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Why an investment fund is a good savings instrument

Mutual funds often offer returns above deposits in the current context of interest rates. Not all investors are aware of the numerous tax advantages offered by this financial product: it is not taxed until its repayment, the balances can be transferred to another fund and the profits can be compensated for the losses of the last four years.

The funds are a collective investment vehicle that gathers savings from different people or organization to participate in different financial products. This instrument assumes more or less risk depending on the profile of the consumer, although it is usually quite safe to diversify its portfolio.

Investors, individuals or corporations, buy shares in a management company that can be a bank or financial institution. The value of the fund is permanently updated by dividing total equity by the number of units in circulation.

The tax advantages applied to this investment tool attract numerous savers. Moreover, at a time when deposits offer low profitability due to the context of low-interest rates in Europe.

No tax until refund

Investment funds are exempt from taxation until such time as an investor sells his interest and recovers the capital. The Tax Agency retains 19% on account of Personal Income Tax (IRPF) as in all capital income:

Up to 6,000 euros: 19%
Between 6,000 euros and 50,000 euros: 21%
More than 50,000 euros: 23%

Of course, when submitting the declaration, the settlement of the tax will depend on the set of savings income, that is, the sum of interest, dividends, and capital gains. Finance will take into account all with holdings when settling capital income.

Transfers from one fund to another

The biggest tax advantage of mutual funds is that they are not taxed when the amount obtained from the sale of their units is reinvested in another fund. There is the transfer figure, which allows you to jump from one fund to another without the need to tax the IRPF.

The new units retain the value and date of purchase of those that have been sold at that time. That is, a saver can transfer its capital from one fund to another without any kind of time limit.

This is a huge advantage over other financial products, although the taxpayer will always end up going through the tax office. In this way, the saver can increase the capital invested and obtain more profitability for its savings than in other investments.

Compensate gains and losses

For the past two years, capital gains and losses and return on capital have been added to calculate savings income. Earlier it was not possible to compensate for losses on the sale of shares with the proceeds from the repayment of an investment fund. It is possible with a maximum of 15% of the taxable savings base on the income statement.

In addition, it is possible to offset the savings results with the previous three years. If you lose money in funds or shares, the Tax Agency allows you to subtract it from earnings for the savings of the previous or subsequent three years. A way to pay fewer taxes if we have had equity losses.

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