How to withdraw money from IIA

Step by step instructions to not lose the right to a tax deduction.

An individual investment account (IIA) is a type of brokerage account that has some restrictions and preferences compared to a classic one. The main restrictions are imposed on the withdrawal of money from IIA. The most important and attractive parameter of IIS is the possibility of obtaining one of two tax deductions:

for contributions (type A) – you can receive no more than 52,000 rubles once a year, simply replenishing the IIA in the amount of up to 400,000 rubles. per year – to receive benefits, you must have a source of income subject to personal income tax at a rate of 13%;
for income from work on IIS (type B) – is given no earlier than three years and only after the account is closed.

Options for withdrawing money from IIA

The peculiarity of this type of investment account is that assets are withdrawn only with its closure. There are two ways to withdraw funds from the IIA.

If your account is three years old or more
Proceed as follows:
Sell all assets.
Write an application for the closure of the IIS.
Specify the details of the bank or brokerage account to which you want to receive funds.
Submit documents to the broker.
Get a confirmation that the account has been closed.

After you submit an application, transactions on the investment account will be blocked. The broker will check what tax deductions have accumulated on the IIA, withhold the amount of taxes on dividend payments, and transfer the rest of the funds to the details.

If you want to use the income deduction, first take a certificate from the tax office that you used the type A benefit – you need to provide it to the broker. Read about how to cut taxes on dividends in Open Journal.

If the IIA is not three years old

The investor can withdraw money from the IIA before three years have passed. It will not work to withdraw part of the funds, as this will automatically lead to the closure of the account. Steps for early closure of IIA:

Sell all assets.

Write an application to close the account.

Specify the details of a bank or brokerage account for withdrawal.

Submit documents to the broker.

Get a certificate of account closure.

In case of early closure of the IIA, the investor loses the opportunity to receive tax deductions. If you have already received a type A benefit, then the entire amount will need to be returned, adding to it penalties that will be accrued at the interest rate. The broker will contact the Federal Tax Service himself to find out information on benefits, calculate taxes and transfer money to you without them.

Withdrawal of dividends and coupons from IIA

The profit on the account is made up not only of the difference in prices when trading assets: coupon income from bonds and dividend payments on shares are also accumulated on IIA. The withdrawal of this type of profit from the investment account in the “Opening Broker” is possible only at the time of closing the account.

What taxes will you have to pay when closing an account?

If the account is closed early, the investor will have to pay all taxes that are provided for regular brokerage accounts: tax on profit from trading operations, on dividends and coupon payments on bonds. In addition, if the investor has already received benefits under the type A tax deduction, their amount will be withheld.

Depending on the type of tax credit, if the account is three years old, the investor may be exempt from paying taxes on trading income.

With regard to dividend payments and coupons on any type of bonds, they are taxed regardless of the type of deduction.

Withdrawal of money from IIA without closing is impossible. Everything will be decided only by the transfer of funds to the details specified in the application for closing. From there they can be picked up in any way provided by the broker.

WHICH TYPE OF DEPOSIT TO CHOOSE?

The choice of the type of deduction depends on the expected return on investment and whether you receive income taxed at the rate of 13%.

The first type of investment deduction (or deduction type A) allows you to annually reimburse the paid personal income tax in the amount of 13% of the amount of funds deposited in IIA.

To qualify for the exemption, you must have income taxed at the rate of 13% in the year for which you plan to receive the deduction. For example, it could be wages. You can get a deduction only for those years in which you replenished the Individual Investment Account.

This type of deduction should be chosen if you have income subject to personal income tax, you are going to replenish IIS annually and do not plan risky investments for the sake of high profitability.

The second type of investment deduction (deduction type B) allows you to exempt from income tax all profits received on IIA. You can get a deduction from IIA type B only when you close an account and not earlier than three years after opening an IIA.

To receive this type of deduction, it does not matter if you receive income taxed at the rate of 13%. For the entire period of existence of the IIS, the tax is not calculated and is not withheld, at the time of closing – it is considered profit, which is exempt from taxation in full. The exception is tax paid on dividends.

WHEN DO YOU NEED TO DECIDE WITH THE TYPE OF DEDUCTION? IS IT POSSIBLE TO CHANGE THE TYPE OF WITHDRAWAL?

At the time of opening the IIS, the type of deduction is not fixed anywhere, but if you use the type A deduction, then you cannot change it to type B. A benefit of type B can only be obtained upon closing the IIA, provided that you did not use the type of deduction A. That is, the type of deduction is determined at the time of its receipt.

If you have already used the benefit (deduction A), then you can change the type of deduction only after closing this IIA and opening another one. Please note that if you close the IIA before three years, you will lose the right to receive a deduction.

HOW LONG DOES IIS OPEN? IS IT POSSIBLE TO CLOSE IIS EARLY? IS IT NEEDED TO CLOSE IT AFTER 3 YEARS?

The minimum term for which an IIS is opened is 3 years. If you close the IIS before the expiration of this period, then you will lose the right to receive a tax benefit. At the same time, if you have already managed to use the type A tax deduction, you must return the received deduction and pay penalties.

The maximum validity period of the IIA is not limited and it is not necessary to close it after 3 years. You can continue to use the account and receive tax benefits.

If an IIA exists for more than 3 years, we recommend that you apply to the tax office for a type A benefit at least once every three years. For example, for funds credited to IIA.