Should I use the deemed acquisition cost or my real purchase price?

The rule in one line

From the sale price you deduct either the purchase price plus the costs of buying and selling, or the deemed acquisition cost: 20% of the sale price if you held the asset for less than 10 years, 40% if you held it for 10 years or more. The larger deduction applies, so the gain is calculated the way that is better for you (section 4.2.2 of Arvopaperien luovutusten verotus and chapter 10 of Omaisuuden luovutusvoitot ja -tappiot; both detailed guides are in Finnish).

Fees are not deducted on top: the deemed cost replaces both the purchase price and the expenses (chapter 10; vero.fi: Selling shares). So the comparison is:

purchase price + buying and selling fees versus 20% (or 40%) × sale price.

What the deemed acquisition cost is and where it applies is covered in our article on the deemed acquisition cost. This guide is only about the choice.

Example: 1,000 € → 6,000 €

You bought a lot of shares for 1,000 € and sold it a few years later for 6,000 €. Broker fees for the purchase and the sale were 20 € in total. You held the lot for less than 10 years.

• with real costs: 6,000 € − 1,020 € = 4,980 € gain
• with the 20% deemed cost: 6,000 € − 1,200 € = 4,800 € gain

The deemed cost wins: the taxable gain is 180 € smaller. Had you held the lot for 10 years or more, the 40% deemed cost would be 2,400 € and the gain 3,600 € — 1,380 € less than with real costs.

Sell the same lot for 4,000 € instead, and the gain is 2,980 € with real costs versus 3,200 € with the 20% deemed cost. Now the purchase price is better, by 220 €.

The break-even point

Both methods give the same gain when the deemed cost equals the purchase price plus fees. That gives the sale price above which the deemed cost wins:

sale price = (purchase price + fees) ÷ 20% (or ÷ 40%)

In the example that is 5,100 € for a holding under 10 years and 2,550 € for 10 years or more. Rule of thumb: the deemed cost wins when the sale price is more than 5 times the purchase price plus fees (under 10 years), or more than 2.5 times (10 years or more).

Exactly at break-even it makes no difference. PnlTrack uses the real cost in that case.

1. Add up purchase price and fees. The purchase price of the lot plus the buying and selling fees, all in euros.
2. Work out the deemed cost. Take 20% of the sale price, or 40% if you held the lot for 10 years or more.
3. Compare. The larger amount is deducted. If the deemed cost is larger, the gain is calculated with it and fees are not deducted separately; otherwise with the purchase price and fees.

Calculator

Enter one lot’s amounts in euros and pick the holding period. The grey line is the gain with real costs, the blue one with the deemed cost. The dashed line is break-even: to its right the deemed cost is better, to its left the purchase price.

To estimate the tax on the resulting gain, use the capital gains tax calculator.

Counting 10 years, lot by lot

• The holding period runs from the binding purchase agreement to the binding sale agreement (chapter 7.1 of Omaisuuden luovutusvoitot ja -tappiot). For listed securities that means trade dates, not settlement dates. PnlTrack counts full calendar years between the trade dates.
• Each lot separately. Gains and losses are calculated per purchase lot (section 2.4 of Arvopaperien luovutusten verotus), and whether to use the deemed cost is decided for each lot (section 23.2 says so explicitly). If you sell an old and a new lot together, the old one may be better off with the 40% deemed cost and the new one with its purchase price.
• Amounts in euros. Both the deemed cost and the purchase price are in euros; for trades in dollars the exchange rate affects the result too.

When the deemed cost does not help

• A loss. The deemed cost always produces a gain, because 20% of the sale price is less than the sale price. If the purchase price plus fees exceeds the sale price, that is deducted and you have a loss. But if you cannot show the purchase price, the gain is calculated with the deemed cost and a loss-making trade can turn into a taxable gain (section 4.2.3). The vero.fi filing instructions say the same: when the pre-completed tax return lacks the acquisition date and price, the gain there is calculated with the deemed cost. How to deduct a loss: capital loss deduction.
• Futures and forwards. The deemed cost is not deducted from a gain on a forward contract (termiini): Income Tax Act section 45(3), section 3.2 of Johdannaisten verotus, chapter 10 of Omaisuuden luovutusvoitot ja -tappiot.
• Options. The writer may deduct the deemed cost from the premium received (section 2.4 of Johdannaisten verotus, Supreme Administrative Court 9.9.1999 no. 2410). The holder of an exercised put may also deduct it from the sale price of the delivered asset (same section).
• Equity savings account (osakesäästötili). The guide on disposals of securities does not apply to trades in an equity savings account, and neither does this guide.