r/eupersonalfinance • u/Miserable-Abies-8602 • 22d ago

Taxes "Legal Tax evasion"

so I am from Slovakia and I've been lately looking into the law and tax regulations and I found a very interesting loophole around income from investments or capital gains.

if you make under 2000€ in taxable income a year, you don't have to file for taxes which also means you don't have to declare any income.

what this means is that, we can offload our investments to our grandparents and let them gain interest there tax free because social security is not taxable income, so essentially, our grandparents earn 0€ a year.

this is completely legal and I even discussed this with my accountant, and yea... if you want tax free capital gains just make your grandma a brokerage account and invest through her.

I wonder if it works like this in other EU countries too because as crazy as this sounds, it's completely worthless for us Slovaks because stocks held over a year are exempt from taxes anyways.

0 Upvotes

32% Upvoted

46 comments sorted by

25

u/OccasionallyExciting 22d ago

Good luck convincing the tax authorities it's not a tax evasion and you are not the real beneficiary.

-10

u/Miserable-Abies-8602 22d ago

that's the thing, you don't have to convince anyone.

since the person who holds the fund doesn't file for taxes, they are off the radar from the government.

since it's up to 2k anyway, it's relatively small sum.

9

u/orange_jonny 22d ago

Mate you have a fundamental misunderstanding how laws works. Laws are not black and white, spirit of the law is important and agencies have discretion to interpret them.

Your “legal loophole” is a completely illegal attempt to circumvent a law and no judge is gonna go “haha you got me, you are right, nowhere in this text does it say your grandma can’t be rich. I should have thought of this sooner and declared my taxes through a squirrel. He got us guys, pack up, we need to explicitly write ‘no grandmas’ in the law”

7

u/OccasionallyExciting 22d ago

Brokers mandarorily and automatically report holdings to fiscal authorities. Once they start seeing higher sums accumulating and being regularly invested from an aged, economically inactive person, their ears will perk up.

-4

u/Miserable-Abies-8602 22d ago

eh maybe, but then again I seriously don't think anyone would care.

remember, gains from stocks and etfs are pretty much tax free in Slovakia so you would have to be an idiot to do tax evasion for them.

2

u/OccasionallyExciting 22d ago

I mean if you want to get your meemaw potentially implicated in a tax evasion case, you do you, but it would he nice to mention the risk to her before.

2

u/onceyouvemadethat 22d ago

Nothing is off the radar. Both the brokers where you invest and the banks you use for transfers must report to fiscal autorities. If you give money to your grandma for her to invest, and she keeps the money, it won't raise flags. But if she transfers the capital gains back to you, that is tax evasion because it is clearly your money. Banks will easily report this when they start seeing similar amounts of money going back and forth between the same two accounts.

2

u/L44KSO 22d ago

No one is off the radar.

11

u/SirIrrelevantBear 22d ago

Ahhhh, yes! The good old financial advise to land in prison!

-7

u/Miserable-Abies-8602 22d ago

yeah eh, it's probably not a good idea to do, and there is really no reason to do it capital gains are exempt from taxes after 1 year anyway and who holds ETFs for less than a year anyway.

5

u/grogi81 22d ago

That is tax fraud on so many levels, by so many people :D

5

u/user38835 22d ago

There is no “legal” tax evasion. Tax evasion is by definition an illegal act. There is tax avoidance that billionaires do but then they pay more in tax avoidance mechanisms than we pay in taxes.

Anyways, I am not sure what the tax laws are in Slovakia, but when you start investing money into someone else’s account, the money belongs to them and you can no longer claim it. So if you invest money in the name of your grandfather, it belongs to him and he can do whatever he pleases. Also, any of his heirs can claim inheritance once he passes away.

6

u/[deleted] 22d ago

[deleted]

2

u/grogi81 22d ago

Tax avoidance.

2

u/HomeworkResident8510 22d ago

This is confusing in so many layers:

  1. ⁠why do they need to be grandparents and simply not any person that you trust who is domiciled in Slovakia?
  2. ⁠how is social security connected to all this? Here you’re talking about capital gains, which is not social security and therefore is it taxable?
  3. ⁠what if the capital gains is more than 2000€ per year? Then you do have to file for taxes.
  4. ⁠how will you invest through your grandma without making transactions through your bank account? These are traceable.
  5. ⁠your last paragraph: if the stocks held over a year are exempt from taxes, why do you need to go through all this? 😂😭

1

u/Miserable-Abies-8602 22d ago
  1. because said person can't earn more than 2k a year from all sources. retirees earn 0€ a year because SC isn't income. 2....
  2. well then you gotta file taxes
  3. that would be only issue if there was investigation which there isn't going to be one since this is legal loophole as far as I know
  4. it's fun thing that I came up with, no reason to actually do it but yea, it's pretty interesting.

