What is the best lifespan of IIS?

So, you are planning to open an IIS, since the state provides tax benefits for this type of brokerage account – a deduction for the amount deposited or for income received. At the same time, it is necessary to decide for what period it is most profitable to open it.

In this article, we will not take into account force majeure circumstances that may affect the need to close the account and withdraw funds earlier. We will calculate when and what profit can be obtained by opening an IIS in order to receive tax deductions for the amount of replenishment.

Option gray

We open the IIS and by the end of the third year of its operation, in December, we replenish it with 400 thousand rubles, and at the beginning of the next year we submit an application to the tax service for a deduction. After three months of a desk audit (plus a month for the transfer of funds), you can get 52 thousand rubles. and close the account, taking the invested 400 thousand rubles.

At the same time, the tax authority may recognize this option as not suitable for benefits, since not a single available financial instrument has been purchased.

Total: the life of the IIS is three years, the benefit is 0 or 13%.

Reinvestment Options

Consider options not only for opening an account and crediting funds to it, but also for purchasing securities.

Let’s assume that you place your funds conservatively, for example, in bonds at 7% per annum. In this case, there are several options for using the account.

Option 1

Every year, replenish the account for the same amount (400 thousand rubles), from the second year adding to it the tax deduction received from the tax. And all this, together with the coupons received for the previous year, should be reinvested.

Rice. 1. Funds deposited into the account (tax deductions are not included in own funds). Source: author’s calculations

Option 2

In the first year, replenish the account by 400 thousand rubles, and from the second year, replenish the account for a total amount of 400 thousand rubles, part of which is the received tax deduction. As in the first case, it is supposed to reinvest the coupon income and invest the deposited amount in the same securities.

Rice. 2. Funds deposited into the account (tax deductions included). Source: author’s calculations

Option 3

In the first year, replenish the account by 400 thousand rubles, and from the second year, make only the resulting tax deduction. In this case, approximately on the seventh year of the life of the IIS, the last payment will be made. Otherwise, the option does not differ from the previous two – coupons are reinvested every year.

Rice. 3. Funds deposited into the account. Source: author’s calculations
Rice. 4. Amounts of income for various options for using IIS. Source: author’s calculations

Dependence in the increase in income from IIS is not proportional to the years. Every year the rate of income growth increases. And this increase becomes more and more significant, starting from the fourth year of the life of the account.

Which option is more profitable?

Rice. 5. Comparison of options for using IIS in terms of profitability. Source: author’s calculations

The third option seems to be the most profitable, but only in terms of the ratio of invested and received funds. From the point of view of the amount, this option looks the weakest.

Total: the life of the IIS is three years, the benefit is from 24 to 27% with an investment of funds at 7% per annum.

When is the IIS most beneficial?

If you are ready to open an IIA, buy securities with it that can generate income, and also if you use the tax deduction for contributions as part of the annual replenishment of the account, then the longer the IIA is open, the more benefits it can bring, subject to the action tax benefit.

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