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Capital accumulation products tax information

‚ÄčIndividuals investing in products for the purpose of capital accumulation

Article 134A of the Income Tax Law allows the Comptroller to raise an assessment where he is of the opinion that the main purpose or one of the main purposes of a transaction is the avoidance (or reduction) of a person's liability to income tax.

Where individuals have invested in a product designed to accumulate capital rather than generate income the Taxes Office approach has historically been to assume the investment purpose was one of avoidance and to challenge the position in all cases above a set de-minimus level of investment. A figure of notional interest (currently set at 1% of the capital invested) has been taxed on the individual.

Tax treatment from assessment year 2017

This approach has recently been reviewed.

Given the amounts involved and the potential difficulty to determine the principle purpose of an investment, the Taxes Office will no longer automatically assume avoidance in every case.

Furthermore, in relation to capital accumulation products notional assessments will no longer automatically be included in personal assessments with effect from the year of assessment 2017.

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