Investor funds are taxable only once
Joint investment institutions have taken their place in the CIS market as an effective tool for financing housing, operations with loan portfolios and other investment projects. An important role in the development of joint investment institutions was played by state incentives in the form of tax incentives.
Lawyers specializing in the resolution of arbitration tax disputes indicate that the peculiarities of taxation of joint investment institutions are that, not being a legal entity, joint investment institutions do not pay income tax on income received, which avoids double taxation. That is, investor funds are taxed only once, at the stage of profit distribution among investors, but are not taxed at the level of joint investment institutions.
An important advantage of the institution of joint investment is the exemption from the obligation to pay the advance payment of income tax when paying dividends. Dividends are taxable only for individual investors at a reduced rate of 5%.
In addition, the investor of the joint investment institution may receive investment income from trading / selling operations of the certificates of the joint investment institution. A unit is a security, as a result of operations on which the investor receives income. Thus, the investor taxes the positive difference between the purchase and sale price of the unit at a rate of 5% for individuals (tax rate on personal incomes, applied for investment profit) and 10% for legal entities (corporate income tax rate on transactions with valuable papers). Operations with shares are exempt from excise tax; it is applied to operations on the sale, exchange and other methods of alienation of securities.
Thus, the existing tax incentives for joint investment institutions contribute to their successful use in investment projects. However, there is reason to believe that the tax policy of the state with respect to joint investment institutions may soon change. He is currently developing a package of amendments to bills. which contain the rules that amend the tax legislation accordingly, which are proposed to abolish tax exemptions for joint investment institutions.
If these initiatives are accepted, joint investment institutions will become payers of income tax and excise tax on securities. If the proposed changes are accepted, the mechanism for the functioning of joint investment institutions will lose their attractiveness and lead to investors seeking alternative mechanisms.