In the last article, we talked about changes in the tax on bank deposits. However, in 2021, changes in taxation will affect not only bank deposits, but also deposits in bonds… What will the bond tax look like now and can it be reduced?
First of all, you need to understand how bond income is generated… It consists of:
- profits from exchange rate differences. For example, a bond was bought for 100 rubles, and sold for 150. 150 – 100 = 50 rubles – this is the profit from the exchange rate difference.
- coupon payments;
- the profit received upon redemption of the bond, if it was purchased lower than par.
Earlier bond taxes
Previously, government bonds were not taxed, and corporate bonds were subject to the following conditions:
- If the bond was issued before January 1, 2017, then the tax on all types of profits from it was 13%;
- For bonds issued after January 1, 2017, the tax base was calculated according to the following formula: if the coupon rate was higher than the key rate of the Bank of Russia + 5%, then the tax on this amount for residents was 35% (30% for non-residents).
New bond tax
Starting January 1, 2021, there are no longer any exemptions for taxes on bonds – both corporate and government bonds are subject to taxation. No calculations are required either – the tax applies to all profits on the bond, the rule “rate of the Central Bank of the Russian Federation + 5%” is no longer valid. The tax rate for residents is 13%, for non-residents – thirty%…
You do not need to submit any documents to the Federal Tax Service, the broker, as a tax agent, will calculate and withhold the investor tax on his own.
The new law does not apply if bond coupons were received by investors before December 31, 2020.
Let’s consider an example
For example, an investor bought a bond with a coupon of 5% per annum and a nominal price of 1,000 rubles. The coupon payment for the year will be 50 rubles (5% of 1000), from which you will have to pay 6.5 rubles of tax (13% of 50 rubles).
If the bond was purchased below its par value, for example, for 900 rubles, and the investor waited for its maturity, then in this case the profit will be 100 rubles (1000 – 900), from which 13 rubles will be taxed (13% of 100 rubles).
How will the new tax affect bond yields?
For example, let’s take a real OFZ 25083. The maturity date of the bond is 12/15/2021, the coupon rate is 7% per annum.
Under the old legislation, government bonds are not taxed, the bond yield is 4.54%. With the new tax, its yield will already be 3.4%.
Accordingly, the introduction of new taxes will negatively affect bond yields. And since coupon rates directly depend on the key rate of the Central Bank of the Russian Federation, its low value also plays a huge role in this influence.
Can you avoid paying taxes on bonds?
You cannot completely avoid the bond tax, but you can do it partially. For example, buying and selling bonds on IIA type B. Under the terms of this account, income from trading a security, and the sale of a bond falls under this criterion, is exempt from paying personal income tax.
There is another option, how to avoid paying tax on profits from the sale of bonds. As with stocks, bonds have a long-term ownership benefit. That is, the investor must own the bonds at least three years… If at the time of closing the IIA three years of bond ownership has not yet passed, then you can simply transfer it to a regular brokerage account. Please note that this method is only applicable for bonds traded on the Russian market.