Equity savings account
- start investing in equities
An equity savings account allows you to buy and sell both domestic and internationally listed stocks without facing immediate tax consequences. All dividends and interest earned in this account are tax-exempt, enabling you to reinvest your profits tax-free. This account is particularly beneficial for long-term investors aiming to maximise their returns through the power of compound interest, as taxes on earnings are deferred until you withdraw the funds.
Benefits of opening an equity savings account at Danske Bank:
- Invest in both domestic and international exchange-listed stocks
- Reinvest your potential profits within the equity savings account
- Defer taxes on returns until you withdraw funds from the account
Is an equity savings account worthwhile, and who is it for?
An equity savings account is ideal for anyone interested in stock investing, from beginners eager to learn to long-term investors focused on reinvesting dividends and periodically adjusting their investment portfolios. The more actively you manage your investments, the more advantageous an equity savings account becomes compared to traditional investment methods.
The "buy and hold" strategy is less effective with an equity savings account
The passive "buy and hold" investment strategy is less effective with an equity savings account. An investor who prefers to direct dividends towards immediate consumption might benefit more from a traditional book-entry account, which allows for direct use of dividends.
Understanding equity savings account and how it differs from traditional book-entry accounts
An equity savings account allows you to deposit up to €100,000, although the account's value can exceed this limit through investment gains. Unlike traditional accounts, you can only trade stocks within an equity savings account, not other securities like exchange-traded funds (ETFs). The primary advantage over a book-entry account is that taxes on profits are deferred until you withdraw funds, enabling tax-free buying and selling of stocks in the interim.
Tax benefits and considerations
Dividends received in an equity savings account are not taxed until withdrawn, allowing for tax-free reinvestment. However, it's important to note that you cannot utilise the tax-free portion of dividends; all withdrawals are subject to standard capital gains tax. Additionally, dividends from foreign stocks may be taxed according to the origin country's rates before withdrawal. Investors are advised to focus on growth-oriented foreign stocks over high-dividend ones.
Account limitations
You are allowed only one equity savings account at any time. Should you decide to close your account, capital losses can be deducted provided all assets are withdrawn.
Differences between an equity savings account and a traditional book-entry account
| Equity Savings Account | Traditional Book-entry Account | |
|---|---|---|
| Owner | Limited to individuals | Open to both individuals and businesses |
| Number of accounts | One per individual | Unlimited |
| Deposit limit | €100,000 | Unlimited |
| Trading | Restricted to domestic and foreign stocks | Includes domestic and foreign stocks, funds, and ETFs |
| Taxation of returns and dividends | Taxation occurs upon withdrawal | Profits and dividends are taxed annually |
| Capital losses | Deductible only upon account closure and sale of holdings | Deductible annually or over a five-year period |
Open an Equity Savings Account
Starting your investment journey is straightforward. All you need are your Mobile Bank credentials to set up an account.
