Wealth management? 5 + 1 important information on the long-term investment account (TBSZ)

Today, we look at a very useful institution for tax purposes. We gathered the most important information in case e.g., we would like to trade on a stock exchange or possibly invest in government securities with this option. All this can be done not only by a natural person, but also by a private foundation and a trustee. If the conditions specified in the law are met, we are partially or fully exempted from paying the tax on the achieved yield.

If you are thinking about a medium or long-term investment, this long-term investment account is an excellent option. TBSZ is a form of savings (e.g., bonds, shares, investment funds, etc.) through which (after a certain period) we are partially or fully exempted from paying tax on the achieved yield.

The number of contracts is not limited

• Within a calendar year, we can conclude a TBSZ with several investment service providers. (Example: in 2022, we can conclude such a contract with more than one bank at once, like bank X, bank Y, and so on, and this is not limited.)
• Within a calendar year, only one TBSZ can be concluded with an investment service provider. (Example: in 2022, we can conclude just one contract with X bank.)

During the collection year, we can increase the amount of money indefinitely

The year of account opening is called the “collection year” or “collection period”, to which at least HUF 25,000 – or the equivalent foreign currency – must be paid, and this can be increased indefinitely during the collection year. It is important to point out that after the collection year, no deposit can be made to the TBSZ. E.g., if we opened a TBSZ account now, the year 2022 (in this case from June to December 31) would be our collection year, but we can also trade during this period.

After three years, the tax rate is only 10%

Our next period is the so-called 3-year commitment period. Orders given for transfers from the account or cash withdrawal during the investment period interrupt the investment and result in the termination of the TBSZ. If we still want to withdraw our money, the part more than the committed money will be considered as income and after that the 15% tax must be paid (which would normally be required). After the 3-year deposit term has ended, a discounted income tax (10%) must be paid on the income earned on the terminated long-term investment.

After five years, the tax rate is 0%

Our last period is the two-year commitment period, so it will be a total of 5 years and the plus 1 collection year. Generally, this period will be the “lifetime” of the TBSZ. After five years, we “pay” 0% tax on the yield.

There is no collection year if we continue the contract after the 5th year

After the 5th year, we can decide to withdraw our money, or we can continue our investment. If we continue the TBSZ account, the 3 + 2-year commitment periods will apply to our contract in the same way, with the difference that there will be no extra 1 collection year, because in this case the 5th year will be the collection year.

+1. A private foundation and a trustee may also enter into a TBSZ

In addition to a natural person, the follows can enter into a long-term investment contract:

• a private foundation, which concludes the contract for the purpose of transferring assets to the beneficiary, and
• a trustee, who enters into the contract to fulfil the provisions of the trust agreement.

By law, a trustee and a private foundation are treated the same way as a natural person, so they must also file and pay the tax return.

If you are interested in this possibility, contact us at one of our contact details.