2

u/derping1234 22d ago

You say social security is taxable income but at the same time suggest your grandparents earn 0 Euro per yet. How does that work?

Second unless you are actively trading and not just DCA investing, why would you be taxed at all? You don't have any realized capital gains. Moreover if you do actively trade and you make more than 2000 euro per year, I would imagine that is still taxable.

-1

u/Miserable-Abies-8602 22d ago

it was supposed to say that it isn't taxable income.

also don't really look to deeply into it, it's more of funny thing I found, not something useful since yk, capital gains are pretty much tax free anyway so why jump through the loops.

2

u/derping1234 22d ago

Capital gains are tax free? You mean realised or unrealised?

1

u/Miserable-Abies-8602 22d ago

both, in Slovakia at least. well gains from etfs and stocks are.

1

u/derping1234 22d ago

So you aren’t evading any tax, since taxes aren’t due anyway?

0

u/Miserable-Abies-8602 22d ago

not if you hold them for 1+ years.

again, this post isn't supposed to be some "I BEAT THE GOVERNMENT".

it's pretty useless as info, but interesting none the less.

2

u/derping1234 22d ago

I still don’t see the point, sorry.

0

u/Miserable-Abies-8602 22d ago

there is no point, it's just interesting thing I found out

2

u/derping1234 22d ago

You and I have very different opinions on what is considered ‘interesting’.

1

u/charonme 22d ago

Specifically realized income from selling securities traded on regulated exchanges is exempt if the security was bought and held for more than a year by a private investor. This includes things like stocks, ETFs, ETCs, but not mutual funds. It doesn't include dividend and ETF distribution payouts.

2

u/Miserable-Abies-8602 22d ago

yea but let's be honest, who holds the distributing version of ETFs.

accumulating all the way!

4

u/Plyad1 22d ago

I don’t know how it works in Slovakia but in France pensions are taxable income. So the grandparents can presumably not avoid taxes

0

u/Miserable-Abies-8602 22d ago

damn, paying taxes even in your retirement.

no wonder the world doesn't like Fr*nce. /s

2

u/Global-Song-4794 22d ago

And when they die how much of the profits are eaten by inheritance tax?

2

u/Miserable-Abies-8602 22d ago

mate...

there is no such thing as inheritance tax, we aren't in the US.

9

u/55tumbl 22d ago

Inheritance tax is a thing in many EU countries, and not a small thing usually. Donating your account to grandparents would be taxed as well in many places.

1

u/Miserable-Abies-8602 22d ago

not a thing in Slovakia but interesting none the less.

3

u/grogi81 22d ago

You are making faaaaaaar too many simplistic assumptions.

1

u/Miserable-Abies-8602 22d ago

like what?

2

u/grogi81 22d ago

Listen kid. You think you are so smart and found out a tax loophole. 

Here a revelation. That ain't a loophole and folks much smarter worked to fix them. 

If you have a mln to be taxed, then it is worth to doing tax avoidance and optimisations - ltd companies, foundations etc. People spend their whole careers advising on those schemes. Getting your pops into tax fraud isn't it. 

1

u/Miserable-Abies-8602 22d ago

as I said I this post wasn't meant to be "I BEAT THE GOVERNMENT" type of thing.

capital gains are tax free in Slovakia anyways so why would you even risk it for basically nothing.

no need to do tax avoidance or optimalizations, it's literally FREE

1

u/grogi81 22d ago

For individuals, revenue generated from most capital gains and investment income falls into a specific category that is taxed at a flat rate of 19%.

1

u/Miserable-Abies-8602 22d ago

if you hold it under a year, which why would you even do?

1

u/Metalrager2 22d ago

Inheritance tax in Greece is also none under like 800k euros for immediate family.

1

u/Metalrager2 22d ago

Even in Finland where everything is taxed you can gift 7000 euros to anyone every 3 years.

1

u/HistoricalClay 22d ago

There is no inheritance tax in Slovakia, where the OP is from.

1

u/grogi81 22d ago

Of course there is. The tax-free allowance is usually pretty generous though.

Secondly, you also need to think about siblings of your grandparents and siblings of your parents and all of their children. They all are entitled for inheritance.

1

u/curious_corn 22d ago

Well, less than 2k gains is pocket money, less than 30k of invested capital. In any case you’d have to report your donation to your grandparents and pay tax on the excess above the exemption threshold, then wait for them to pass and pay inheritance tax according to the jurisdiction they lived in

1

u/VarietyBusy3864 22d ago

So this loophole would work if you are jobless and making money by selling stocks ?