IIS-3 deductions: they refund tax already paid, not part of the contribution

An IIS-3 deduction is not a state top-up to your contribution. It is a refund of tax you have already paid on other income, plus a tax exemption for what the account itself has earned. Article 219.2 of the Russian Tax Code introduces both mechanisms at once, and they work together rather than as alternatives: the contribution deduction is calculated on an amount of no more than RUB 400,000 a year, while the income deduction exempts the account's result at closure within RUB 30m. Both rest on the same condition — the account must stay open for the minimum term.

The new-style account has been available since 1 January 2024; the earlier types, where the holder had to choose between a contribution deduction and an income deduction, have not been opened for new clients since that date. How the account itself is built — the term, the eligible securities, the protection if the intermediary goes bankrupt — is covered in the piece on how the third-type IIS works. Here we deal only with the tax arithmetic: what the refund is made of, what limits it and when there is nothing to refund.

The contribution deduction: where the refunded amount comes from

The contribution deduction retroactively reduces the part of your income on which personal income tax has already been withheld: the income is treated as if it were smaller by the amount of the contribution, and the tax on that difference is refunded. Hence the limits, which all apply at the same time.

• The cap on the amount. The calculation takes the year's contribution up to RUB 400,000. The law sets no ceiling on what can be paid into the account itself — you may contribute more, but the excess does not increase the refund.
• The rate. The tax is refunded at the rate at which it was paid. That is the rate on your other income, not the account's return and not a figure you can choose; it is shown in the certificate of income and tax withheld.
• Tax actually paid. Only what has really been transferred to the budget can be refunded. If less tax was withheld over the year than the contribution multiplied by the rate would give, the refund for that year is the amount withheld.

The calculation therefore comes down to one multiplication and one comparison: the contribution within the cap is multiplied by the rate, the result is compared with the tax paid for the year, and the smaller of the two is taken. The IIS-3 calculator repeats this year by year: you enter the annual contribution, the term, the expected return and the tax rate on your salary, and a separate setting determines whether the refund is kept as cash or paid into the account as the next contribution. The calculator assumes there is enough tax to cover the full refund; whether that is true in your case, it does not know.

When there is nothing, or almost nothing, to refund

The last limit leads to the case people think about least when opening an account: the contribution deduction exists only where there is tax. There will be no refund, or it will be smaller than expected, if

• in the year of the contribution the person had no income from which personal income tax was withheld;
• there was income, but it is subject to a different tax rather than personal income tax;
• tax was withheld, but it is less than the calculated amount — in that case the refund equals the tax withheld, and the rest of the contribution earns no deduction.

The income deduction does not depend on any of this: it does not refund what has been paid, it exempts the result of the account itself. For someone who pays no personal income tax, the account is left with one benefit instead of both, and that changes the comparison with an ordinary account, from which money can be withdrawn on any day — a comparison set out in the side-by-side look at an IIS and a brokerage account. For this case the calculator offers the option "I pay no personal income tax — no contribution deduction": only the income exemption remains in the calculation.

Whether the unused part of the deduction can be carried over to another year, and exactly which income counts towards the calculation, this text does not assert: the answer lies in the current wording of Article 219.2 of the Russian Tax Code, and that is what should be checked.

The income deduction: what is exempted at closure

The income deduction applies when an account that has lasted the minimum term is closed. Income from transactions on the account within RUB 30m is not taxed. On the excess, tax is charged at the ordinary rates for investment income: 13% within RUB 2.4m of the annual tax base and 15% above that threshold.

Dividends stand apart. A law signed in 2024 allowed dividends from an IIS-3 to be received in a separate bank account; tax on them is withheld at payment, and the exemption at closure does not cover them.

Tax on the amount above the limit, like tax on a sale in an ordinary account, is worked out by the tax calculator: the profit on the trade net of commissions, with the progressive scale applied on top of it.

The term without which neither benefit applies

The minimum term depends on the year of opening: for an account opened in 2026 it is 5 years, the same as for agreements of 2024–2025. For accounts opened later the term is longer, and it grows with each subsequent year of opening until it reaches the limit written into the law. The year of opening thus becomes part of the tax calculation: it sets how many years the money is out of reach without losing the benefits.

Closing before the term is up cancels both benefits, and the contribution deductions already received for previous years will have to be repaid to the budget with late-payment interest. There is no partial withdrawal without closing the account; the law makes an exception for paying for costly medical treatment on a list approved by the Government. The price of such an exit is calculated in the analysis of closing an IIS early.

The term is not interrupted when the account is transferred to another broker or asset manager, and when an old-type account is converted, the earlier term is credited within the limits set by law — the procedure is described in the piece on opening and transferring an IIS-3. You may hold three accounts at the same time; how the annual deduction cap and the exemption limit are split between several agreements should be checked against the current wording of the same article.

Conditions under which this calculation stops being correct

• The rule changes. The cap, the limit and the term are given in this text as of the date it was prepared. The rules are set by the Tax Code, and they may change before an account opened today is closed.
• Your income changes. The contribution deduction depends on a circumstance that has nothing to do with the account — the tax on your other income. A year without personal income tax leaves that year's contribution with no tax to refund it from; whether the deduction carries over to another year — see the caveat above.
• The account is closed at a loss. There is nothing to exempt: the income deduction adds nothing to a negative result. Neither benefit protects against a fall in the price of the securities.
• The refund arrives later than the contribution. In the calculator's model, the deduction for a year is received in the following year, and the one for the final year only after the account has been closed. This is an assumption of the calculation; the actual timing is determined by the tax authority's procedure.

How exactly the deduction is obtained — through a tax return or by another route — this piece does not describe: the procedure is determined by the tax service's regulations and by the agreement with the intermediary, and the current wording is what should be checked. The overall picture of tax on securities transactions is brought together in the piece "Personal income tax for investors".

The question the deduction does not answer for the account holder: will you have personal income tax to pay in each of the years for which the money is locked up, and are you prepared not to touch it for the whole term.