other features of investing that tend to be taxable?
Dividends also require tax report but capital gains are liberated after holding for some time (3 years in CZ, 1 year in SK).
That’s why you generally want to invest in accumulating ETFs there.
Capital gains relief on long term investment is quite generous. In the UK outside of a tax privileged account (ISA, pension etc) gains above the annual allowance are taxed. Thanks for sharing.
It is, indeed! In addition if your income (not gain) from selling securities is less than 100k CZK in tax year you don’t need to tax or report it. And we also have special DIP account and you can deduct investment of up to 2000 € per tax year in this account from your general tax basis (from other types of taxable income).
There is clear government incentive to motivate people to invest long-term since it’s not a habit here yet (except real estate investments).
On the other hand any interest or dividend income is taxed unconditionally.
