ISK vs AF vs KF account types - Part2/2
ISK account (Investeringssparkonto)
Who is this for?
As this is the account type that most people reading this blog should have, I have written a dedicated blog post here. If you are a long term passive investor in the stock market then this account is for you. This account type is only available to people who have a swedish personnummer (not available to people living outside Sweden).
Taxation
This is a flat-tax account. Meaning, instead of paying 30% on the capital gains that you might have, you pay a fixed (low) percentage of the total value in your account and its deposits. There is no need to carry out any paperwork during the taxation time as it is taken care of automatically. To see an example calculation, read this blog.
Ownership
You own the securities. Which means that you are entered in the share register as the owner. This means that you can choose to attend general meetings if you would like to do so. There you can usually choose to exercise your voting rights if you own such shares.
Inheritance
The capital goes to your estate in the event of your death
AF account (Aktie- och fondkonto)
Who is this for?
If you live outside Sweden and are unable to open an ISK or KF account. Or, if you trade stock frequently (where there is a chance of losing a large sum of money). This account type is for you.
Taxation
You are taxed 30% on the amount each time you sell at a profit, or receive a dividend. You can set off your profits against losses in the return, which means that if you have made as much profit as loss during the year, you do not need to pay taxes. If, on the other hand, your profit is greater than your losses, you are taxed at 30% on the excess. You need to declare all individual securities transactions in a K4 form when you file your tax returns.
Ownership
Same as for an ISK account. You own the shares that you buy.
Inheritance
Same as for an ISK account. Your capital goes to your estate, in the event of your death.
KF account (Kapitalförsäkring)
Who is this for?
If you want your kids to be the beneficiaries of your capital after they turn 18 or if you are living with your partner (sambo), to who you would like to pass on your capital to at the unlikely event of your death. Then this account is for you. This is an insurance product.
Taxation
The taxation is similar to that of an ISK account with a minor difference to the way the taxable amount is calculated. The taxable amount is calculated as the sum of: the value of your investments Jan 1st + deposits to the account during the year (Q1+Q2 deposits: 100% of the value, Q3+Q4 deposits: 50%). The rest of the process remains the same as for an ISK account.
Ownership
Since endowment insurance is insurance, the account, and thus the shares, is owned by the insurance company. You therefore do not have the right to vote at a general meeting.
Inheritance
You set the beneficiary on who inherits the capital in the event of your death. If you have not chosen a specific beneficiary, a general beneficiary designation applies, i.e. the spouse/registered partner/cohabitant inherits in the first place, and if there is no such, children inherit, and in the last instance heirs. It is always possible to change beneficiaries on capital insurance.
Further reading
Futher information about ISK account Statslåneräntan is here.